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Unit Titles and the Stratum Estate

Unit Titles and the Stratum Estate

If you are looking to buy an apartment, townhouse, flat, or another dwelling in a shared housing complex, there is a good chance the title to the property will be structured as a stratum estate. This is a special type of estate in land created under and governed by the Unit Titles Act 2010 (Act).

The Act provides a legal framework for the ownership and management of land and associated buildings and facilities on a socially and economically sustainable basis by communities of individual owners. It allows for the subdivision of land and buildings into unit title developments, comprising of:

units that are owned in stratum estate in freehold or stratum estate in leasehold or licence by unit owners. A unit is essentially an area within a unit title development that is designed for separate ownership. It can include a principal unit, which is the main space intended for residential, business, or other use by the owner, and an accessory unit, being a unit designed for use with the principal unit, such as a garden, garage, car parking space, storage space, swimming pool, laundry, stairway, or passage; and

common property that is owned by the body corporate on behalf of the unit owners. Common property is all the land and associated fixtures that are part of the unit title development but that are not contained in a unit. Common property will vary depending on the complex, but can consist of driveways, carparks, elevators, recreational facilities (for example gyms and swimming pools), gardens, and other shared facilities.

While the Act does not technically define “unit title”, people use the term to refer generally to the stratum estate that provides ownership of the principal unit and any accessory unit, as well as an interest in the common property shared with other unit owners.

Unit owners are entitled to exclusive possession of the principal unit and accessory unit (if any). The area of both units should be set out in the Record of Title for the property.

Common property, however, is owned and managed by the body corporate. A body corporate is a special type of legal entity that is assigned to a specific unit title development, created under the Act when the unit plan for the development is deposited, and referred to as “Body Corporate Number” followed by the number of the unit plan. The function of the body corporate is to take care of the common property on behalf of all unit owners.

Every unit owner is a member of the body corporate and will have a designated ownership interest in the common property. The owners of all the units are beneficially entitled to the common property as tenants in common in shares proportional to their ownership interest.

The body corporate must have, maintain, and enforce operational rules that apply to units and common property. These rules are binding on all unit owners under the Act. As such, it is important for unit owners to ensure their use of the unit complies with the rules.

The running costs of the body corporate, as well as the costs to repair, replace, or maintain the common property as required, are met through levies raised under the Act. A unit owner will be liable to pay levies in proportion to their ownership interest.

The Act and operational rules set out various requirements regarding the governance and management of body corporates. Provided those requirements are met, with necessary voting thresholds satisfied, the body corporate has the power to make decisions that can have wide ranging consequences to individual unit owners, potentially without their consent.

These include, for example, decisions to raise levies to fund the cost of significant repairs to the structure of the building following discovery of weathertightness issues. These levies would be raised in proportion to the ownership interest of unit owners.

The Act also imposes additional obligations on sellers of unit titles (compared with sellers of fee simple and other estates). Sellers are required to give at least two separate disclosure statements – a pre-contract disclosure statement and pre-settlement disclosure statement, which are not required for sellers of other property. The statements must set out the information prescribed under the Act. They provide prospective buyers with increased rights, including in some cases to cancel an otherwise unconditional contract. They also increase the legal costs to sellers.

Because of the separation between units and common property, the involvement of the body corporate, and the additional requirements of the Act that do not apply to other interests in land, it is important for owners and prospective buyers of unit titles to know what they are getting in for. They will not be owning or buying a distinct parcel of land that is separate from their neighbours. They will instead be buying a distinct unit within a communal building complex, with shared common property and a governing body corporate comprised of the neighbours.

If you are looking to buy or have a question about a unit title, get in touch with our specialist property team here.