Land titles

A land title is the official record that confirms who is the registered owner of a piece of land at any point in time. A land title contains information about mortgages, covenants, caveats and easements. Land titles can be searched online (at www.landata.vic.gov.au) or at Land Use Victoria’s Land Information Centre (seeContacts”).

Special titles

A property may have a special title. General law titles, company share apartments, stratum titles, strata titles, cluster titles, subdivision titles, and off-the-plan properties are all special titles (these are outlined below). Dealing with special titles requires advice from a property lawyer or a licensed conveyancer.

General law titles

The general law title system relies on a “chain of deeds” to prove ownership. This “chain” is made up of all the documents related to the sale of the land since the land was initially sold by the Crown. General law titles are still valid proof of ownership. A buyer must have each document in the chain assessed by an expert to ensure it is valid. However, Land Use Victoria recommends that all general law titles be converted to registered or Torrens titles.

Company share apartments

Company share apartments are the earliest “group” titles and were popular in the 1950s. In these schemes, a company is the registered owner of the land and buildings. Unlike standard apartment purchases, the title to a company share apartment is not transferred from the company to the buyer. Instead, each buyer is issued with a parcel of the company’s shares that entitles them to live in a particular apartment.

The company reviews each sale and must consent to the transfer of shares; it is usually the buyer’s responsibility to obtain the company’s consent for the sale. Note that the time it takes for the company to review and approve a sale may affect the settlement period. These titles are not popular with lenders as the loan is secured by shares, not land.

Stratum titles

With stratum titles, each owner receives a registered title to an apartment in the development and shares in the service company. The company holds the title to the common property and manages the property on behalf of all the owners. Some lenders refuse stratum titles as security because the service company has the first call on the land for debts owed by the owner.

Sales of these lots are complicated; a contract of sale for a stratum title property should only be signed after you have obtained independent legal advice.

Many company share schemes and stratum titles have been converted to strata titles, which significantly improves the saleability and value of the apartments. However, conversion requires the agreement of all the owners.

Strata titles

Strata titles were introduced in 1967 to reduce the complications of multi-storey developments. Strata titles were also used for many single-storey and villa-unit developments. Each owner in a strata subdivision receives a registered title.

A statutory owners corporation (not a company) manages the block. (Note that before 31 December 2007, owners corporations were called the “body corporate”.) Each unit owner is a member of the owners corporation and contributes to the management and running costs of the block. Owners corporation rules govern the way the block is managed. An owners corporation is responsible for the common property areas and is liable for what happens on common property.

The Owners Corporations Act 2006 (Vic) started operating on 31 December 2007. This Act controls the activities of owners corporations, removed provisions about bodies corporate from the Subdivision Act 1988 (Vic) (“Subdivision Act”) and comprehensively provides for the activity and operation of all owners corporations in Victoria. (See Owners corporations.)

While strata titles provide individual unit or lot ownership, there are restrictions that go with these titles. Owners of a property with a strata title must abide by the rules of the owners corporation. While there are common versions of these rules, many owners corporations expand their rules to include rules about noise, pets, colours of painted buildings, and maintenance funds.

A buyer should investigate the rules of an owners corporation to see if there are restrictions that do not accord with their lifestyle. Also, remember that the majority of owners govern the owners corporation rule-making process, so discovering as much as possible about your potential future neighbours can be useful.

A common problem in a strata development is the mix of owner-occupied units and tenanted units. An owner-occupier can find themselves dealing with complacent absentee owners about owners corporation issues affecting their occupancy. Doing your research before you sign a contract of sale can often help to alleviate or avoid such problems.

Often, it is said there is no owners corporation. This is not accurate. More likely, the owners corporation is not active. Be wary of an inactive owners corporation as a strata development’s owners corporation has a statutory obligation to insure, in its name, the strata development’s common property and shared services. This is a very important feature of strata developments and a buyer should insist on the details of the owners corporation insurance being disclosed.

If an owners corporation has not, in the past 15 months, held an annual general meeting, nor fixed any fees, nor held an insurance policy, then it may state in the vendor’s statement that it is inactive.


NOTE

The person or organisation selling a property is called the “vendor”.


Cluster titles

These titles are rare; they are similar to strata titles. The scheme was introduced in 1974 to facilitate flexible development of vacant land.

Subdivision titles

The Subdivision Act replaced the legislative schemes with a single subdivision procedure under which owners have registered titles to their lots. The procedure is much more flexible and allows an owners corporation to be created whether or not there is common property. The plan and the owners corporation rules define owners’ rights to use common property, easements, the lots, and the liability of each owner to contribute to the owners corporation funds.

Off-the-plan properties

Off-the-plan properties do not yet have a title because the plan of subdivision is unregistered. Before agreeing to purchase an off-the-plan property, you should seek independent legal advice, especially about stamp duty savings and potential issues and risks associated with such purchases.

Sales of off-the-plan properties are now more common with the explosion of high-rise apartment developments in major cities. Developers obtain finance for these projects and are therefore under pressure to show their lenders signed contracts as evidence of properties being sold and of the profitability of the development.

Selling an off-the-plan property involves the vendor giving the buyer a complex contract of sale well before the actual construction of the building. The contract contains all the plans and specifications of the property being purchased. Usually, the contract is not a building contract as the building agreement is between the developer and a licensed builder.

Off-the-plan property contracts generally contain substantial detail about the proposed development; this includes the rights of the vendor to vary the planning and building permits, information about amendments to the common property areas, the plan of subdivision (including the boundaries of the unit or lot being purchased), the location of easements, and when building works will commence. A well-drafted contract also specifies the time frame within which building works are expected to be completed, and stipulates what is to happen if the works cannot be completed by the set date. This contract avoidance right is very important: some contracts grant it as a right to be exercised by the vendor only; other contracts allow both parties to exercise the right.

For off-the-plan properties, it is not unusual for buyers to pay the deposit by way of a bank guarantee or a deposit bond that is issued in the vendor’s favour. Paying the deposit in this way may lead to difficulties if a buyer does not understand how these payment methods correlate to the settlement amount.

Due to the complexity of off-the-plan property contracts, it is prudent for a buyer to seek legal advice before signing the contract of sale; buyers can be bound by the contract in circumstances that might surprise them.