There’s a lot to think about when buying a home, but I’d wager that the property title isn’t something that springs to mind for most buyers.
There are quite a few different types of titles found in Sydney properties and they can have an impact on your overall costs, legal considerations and buying process. Let’s look at the types of property titles you need to know and the differences between them.
Torrens title, or freehold title, was established in NSW in 1863 and is the most common type of property ownership in Australia – so while you’re probably familiar with it, you may have never heard the name. Under Torrens title, a homeowner owns both the property and the land it sits on, so it typically applies to the freestanding houses that made up 72.9% of the country’s dwellings in 2016, as well as some townhouses.
According to 2016 census data for Alexandria, 3.4% of residential properties were separate houses, 34.1% were semi-detached, row or terrace houses, townhouses etc. And 37.5% are actually Torrens Title which is more common but not as common as the national average 72.9%
When you buy a home under Torrens title, your name will be on the Certificate of Title (or Title Deed) to show that you own the land completely. If you have a mortgage, it will also be registered on the Certificate of Title to show that your lender has a financial interest in the property until the loan is paid off.
Old System title
Before Torrens title was introduced, Australian property ownership fell under what we now call Old System title. These days, it’s uncommon to find an Old System title, as most of these titles were replaced by Torrens titles under the Real Property Act, but it does happen. Both systems are similar in that they give full ownership of land and property to the person on the title.
Old System titles started in NSW in 1788, when the English colonised the state and brought their own property ownership structure with them. Under this system, a separate document is used every time someone purchases the land. It’s then attached to the title, creating a paper trail that shows the history of the transactions – unless it goes missing, which is surprisingly common…
In the changeover from Old System to Torrens titles, some properties were left without properly surveyed boundaries – or, at least, without a registered plan that showed that the surveying took place. NSW Land Registry Services can survey these boundaries on request, but if this hasn’t taken place already, the property in question will be owned under a Limited title. On a Limited title, the boundaries will be described in metes and bounds and will have the following notification:
‘Limitation pursuant to s.28T(4) Real Property Act 1900. The boundaries of the land comprised herein have not been investigated by the Registrar General.’
Sydney suburbs like Newtown and Marrickville still have properties on Limited titles, so you may come across one when searching for your next inner-city home. It shouldn’t have any impact on your purchase, but you will need to have the boundaries properly surveyed if you plan to subdivide or change anything relating to your land.
Strata title is the most common form of ownership for apartments, and it also covers many retail shops, offices and the majority of townhouses. With units and townhouses combined accounting for 95.4% of residential properties in Alexandria as of 2016, and new developments underway all the time, it’s likely you’ll encounter strata schemes if you’re buying into an apartment block.
Strata was introduced in NSW in 1961, mostly replacing the previous company title system. It was established as a means of controlling ownership of parts of a building, known as “lots”. In strata title, people own their apartment individually and share ownership of common spaces like hallways, floors, stairs, gardens and the building’s exterior walls. This common property is managed by an owners’ corporation and a strata committee, who oversee common property maintenance, building insurance, finances, by-laws and more.
Owners pay quarterly fees and levies to the strata scheme to cover expenses associated with the scheme’s management, as well as occasional additional fees if needed. The amount of the payments depends on the scheme, but will be listed on the strata records. More information about strata titles is available on the NSW Fair Trading website.
As company title was mostly replaced by strata title, it’s less common in NSW these days, but still found in some parts of Sydney with older art deco apartments – like Surry Hills or Darlinghurst. Under company title, the building is owned by a company and homeowners purchase “shares” in that company, rather than owning the apartment’s title themselves. Ownership of the shares gives buyers the exclusive right to live in their unit, but they’re given a Share Certificate instead of a Title Deed.
The size of the shares differs based on the comparative value of the units according to the original developers – so a larger unit or one in a better location will have a higher cost for its group of shares. Value for money can be good in company title, especially if the building later changes to strata title. On the other hand, it can be more difficult to get a loan for a company title property and shareholders might not be consulted on big issues affecting their apartment or building.
Community titles are similar to strata titles in that they involve regular management payments, ownership of lots, common property spaces, by-laws and owners’ corporations, but they differ in the way they’re managed. In community title arrangements, the maintenance is typically handled by the property owners and upkeep is managed by a residence committee instead of a strata committee.
Another key difference is in facilities and services: local councils do provide a service, but it’s often limited, and the community scheme is usually responsible for managing its own garbage collection, gardens and roads. For this reason, community titles generally apply to large developments and gated estates, so they’re much less common than strata schemes.
Leasehold titles most commonly apply to government-owned land, which is then leased to a person instead of being sold. This makes the would-be buyer a lessee instead of an outright owner of the property. However, leaseholds do differ from typical rental leases that you’d find in investment properties; under leasehold arrangements, the lessee can usually lease the property for 99 years. Instead of paying to purchase the property, you would instead pay an initial cost to set up the leasehold, as well as annual rental payments.
Unsure of the implications of your next property purchase’s title?
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