What is Strata and Community Title?

As the population of New South Wales increases, residential land for housing particularly in urban areas is becoming scarcer and more expensive. Consequently, in recent years, a title system for multiple occupancies on the one site has been developed. Often known as home units or villas, New South Wales Strata Titles Legislation and regulations provide for the subdivision of a building or buildings to allow for ownership of various parts of it but with common ownership of structures and land called common property. Whilst very frequently residential, Strata Titles can apply to industrial estates, shopping complexes and commercial buildings.

The below questions and answers are a brief summary of the basic operation of a strata scheme. There can be many variations for particular properties. It is not always easy to understand how strata title works. If you are considering purchasing a strata unit, clear advice is recommended to enable you to fully understand your rights and obligations. Turner Freeman have experienced property lawyers who are able to provide you with this advice.

find out more

Frequently asked questions

What is a residential Strata unit?

Typically a residential Strata scheme comprises a multi story building containing numerous lots. Each unit is a lot or lots shown in a survey plan (Strata Plan) registered in the Land Titles Office of NSW. The Strata Plan is, in effect, a subdivision of the whole building. Each lot is defined by walls floor and ceilings which constitute the boundaries of the Lot. The building itself is owned by all of the Lot owners as common property. So, in most cases, the unit that you own is an air space within a building. Many Strata Plans show a lot as being various parts of the building. It can comprise the area in which you live, car parking spaces and storage areas and enclosed external areas which, combined, constitute the lot.

The Strata Titles legislation gives a unit owner a legal title to the lot in the Strata Plan.

What is common property?

Generally, the building or buildings of which a lot forms part is common property. Common property is owned by an entity comprising all of the lot owners called the owner’s corporation. Whilst it is possible for a lot owner to have ownership of some of the land, generally the land on which the building sits is common property. Entrances, gardens, stairwells, lifts, and visitor car spaces are almost always common property. Incoming services such as power water and sewer are always common property. When a strata plan is registered a separate title deed is issued to the owner’s corporation for the common property.

What does the owner’s corporation do?

The owner’s corporation is responsible for the maintenance and management of the common property. It also controls and enforces the by-laws. As each lot owner has no ownership of the structural boundaries of their lot, it is the responsibility of the owner’s corporation to insure the building and to maintain it. Strata Titles legislation requires the owner’s corporation to insure all common property not just for buildings and structures but also for public liability and workers compensation. The amount of building insurance required is also controlled and required to be reviewed and increased at regular intervals to take account of increased repair and replacement costs. Maintenance of the common property is also to be carried out as required. The owner’s corporation must prepare a budget for projected expenditure in forthcoming years as the building ages. By this means provision can be made for a reserve for these purposes called a sinking fund. The owner’s corporation also pays regular ongoing expenses for the common property such as external lighting, garden and grounds maintenance, and Strata management fees.

How is the owner’s corporation funded?

Each lot owner must contribute a proportion of the overall expenses of the owner’s corporation. The amount payable by each owner is calculated by the unit entitlement of their lot a shown on the Strata Plan. When the plan is registered each lot is given a unit entitlement based largely on its size. The contribution is the unit entitlement as a fraction of the total entitlements. Thus owners of larger units pay a higher percentage of the outgoings. Payments are usually made by quarterly levies, one to cover the regular expenses called the administrative fund and a further payment to a sinking fund as a reserve for future expenses. The owner’s corporation can also impose special levies. This often happens if there is unforeseen damage to the common property and no funds are immediately available. This is often a lump sum but may also be payable by installments. Again, the contribution to a special levy is based on unit entitlements. Levies are in addition to annual rates and water rates. You should also keep mind that merely because the damage to the common property does not directly affect your lot physically; you are nonetheless required to contribute. The owner’s corporation is given legal powers to recover levies from unit owners who do not pay as required. The annual meeting of the owner’s corporation must also prepare and approve a budget for the administrative fund for the forthcoming year.

What are by-laws?

By Laws are a series of rules that apply to a particular strata scheme. They govern such matters as the behaviour of occupants, control of the common areas and provide procedures for annual meetings and appointment of the management council of the owner’s corporation. Where many people are living close together behaviour has to be regulated to ensure minimal disturbance to others.

Rates and other expenses

Each lot in a strata scheme is liable to pay council rates and a water rate just as if it is was free standing house. As real estate and depending on its value, it can also be liable for land tax if no specific exemptions are applicable. Whilst the owner’s corporation insures the building, you must insure your own property within your lot.

Conveyancing Enquiry

Strata & Community Title

Property Law