Apartment Ownership Titles - What’s The Difference?

Why is it important to understand ownership titles?

Understanding the different types of ownership titles for apartments is crucial because it determines the extent of your ownership rights and responsibilities. Each type of ownership title comes with its own set of rules, regulations, and costs that can significantly affect the value and maintenance of your property.

It can also impact your ability to sell or transfer ownership of the property, as some types of ownership titles are easier to sell than others. Therefore, it is essential to have a good understanding of the ownership title of your apartment before making a purchase.

Types of Ownership Titles for Apartments in Melbourne:

Strata Title

If you’re buying an apartment, villa or townhouse it will most likely be part of a strata scheme.

You’ll need to adhere to bylaws, pay regular levies for maintenance and other expenses, and attend annual general meetings run by the strata management company.

Strata Title Pros:

• It is widely considered a fair, transparent and equitable system, and there is a clear legal framework for dispute resolution

• A surveyed structural diagram clearly shows which parts of the property are common and which are owned by individuals.

• Owners can vote on important decisions regarding common property

• Typically strata title adds value to a property when compared to company title.

• Individual owners have control over the internal structure and fixtures of their unit

Strata Title Cons:

• Owners are required to pay usually quarterly body corp/owners corp fees, and be responsible for the maintenance costs of the common property.

• Owners have to adhere to bylaws and vote at meetings.

• Owners may have limited control over the appearance and use of common property

• Changes to the common property may require approval from other owners and the owners corporation

Stratum Title

Stratum title is a combination of stratum and company titles.

An owner will hold the strata title for the portion of the land that is theirs, while a company title would cover any land that is shared, which would be part-owned by each individual in the group. So for instance, they may have a ‘normal’ strata title for the apartment, but a company title or share for the carpark..

It is run quite similar to a strata title, with AGMs for decision making around common property, as well as having to pay quarterly fees.

One of the main differences is that banks don't love company share titles, so lending may be an issue.. But it is on a case by case scenario, so best to check with your lender or broker as to whether the bank you are getting finance through is ok with lending to this type of title or not.

Company Title

Company title is less common than strata title, but you will definitely still come across them in the likes of Elwood, St Kilda and Hawthorn.

Before buying into a building with company title you should check the constitution of the corporation for any restrictions, and seek independent advice on any potential legal and financial implications.

Company Title Pros:

• Properties can represent good value for money.

• Investors can make easy money by buying into a company title block that is later changed to strata title, as this change will often add instant value to the property.

Company Title Cons:

• Owners don’t own the title, but simply a “share” in a company that owns the title.

• Historically some banks have been reluctant to lend money for company title units. Some lenders will only loan on a case-by-case basis, or require a particular loan-to-value ratio.

• Because of this, company title properties often sell more slowly than strata title properties.

• Company directors don’t have to consult shareholders, even on big issues.

• A company’s constitution can sometimes be onerous and even arbitrary. For example, it might limit who can buy into the property, whether the property can be rented, what changes can be made to the property, or even how much buyers can borrow.

So there you have it… To be honest, in our opinion the most important reason to be across these is because of finance and re-sale value.. You may not need finance so it may not matter to you what type of title it is. However, when you go to sell, it may rule out a few buyers, because they can't get finance on that apartment.. And yes, you can change the type of title.. Ie Company Share to strata, but it is very complicated, and be prepared to be forking out for the lawyer bills.