Thursday, January 12, 2006


Anatomy of Strata Developments

The history and creation of condominiums

Combining the advantages of apartment occupancy with those of home ownership has long been a dream of urban dwellers, but direct ownership of "condos" has not been easily achieved. Historically, the law allowed landowners to subdivide their land into two or more separate parcels. The owner of any piece of land also owned the building(s) on it. But what if the owner of a building wanted to subdivide a building into several parts each owned by separate owners? Although owners could subdivide land, the law did not easily permit them to subdivide the buildings into separately owned parts. In Roman Law it was forbidden and at Common Law, though it was permitted, it was generally viewed as dangerously cumbersome in the absence of express statutory authorization. Prior to the introduction of condominium ownership an alternate form of apartment ownership known as ‘Commonhold of Flats’ in England and ‘Real Estate Stock Cooperative’ in the United States were introduced.. Nowadays, laws facilitating such "condominium" ownership have been enacted in both civil and common law lands. ‘Strata Title’ is a form of ownership devised for multi-level apartment blocks, which have apartments at different levels or "strata". Strata title was first introduced in New South Wales, Australia to better cope with apartment blocks. Previously, the only satisfactory method of dividing ownership was company title, which suffered from a number of defects such as the difficulty of instituting mortgages.

A strata development consists of strata lots, common property and common assets. The part of the property that is individually owned is technically called ‘strata lot’, although we normally refer to it with various terms such as ‘condominium’ , ‘condo’ or ‘strata unit’. Every strata owner owns a proportionate interest in the common property and common assets of the strata corporation. The owner cannot separate his or her interest in the strata lot from the proportionate interest in the common property and common assets, with a few exceptions. In practicality this means that the strata lot owner cannot sell only the proportionate interest in the common property and common assets while retaining the interest in the strata lot.

The owner of a strata property has less autonomy than someone who owns a non-strata interest in real estate. This is so because the individual strata ownership is always subject to the broader community interests of the strata development. The strata corporation is based upon a democratic structure, with by-laws that reflect the strata’s community values. These by-laws govern how owners and tenants may use the strata lots, the common property and common assets. The combined owners of all strata lots make up the strata corporation. Each owner has one vote per strata unit, and eligible voters elect a strata council to carry out the day-to-day work of the strata corporation. Major decisions that affect strata owners or their strata lots must be made by the eligible voters in general meetings.

The same legal principles that apply to a 450-unit residential condominium development apply to a 50-unit industrial warehouse complex and a 20-parcel bare land strata or, for that matter, a two-unit duplex strata. The strata scheme is self-enforcing, in that there is no government body that regulates compliance with strata legislation and there are no ‘strata police’. To enforce the provisions of the law, every owner has the right to file an application into Court for an order requiring the strata corporation to comply with the legislation. In addition, certain disputes among owners or with the strata corporation can be arbitrated.

A strata development is not the same as a cooperative housing project. Aside from the fact that the law governing strata corporations is different from the law governing cooperatives, in a housing cooperative a corporation is created to purchase or lease and develop land for housing. The corporation is called an ‘association’. The association owns the lands or buildings or in some cases leases the property from a leasehold landlord. An individual becomes a member of the cooperative by purchasing a share in it. The most significant difference between the two types of ownerships is that in a strata development the owner buys an interest in a strata lot and, thus, owns real estate. Instead in a housing cooperative the member only owns a share in the association. He does not own an interest in real estate. Finally, it is possible for condominiums to consist of single family dwellings: so-called "detached condominiums" where homeowners do not maintain the exteriors of the dwellings, yards, etc. or "site condominiums" where the owner has more control over the exterior appearance. These structures are preferred by some planned neighborhoods and gated communities.

Luigi Frascati

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Real Estate Chronicle

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