Foreign investor thinking about investing in Australia? We explain the different forms of property tenure

Considering investing in Australia as a foreigner?  Here’s our guide to the forms of property tenure and the rights and obligations that run with them.

As a property owner, it’s important to understand the property tenure you are purchasing, because the structure of your ownership will impact your rights and the obligations that go with it. 

In Australia, each state or territory registers title to land based on the Torrens principle of title registration. Each state and territory maintains its own central register of all land within the state which records the owner of the land. This title is the official record of the state. 

Freehold

Freehold is the most common form of title in Australia for houses and land. 

Leasehold

Leasehold property is not common in Australia and is typically used for farming and mining land, rather than residential property

Strata Title

Because strata title was created in Australia the vast majority of apartments and properties are owned via strata title. There are now over 270,000 strata corporations in Australia and it accounts for more than half of all residential sales in Sydney. Strata title is a popular form of ownership with investors, because of its ease of ownership and management.

The terminology varies between states and is known as:

  • New South Wales – Owners Corporations
  • Queensland – Body Corporate
  • Victoria – Owners Corporations
  • Australian Capital Territory – Owners Corporations
  • South Australia – Body Corporate
  • Tasmania – Body Corporate
  • Western Australia – Strata Company
  • Northern Territory – Body Corporate

Because strata title legislation is specific to each state, specific regulations vary between states.  If you’re investing in property in Australia, make sure your research is state specific.  Rules and legalisation that apply in New South Wales may not apply in in Queensland. 

Community Title  

Community title is specific to Australia and was introduced in the Community Titles Act 1996. There are two forms of community title, a community scheme and a community strata scheme.  A community title scheme is similar to a strata scheme in that when you buy a lot, you own that lot and share ownership and responsibility for common areas on the property.

A community title requires a minimum of two separate lots as well as common areas. The common areas could simply be a driveway or communal land. In a residential setting, community title is typically used for large housing estates or housing schemes which share common land. 

A community title scheme is created by registering a community, neighbourhood or precinct plan which is managed by a community association which is collectively held by all of the lot owners. The common area in a community title schemes is called Association property. Unit entitlement is based on site values which determines unit owners’ voting rights and contributions to maintenance and insurance levies.

For the maintenance of the property the rights and decision making process is similar to strata title. Owners are required to pay levies for maintenance depending on the size of their unit or lot and all owners have voting rights about any changes and developments in general meetings.

Differences between strata title and community title

  • Strata titles apply to structures such as apartment blocks, townhouses and duplexes and the units whereby each specific area is defined by a structural aspect of the building. 
  • Community title typically involves multiple buildings (such as houses) and the boundaries are related to surveyed measurements of the land.
  • Insurance is managed differently:  

Strata title: insurance is compulsory for both the building itself and public liability insurance, including the common area managed by the body corporate. The entire building structure is therefore covered by strata insurance and each unit owner is then only responsible for the content’s insurance of their own unit.

Community title: there is no obligation on the owners to maintain and insure other lot owners’ buildings.  The owner of each individual lot is responsible for the insurance of any building on that lot. The community corporation is only responsible for insuring any common areas or buildings such as driveways and service infrastructure.

A community scheme can also include strata titled buildings which means that sometimes the by-laws of both the strata scheme and community scheme apply. All by-laws in a community title scheme are detailed in a management statement, which differs with each plan. As every community scheme varies in nature, the by-laws are therefore far less standardised than strata scheme by-laws.

Property Tenure is important for foreign investors to understand
There are so many reasons to invest in Australia, to find out more check out latest informative articles. 

Don’t forget, when you’re investing in overseas properties you must consider the factors that will impact the performance of your investment. 

Property investment is complex and multiple factors dictate whether a property is a good is investment – it’s not simply about the purchase costs.   Before making a commitment to purchase any property, be sure to run financial models so you have a really clear understanding of the likely performance of your property.    

We hope you found this article useful, read in conjunction with our other articles on investing in Australia and this should give you an understanding of the market and why we believe there is an opportunity to invest.  We’ve produced articles not just for Australia, but also New Zealand and the UK, so make sure you take the time to consider all your options and make sure your investment is right for you. 

Important notice:  Proptech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect.  You use the information at your own risk and accept no liability if you rely on this information.   Proptech Pioneer is not a tax advisor, conveyance, lawyer, financial advisor or mortgage advisor.  You should seek independent advice from independent professionals before making any investment decision.