You’ve almost certainly heard of Torrens title and strata title, but how well do you understand these terms? What about less common land titles like company title and community title?
The NSW land title system can be confusing. Understanding different types of land title will help you understand your rights and responsibilities as you purchase property.
Let’s start with a brief overview of the current system and how it evolved.
In the early days of the NSW colony, there was no agreed system for recording land sales and purchases. Sometimes there was no evidence at all of a transaction.
In 1802 a register was established – this was the start of what are now called ‘Old system land titles’. The register was an improvement, but not perfect. Records were not complete, nor were they always up to date. Responsibility for maintaining the register moved between different bodies too.
One key challenge was that these systems worked by a new deed being drawn up every time land was sold or mortgaged. Proof of ownership relied on the ‘chain of deeds’ showing legitimate transactions from start to finish. It was cumbersome, expensive and unreliable. As property changed hands more and more times, the number of documents grew ever larger, and many were inevitably lost.
The Real Property Act 1863 saw the introduction of the Torrens Title Register, which is what we all use today. Importantly, the State recognised ownership listed on the Torrens Title Register as actual ownership. That eliminated the need to go back and forth pulling up deeds to prove ownership.
Today, there are two different Register systems operating in the state of NSW.
- Most property is listed on the Torrens Title Register.
- A small percentage of properties still have ‘Old System Land Titles’.
Both are managed by NSW Land Registry Services, which also administers Crown land.
When real estate agents and others in the property industry use the term ‘Torrens title’, they’re not usually referring to the property being listed in the Torrens Title Register. Instead, they’re talking about the rights your title grants you.
In practical terms, when you buy a property under Torrens title, you are the sole owner and you own the property freehold. You are ‘king of the castle’, so to speak.
However, that doesn’t necessarily mean you can do anything you want.
- You have to comply with the law, including local council zoning and regulations.
- Usually, the title says you don’t own any minerals found in the land. That’s not so relevant in Sydney itself, but if you’re buying further afield and you find gold or oil, it’s likely the Crown will own those minerals.
- There may be easements on your property. A great example is terraced houses in the city which share a dividing wall. You may have freehold (‘Torrens title’ in real-estate-speak), but you can’t simply knock down that wall. There will be an easement saying that you cannot make alterations which damage neighbouring houses.
While freestanding homes tend to have Torrens title, that’s not always the case. And once you start looking at townhouses, duplexes and apartments there are even more options.
Let’s start with the freestanding homes.
There are still occasions, usually for property outside Sydney, where the property is not on the Torrens Register. It has been passed down through the family, without change of surname, and there’s been no need to register it. It has an Old system title.
When a property like this is sold outside the family, it is added to the Torrens Register with what is known as a qualified title. NSW Land Registry Services cannot verify that there’s been no fraudulent activity up to the time of this sale, nor that it has a full record of easements, leases and so on.
If no issues arise in 12 years, then the qualified title automatically becomes a normal title on the Torrens Register.
Limited title applies when NSW Land Registry Services does not have an accurate survey of the property boundaries.
This situation arises because properties were not all surveyed when transferred to the Torrens Title Register – it just wasn’t practical. Some deeds of conveyance from this time have accurate plans of the property, but others don’t. Descriptions like ‘northwest to the creek’ or a line between the oak on the top of the hill and the mine shaft’ may have worked in the past, but they don’t work now.
Your bank or loan provider may be concerned about a limited title, but converting to a standard title is simple. You simply submit a survey to Land Registry Services.
All the above titles work on the principle that you own both land and the buildings on it.
But what happens when you build a block of units and sell those units to different owners? Not everyone can own the land.
Strata title, company title and community title are all different ways of dealing with this scenario. Let’s start with the most common.
Strata title is the most commonly used title for apartment buildings, duplexes and townhouses.
With strata title, you own the inside of your apartment and you have a shared interest in exterior structures and common areas.
The strata scheme has a series of bylaws which set out rights and responsibilities of owners; obligations for common areas, and so on. A body corporate or strata company is set up as a legal entity responsible for managing the strata scheme. Owners are members of that entity, and they pay strata levies, usually quarterly, to cover maintenance and repair. There may also be extraordinary levies if major repair is needed at some point.
In a strata title property, you have less freedom to renovate or change the property as you wish than you would with Torrens title. On the other hand, you don’t have to organise all the maintenance and repairs yourself. Areas like roofs, gardens and driveways are all looked after by the strata management.
Like strata title, the company title model allows separate ownership of apartments within a building. However, unlike strata title, you don't technically own the real estate. You own shares in a company which owns the real estate. You hold a share certificate rather than a certificate of title.
Company title existed before strata title, which has largely replaced it. Why?
A significant feature with company title is that potential owners must be approved by the company directors. That may sound great – you get to choose who moves into your building – but on the other hand, when you want to move out the company directors can reject your preferred purchaser.
Additionally, company title properties are not subject to strata legislation. The shareholders elect a board of directors, but how much input they have to decisions after that depends on the company constitution. You may not have as much control as you expect.
For these reasons, purchasers are wary of company title properties.
Lenders are also cautious. From a financial perspective, there’s no actual real estate involved. If they have to take possession, they get company shares rather than a property. Some banks only lend a much smaller percentage of the purchase price.
Community title is similar to strata title in that individuals own their own home in a development or a gated community, plus they own a share of the common areas.
The difference is that you might have a freestanding house, with a freehold or Torrens title, sitting within a community. It’s a common model in suburbs including Stanhope Gardens and Rouse Hill – the community owns facilities like a big swimming pool, a clubhouse and tennis courts. All members of the community have access to use the facilities, and they pay a community fee for maintenance of them. It’s usually paid quarterly, like a strata fee, but is usually lower.
It is also possible to have a strata title within a community title. Imagine a development which includes apartments and villas, all with access to shared facilities like a pool and a gym. The villas may have a Torrens title within the community title; the apartments usually have a strata title. If you buy an apartment in this scenario, you normally pay strata fees which include community fees, then the strata company pays the community fees on behalf of you and the other apartment owners.
If you’re buying a property, you probably won’t get to choose the type of title, since that’s set already. However, you can make sure you understand what the title means for you in terms of freedom to do what you please with your home, as compared to working together with your neighbours.
You also need to look into a little more detail.
For Torrens title properties with shared walls or spaces, it’s important to check easements so that you know what your responsibilities are.
For strata, community and company title, we recommend checking the constitution and regulations of the relevant organisation. We also review documentation such as recent strata reports. When read with a practised eye, these can indicate disputes, disagreements and dysfunction which may be cause for concern!
A conveyancer with experience in these areas can give you advice specific to your situation. If you’d like some input from an eagle-eyed property law professional, just get in touch!
