Using Strata, Community and Company Title to facilitate Collaborative Housing in NSW

Collaborative housing is a really interesting development that has in part arisen due to the high costs of home ownership in Australia. I recently co-authored an article in the NSW Law Society Journal with Caitlin McGee of UTS and Ann Apps of the University of Newcastle on what it is and is not. A link to that article is here: https://kerinbensonlawyers.com.au/collaborative-housing-the-new-kid-on-the-block/

A very quick summary is that it is an umbrella term for housing models that prioritise community-building, affordability, resource-sharing and resident participation. It can be a very flexible way of enabling less expensive, more environmentally friendly and more community oriented housing. In the linked article we  discussed the different forms that it could take. I am going to focus in on using strata title, community title and company title for collaborative housing projects.

First what are strata title, community title and company title?

Strata title is governed by the Strata Schemes Management Act and the Strata Schemes Development Act 2015. It is a form of subdividing land that allows for dual titles. By this I mean that the land can be subdivided so that lot owners can own their lot and an owners corporation made up of all the lot owners owns common property.  Community title is very similar however the community association (or precinct or neighbourhood association) owns the common community property with lot owners owning their lots. Community Schemes are governed (from 1 December 2021) by the Community Lands Management Act 2021 and the Community Lands Development Act 2021. Both strata title and community title schemes are governed by registered management statements and by-laws that are registered on the title of the common property or in the case of the community, on the title of community property.  

Company title is a separate beast. It is governed by the Corporations Act 2001 (Cth) and these schemes generally having a purpose written constitution as its governance document. Although company title fell out of favour when strata titles legislation was introduced collaborative housing and restrictive Local Environmental Plans that prevent strata subdivisions can make company title more attractive. Company titles are unitary titles as the company owns the land and then issues shares that give the shareholders the right to occupy parts of the land.

What are the pro’s and con’s of each type of each type of title for collaborative housing?

 ProCon
Strata TitleRelatively well known type of development, particularly in cities. Important for lenders. Lot owners  have title to their lot and an equitable interest in the common property. By-laws and management statements are registered on title and easily available Clear rights under the legislation Dispute resolution is through Fair Trading Mediation and then NCATGenerally lot owners own airspace and structural elements are owned by the owners corporation.Disputes arise due to failure to repair the common property and liability to pay compensation for loss to lot owners.Unless work is cosmetic in nature you will need approval to conduct work to your lot. Approval can be withheld if reasonable to refuse. Owners corporation can exercise control over the use of your lot.
Community TitleLesser known type of development but growing in popularity and known to lenders. More flexible form of development than strata title as allows for community themes e.g. golf estate, marina development.Management statements are registered on title and easily available.Dispute resolution is through Fair Trading Mediation and then NCATGenerally lots are parcels of land and lot owners own the structures within their lot. However a strata plan may be registered over a community lot. Community associations can exercise control over what is built on your lot through binding architectural and landscaping standards.Approval may be required from the community association to build on your lot especially if the structure can be seen from outside your lot.
Company TitleVery flexible as company constitutions can be written for specific developments to regulate how meetings are called, how often meetings are to be held, what quorum is to be, what rights attach to shares, whether there are different classes of shares etc.  As the land is owned by the one entity, the company, Councils may be more willing to approve it than a strata subdivision enabling multiple occupancy of a parcel of land.Not as well known, whole lenders are aware of it, potential purchasers may have to be educated on it More time consuming to establish if a company constitution is being customised for a specific development (and they generally all are).  

The key with collaborative housing is to be aware that there are different models that can be used and sometimes they can be used in conjunction with each other) and for this reason it is crucial to understand what is needed or desired for a specific development and then to consider the structure to be used to achieve this.

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