U.S.-based property owners might not have heard of strata title, but this increasingly common form of property ownership has taken some corners of the world by storm. Pioneered in the Australian state of New South Wales during the early 1960s, strata title provides a means for residents of multi-unit buildings to enjoy communal ownership of common areas without sacrificing full control over their private dwellings. However, its success has led to a dramatic expansion of its reach: Strata title can now be used to administer commercial, retail and industrial properties as well as suburban and even rural tracts of residential land.
A Basic Overview of Strata Title
Although its legal underpinnings are quite complex, strata title has just two principal aims. First, it provides the owner of a unit within a multi-unit and often multi-story residential property with an ironclad ownership claim to the private dwelling space that he or she occupies. Secondly, it provides said owner with a proportional claim to the building's communal areas as well as the land on which it sits. Owners of larger units generally enjoy larger communal ownership shares, but the specifics of such arrangements may vary from title to title. It should be noted that some "modern" conceptions of strata title don't apply to residential land and may have different practical applications.
Where Is It Common?
Strata title is commonly used in British Commonwealth countries like:
- Canada
- Australia
- India
- South Africa
It's also popular in Asia-Pacific countries that have longstanding cultural and economic relationships with these countries, including Singapore, Malaysia and the Philippines. In addition to the multi-unit residences for which it was originally designed, strata title can assign ownership of the following land-use types:
- Mixed-use
- Retail/commercial
- Short-term residences/timeshares
- Self-storage
- Retirement and active-living communities
- Mobile home parks
U.S. Analogs
While strata title hasn't yet caught on in the United States, it has a couple of close analogs there. The most common of these is the standard condominium title that millions of city-dwellers use. Most condo complexes provide residents with ownership stakes in the buildings and grounds on which their units lie.
The co-op agreements that bind affluent property owners who reside in urban, multi-unit apartment buildings resemble strata title arrangements as well. However, the means by which co-op dwellers can extract value from the underlying structure are more complex and may be subject to the vicissitudes of local legal codes.
Company Title vs. Strata Title
In some countries, strata title is easily confused with company title. There are a few major differences between the two forms of ownership. Most notably, company title does not give any provision for holders to extract value from the underlying property. Instead, it merely confers a well-defined right to occupy a specific unit or suite within the property's building or buildings. Also, individuals who wish to obtain company title for a specific unit must do so through the property's current overseers. In most cases, it's not possible for such individuals to make "under the table" deals with individual unit-owners. In other words, company title functions more like a long-term lease and less like an ownership stake.
Final Thoughts: A Useful Form of Property Ownership
Strata title is a useful form of property ownership for residents and business owners in expensive, competitive real estate markets. With strata title, those who can't afford to wait years to purchase urban land can enjoy the benefits of land ownership while securing a long-term dwelling space. In recent years, this form of ownership has been expanded to benefit owners of a wide range of land types. While it's not currently in vogue in the United States, this could change in the near future.
