18 Jun Company Title vs Strata Title – Which Is Better For Investors?
While searching for an investment apartment for a client recently I found a lovely apartment in the harbourside suburb of Kurraba Point. This isn’t a surprise but what surprised me was the good value the property represented. However, on researching further I discovered that the apartment was company title rather than strata title, which explained why the price was lower. As a buyer’s agent, I am very familiar with the positives and negatives of company title versus strata title and who they are best suited for. However it made me realise a lot of people might not know the difference and that the property ownership structure that suits property investors and owner-occupiers are different.
In brief, there are two forms of ownership structure for shared property ownership such as apartments:
- Company Title and
- Strata Title
This is the most common form of shared property ownership, i.e, apartments and townhouses. Under this structure, the lots (apartments, etc) are owned individually and there is shared common property. Strata title was introduced in Australia in 1961. Prior to strata title, buyers used company title to purchase shares in the building rather than owning their own individual lot outright. Most buildings have switched to strata title ownership, but there are still some older buildings, particularly in Potts Point and Elizabeth Bay in the East and Kurraba Point on the lower north shore that still use the company title structure.
Strata Title Benefits:
- It adds value to a property as compared to a company title unit
- Is widely accepted as the most transparent form of individual lot property ownership
- Owners get to vote on the bigger issues within their building through the strata committee
- Your property ownership and common areas are clearly delineated
Strata Title Negatives:
- You are required to pay levies
- As a shared owner you have liability if anything goes wrong in the building
The company title structure is where you purchase shares in a building, which gives you exclusive use and ownership of the unit and shared use of the common property. This is the system universally used prior to 1961, and most buildings have now converted to strata title.
Company Title Benefits:
- Good value for money as should be priced less than strata title units.
Company Title Negatives:
- You don’t own the title, rather a share in the company that owns the title.
- The buildings constitution can prevent apartments from being rented out, if you are allowed to make changes to your property and even how much you can borrow to buy it.
- The price growth isn’t as much as with strata title
Buyer’s Agent Professional Opinion:
As a general rule, we believe Strata Title is the best form of property ownership for investors because:
- There is no restriction on renting out your apartment (excluding short term rentals such as AirBnB).
- Banks will lend money on strata title but are more reluctant to lend on company title units
- Units potentially appreciate more in price under the strata title ownership structure
Company title can be very appealing if you are an owner-occupier. This is because this structures tends to represent good value and your money goes further with company title. It is the grand older style apartments and buildings that are still structured as company title so it is ideal if this is the style that you like.
If you’re an investor, you don’t need to be immediately scared away by company title, but you do need to thoroughly research the building to determine how onerous the building restrictions are. If they are onerous this most likely isn’t the right investment for you.
This is a very helpful article from realestate.com.au about company title versus strata title.