The complete guide to property titles in NSW
Whether you are researching a potential home, buying an investment property, or wondering what rights and obligations you have as an owner, property titles are important. There are six main types of title in NSW, from the very common Torrens or Freehold Title to the less common Leasehold and Company Title. Each describes a specific system of ownership and has its own particular set of regulations. Here, we look at the different types of property titles and explain why understanding them is essential to making any major decisions about buying, selling, or renovating a property.
1. Torrens title, aka Freehold title
By far the most common title used in Australia for freestanding properties, the Torrens title system was introduced in NSW in 1863. It works through registration and provides a single title document, guaranteed by the NSW government, for each landholding. Every time a new transaction on the property takes place, such as a change of ownership, it is registered with the NSW government and the title document is updated. The name of the legal owner of the land and any buildings is recorded on the title deed. If the property is mortgaged, a Certificate of Title is issued until the debt is paid in full. Did you know? The Torrens title is named after Sir Robert Richard Torrens (1814 - 1884).
2.Strata title
Unlike the Torrens system, which contemplates both the land and the buildings on it, the strata scheme usually reflects ownership of part of a building. Commonly used in apartment buildings, duplexes and townhouses, people who buy a strata title property usually own the inside of their apartments, sharing an interest in the exteriors and common areas of the building and property, such as hallways, gardens, and lifts. Developed in the 1960s, strata schemes have a series of by-laws that clearly set out the rights and responsibilities of owners and explain their obligations for common areas. Owners usually pay a quarterly strata levy to cover common maintenance expenses and may be liable for extraordinary levies for major repair works. All owners in a strata scheme become members of a body corporate, or strata company, which is the legal entity responsible for running the scheme. Did you know? There are over 83,000 residential strata schemes in NSW, with over 1.2 million people living in strata scheme buildings in our state. 1
3. Company title
Company title became popular in Australia in the early 20th century. While there are still some company title properties in NSW, it has largely been replaced by strata. The Company title model allows separate ownership of apartments within a building. However, unlike Strata title, an owner does not technically own the real estate but holds shares in a company that does. If you own a company title apartment, you hold a Share Certificate rather than a Certificate of Title. Company title apartments are often cheaper than those operating under a strata scheme-perhaps because potential owners must be approved by the company directors, a point that doesn’t appeal to everyone and so shrinks the pool of prospective buyers considerably. However, it can be harder to secure finance for a company title property, and the company’s constitution may be far more restrictive than that of a body corporate. Did you know? Company title properties are not subject to strata legislation and are run by an actual board of directors elected by the shareholders.
4. Community title
Though less common, a community scheme is similar to a strata scheme in that individuals own part of a development and a share in common areas, paying levies to cover common maintenance and repair costs. However, the way that boundaries are set in each model is different. Unlike strata title, which defines ownership boundaries in terms of the building only, with all land held in common, community title boundaries include land. An example of this would be gated communities, where owners hold a villa and the garden around it, but the roads, tennis courts, and swimming pools on the development are considered common property. Did you know? Community title properties can span large areas and include residential, commercial and retail lots.
5. Leasehold title
Usually reserved for government-owned properties, a leasehold title property is not sold but leased to an individual, typically for 99 years. The lessee pays a set-up fee plus annual rent on the property. Did you know? All land in the ACT is owned by the Commonwealth and leased to residents under leasehold title.
6. The old system property title
The old register system, which dates back to the early days of colonisation, was largely replaced by the Torrens system in the nineteenth century. Rather than updating a single deed each time a property transaction took place, the old system created a new deed, which was attached (literally) to the previous one. This meant that a single property could have several hundred physical documents attached to its title- a recipe for confusion. Although rare these days, conveyancers may still carry out Old System title searches to check that past rights of way or easements are reflected in the converted Torrens titles to the benefit of the property in question. Did you know? You can search for Old System records online in the NSW Land Registry Services’ Historical Land Records Viewer.
Why does this type of title matter?
Knowing your rights and understanding your legal and financial obligations is essential when it comes to owning property. Property titles define these requirements and set out the model of ownership for each property.
Carrying out a title search on a property you are interested in can reveal a lot of information that may prove invaluable and is part of the due diligence process when buying a property.
A title search will show you who the current legal owners of the property are and indicate any restrictions or interests that apply to the land, including mortgages, easements, covenants, and caveats. In apartments and other properties with common land, the type of title will also dictate what changes you are able to make to your home and whose approval you will need to do so. Understanding property titles is an early step on the path to becoming a homeowner.
Source: [1] https://www.nsw.gov.au/housing-and-construction/strata/living/by-laws
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