Strata vs Company: What’s the Difference?

While strata and company titles involve shared ownership and responsibilities, they differ in their legal frameworks, management, and the owner’s rights. Understanding the differences between these two models is crucial, for property investors and residents in Victoria. 

In this post, you will discover the key distinctions between strata and company titles. It will also focus on how strata management in Victoria operates compared to company title arrangements.

What is a Strata Title?

Strata title is a system of property ownership that allows individual ownership of a unit or apartment within a larger building while sharing ownership of common areas like hallways, gardens, and elevators with other owners. This system is governed by legislation specific to each state, with the Owners Corporation Act 2006 being the primary legislation in Victoria.

Under a strata title, each owner holds a title deed for their unit, which they can buy, sell, or lease independently. The common areas are managed collectively by a body corporate, which is responsible for the maintenance, insurance, and overall management of these areas.

Key Features of Strata Title:

• Individual Ownership: Owners have full ownership of their unit and a share in the ownership of common property.

• Owners Corporation: A body corporate is established to manage the common areas, enforce by-laws, and handle finances.

• Legislation: Strata properties are governed by state legislation, with strata management in Victoria adhering to the Owners Corporation Act 2006.

• Flexibility: Owners are free to sell or lease their units without needing approval from other owners or the body corporate.

What is the Company Title?

Company title is an older form of property ownership that predates the strata title system. Under company title, a company owns the entire property, and individuals purchase shares in the company, which entitles them to occupy a specific unit or apartment. Instead of holding a title deed to the property, shareholders have a license to occupy their designated unit.

The company's board of directors manages the property, and decisions are made collectively by the shareholders. Unlike strata titles, company title properties have stricter rules and regulations, including restrictions on leasing or selling units.

Key Features of Company Title:

• Shared Ownership: Owners purchase shares in the company rather than a title deed to the property.
• Company Management: The property is managed by a board of directors, elected by the shareholders.
• Restrictions: Shareholders may face restrictions on selling or leasing their units, and approval from the board is required.
• No Legislation: Company title is not governed by specific property legislation like strata title, which can lead to less regulatory oversight.

Strata vs Company Title: Key Differences

While strata and company titles involve shared ownership and management, several key differences distinguish the two:

1. Ownership Structure:

• Strata Title: Individual ownership of units with a share in common property.
• Company Title: Ownership is in the form of shares in a company that owns the property.

2. Management:

• Strata Title: Managed by a body corporate, which is responsible for maintaining common areas, enforcing by-laws, and handling finances.
• Company Title: Managed by a board of directors, with decisions made by shareholders.

3. Legislation:

• Strata Title: Governed by state legislation, such as the Owners Corporation Act 2006 in Victoria, providing clear rules and protections for owners.
• Company Title: Not governed by specific property legislation, leading to less regulatory oversight and complexities in management.

4. Flexibility:

• Strata Title: Owners have greater flexibility to sell, lease, or renovate their units, subject to the body corporate's by-laws.
• Company Title: Shareholders may face restrictions on selling or leasing their units, requiring board approval.

5. Resale Value:

• Strata Title: Strata-titled properties have a higher resale value due to the clarity of ownership and legal protections.
• Company Title: Properties under company title may have lower resale value due to the restrictions and complexities involved in ownership.

6. Financing:

• Strata Title: Banks and financial institutions are more willing to lend against strata-titled properties, making it easier for buyers to secure financing.
• Company Title: Securing financing for company-titled properties can be more challenging, as lenders may be wary of the ownership structure and risks.

The Role of Strata Management in Victoria

Strata management plays a crucial role in the successful operation of strata-titled properties in Victoria. Strata management in Victoria involves the day-to-day management of common property, ensuring that the building is well-maintained, compliant with legislation, and financially sound. Professional strata managers are engaged by the body corporate to handle tasks like maintenance and repairs, financial management, compliance, and dispute resolution

In contrast, company title properties rely on the board of directors and shareholders to manage the property, which can lead to varying levels of efficiency and expertise.

Conclusion

While both strata and company titles offer unique benefits, strata title has become the preferred choice for property ownership in Australia due to its clear legal framework, flexibility, and ease of management. Strata management in Victoria provides a structured approach to property management, ensuring that common areas are well-maintained and that owner’s rights are protected. For those considering purchasing a property, understand the differences between strata and company titles and then make an informed decision.