STP-01 Strata Titles Schemes

1. Introduction to Strata Title Schemes and History of the Strata Titles Act

1.1. Introduction

The Strata Titles Act, 1966 (STA) was the first strata titles legislation in Western Australia. It was introduced to permit certificates of title to be issued for parts of buildings. In effect blocks of home units were subdivided by a Strata Plan, resulting in a title being issued for each lot in the building. Because of the close nature of the living environment and the mutual dependence of one lot on another, the Act set up processes and structures to cope with that environment and to promote harmonious co-existence.

In a strata or survey-strata scheme individual proprietors may own portions of the land, buildings, air and soil comprising the lot; but any part not individually owned is common property.

The main advantage of a strata scheme for a building is that it gives the security of a title for a defined lot plus an interest in the common property. This protects the equity of the owner and any mortgagee of the lot overcoming the problems suffered by the only previous alternatives, tenancies in common or company shares.

The STA provides the vehicle to put in place the lots, common property and management control necessary for an orderly use of the land. The STA standard by-laws ensure standards of behaviour, building maintenance and management are maintained.

An STA subdivision allows the occupiers to share services and facilities and to agree to mutually beneficial restrictions.

The STA provides the best option for multi storey buildings or buildings sharing a parcel of land. Also, because of the nature of the tenure the initial costs for a developer are substantially less for an STA subdivision than for a TLA subdivision and this has made it an attractive development alternative.

Land use in older urban areas is changing, resulting in land owners seeking ways to redevelop their properties. Strata titling is an accepted process in this situation for residential, commercial and industrial land and has gained acceptance in historic building renovation schemes and in rural and resort developments.

2. History of the Strata Titles Act

The Strata Titles Act 1966 (STA) came into operation on 1 November 1967. It was:

"An Act to facilitate the Subdivision of Land in Strata and the Disposition of Titles thereto, and for incidental and other purposes"

This Act was designed to overcome the problem of share or company titles where a proprietor’s interest was not defined by a title to a specific part of the parcel. The 1966 Act allowed for a strata lot to be created with boundaries defined by the Act as the centre plane of the walls, floors and ceilings. On registration of the Strata Plan, a certificate of title was issued for each lot which included common property.

The 1966 Act proved deficient in several areas:

• Unit entitlements were allocated by the property developer or surveyor and were not necessarily based on the relative values of the lots.
• A lot could not include land outside of the building.
• Lot boundaries as defined by the Act were unsatisfactory.
• There were no easy dispute resolution provisions.
• Standard by-laws were deficient.
• It was not possible to re-subdivide land in a strata scheme.
• Exclusive use by-laws could not be registered.

In the early 1980s, a Law Reform Commission of Western Australia Report recommended substantial changes to the existing Act.

The 1966 Act was repealed and replaced by the Strata Titles Act 1985 and it is the current Act. The main changes were:

• Boundaries of lots on all Strata Plans became the inner surfaces of the walls, floors and ceilings.
• Lot boundaries could be defined by a variety of wordings on new Strata Plans.
• Unit entitlement was determined by a licensed valuer on the basis of relative values of the lots.
• It was possible to include part of the land outside of a building as part of the lot.
• It was possible to re-subdivide lots and common property.
• It was possible to consolidate lots.
• Exclusive use by-laws must be registered.
• Lots could be created without buildings on them (Vacant Lots).
• A Strata Titles Referee was appointed for dispute resolution.
• The standard by-laws were revised.
• A 12-month period from the appointment date (1 July 1985) was given to register any unregistered Strata Plans lodged under the 1966 Act. This was later changed and an extension was given to 30 June 1987. Notice was sent to the owners of the affected Strata Plans that if not registered by 30 June 1987 the Strata Plan would become Null & Void. In effect those strata plans are now treated as cancelled Strata Plans.

In 1992 a Consultative Committee consisting of industry representatives was formed by the then Department of Land Information to recommend legislative changes. This Committee formulated changes over the next 5 years that were designed to improve the Act to meet modern community expectations.

A notable change considered beneficial to all strata lot owners was the compulsory requirement for common insurance by the strata company. This compulsory insurance coverage was for building replacement and public liability and was designed to protect all lot owners.

This consultative process resulted in the Strata Titles Amendment Act 1995 being passed by Parliament in 1995 and proclaimed on 14 April 1996. The main changes were:

• The introduction of Survey-Strata Plans.
• Management statements.
• New plan and document forms.
• Compulsory disclosure of information on the sale of strata properties.
• Standard by-laws for all strata companies.
• New types of resolutions.
• Stronger powers for the Referee.
• Standard Schedule 1 and 2 by-laws common to all schemes.
• The ability to register within a 12-month period, 1966 STA by-law resolutions that created exclusive use and other rights or privileges that could not have been previously registered.

As a result of these changes the issue of compulsory common insurance became a focus of intense community debate. This caused considerable political pressure that resulted in a “Task Force” being appointed by the Government. The job of this group was to develop legislative methods of overcoming community concerns at the changes.

This resulted in legislation being passed in December 1996 and being proclaimed on 20 January 1997.

The main changes introduced were:

• Automatic changes to single tier strata schemes of 5 lots or less so the boundaries were changed automatically to the external surfaces of the buildings unless an owner in the scheme objected prior to 20 July 1997.
• The option to merge common property land with lots by resolution and without local government or WAPC consent in schemes registered before 1 January 1998.
• The ability to convert existing Strata Plans registered before 1 January 1998 by unanimous resolution to Survey-Strata Plans without local government or WAPC consent.
• The option of individual insurance.
• The choice of opting out of insurance cover.

These changes have given lot owners simple and cheap solutions to having common property included as part of their lots. This, combined with the individual insurance changes has provided more flexibility to strata lot owners to select what they consider best for their scheme.

Since these changes the Strata Titles Consultative Committee has been disbanded and a group known as the Community Titles Advisory Committee (CTAC) was appointed.

3. The Community Titles Advisory Committee

The role of the CTAC was to continue to improve the legislation to meet industry and community needs.

The committee had representatives from:

• Landgate
• The Department of Planning
• The State Administrative Tribunal (the Department of Justice)
• Western Australian Municipal Association
• Water Corporation
• Real Estate Institute of Western Australia
• Spatial Science Institute
• Law Society of Western Australia
• Australian Institute of Conveyancers WA Division Inc
• Urban Development Institute of Australia (Western Australian Division Inc)
• Strata Titles Institute of Western Australia
• Representatives of owners of lot(s) in single tier and multi-tier strata schemes
• Chairperson appointed by the Hon Minister for Lands
• A reference group involving numerous organisations was identified to assist the Committee.

The Committee considered the following issues:

• Upgrading the STA.
• Conciliation service.
• Termination of schemes.
• Staged developments.
• Multi-tiered schemes and Management Statements.
• The ability to strata part of a building.
• Leasehold strata.
• Separation of title and subdivision issues from management and resolution of dispute issues.

In the early 2010s, Landgate set about delivering major reforms to strata. The aim of changes was to resolve problems for people in strata and introduce new forms of land development to drive economic growth and support the Government’s delivery of affordable housing and METRONET station precincts.

The way strata was being used and developed had changed since the Strata Titles Act 1985 was enacted. The reforms aimed to resolve problems for people in strata by providing a modern, transparent and accountable legislative framework for creating and managing strata. The reforms followed six years of consultation with a wide range of community, government and private sector stakeholders to get the best outcome for all.

In 2018, Strata’s importance to the Western Australian economy was underlined by over 300,000 strata lots situated across the State that were worth more than $170 billion. Strata also represented almost half of all new land subdivisions in WA. With WA’s population predicted to rise to 5.6 million by 2056, the reforms were needed to support the delivery of more affordable and sustainable community living spaces.

The reforms were delivered through two separate Acts known as the Strata Titles Amendment Act 2018 (STAA) and the Community Titles Act 2018. Community schemes provide for community ownership of common facilities across neighbouring schemes, necessary for creating the high-density urban villages on which the new METRONET station precincts are modelled.

Problems before the reforms were resolved by:

• Improving the management of schemes - Strata managers to be more regulated and accountable and by-laws more easily enforced. Owners able to have more say in how their scheme is managed and improved, including retrofitting their properties with solar panels or disability access. It also became easier to facilitate ongoing maintenance of schemes.
• Providing better information for buyers - Buyers to receive better information about the strata lots they are buying.
• Simplifying dispute resolution - Dispute resolution to become simplified with the State Administrative Tribunal (SAT) becoming the one-stop shop for strata disputes. SAT's powers to be strengthened to resolve strata disputes quickly, cheaply and effectively.
• Introducing safeguards for termination of schemes - New safeguards for owners introduced to enable a transparent termination process to be followed, which includes a full procedural and fairness review by SAT. This process provides owners with an avenue to terminate and receive fair market value before their building becomes too unsafe or expensive to maintain.
• Enabling more flexible staged subdivision - Streamlining approaches for achieving consent to vary existing strata and survey-strata schemes to provide developers with increased flexibility and reduction in costs and time associated with staged subdivision.
• Introducing leasehold schemes - A leasehold scheme is a strata or survey-strata scheme created for a fixed period, ranging from 20–99 years. It operates under the same governance framework as a freehold strata scheme with some variations. A lot in a leasehold scheme may be bought, sold and mortgaged just like a freehold scheme, however the scheme and all lots within it exist until the expiry day. Leasehold schemes are useful for providing affordable housing and developing freehold land on strategic sites that the government and/or developer/owner wish to retain control of in the long term.

Other changes resulting from the commencement of the STAA included:

• The concept of registering a strata titles scheme by registering the scheme documents being the:
  • the scheme plan,
  • the schedule of unit entitlements
  • the scheme notice (containing the scheme name, address for service of the strata company and, if applicable, that the scheme is a leasehold scheme)
  • scheme by-laws, and
  • strata lease document (leasehold schemes only)
• changes to the scheme plan such as:
  • indicating who manages and controls encroachments shown on the plan
  • lot numbering no longer requiring to be consecutive starting at 1
  • building lot boundaries no longer requiring to be defined by the prescribed wording
  • plan features, such as the north point, no longer a regulated requirement
• introducing short form utility service easements, easements in gross and restrictive covenants
• addition into and removal of common property from a scheme requiring subdivision approval by WAPC
• all forms associated with strata plans and dealings no longer being regulated forms
• termination of all schemes requiring the lodgement of a Deposited Plan depicting the parent lot and notices of the completion of each stage of termination at Landgate
• survey-strata plans becoming subject to s.146 P&D Act expiry

4. Strata Titles Schemes

A strata titles scheme refers to a strata scheme or a survey-strata scheme. The land parcel over which the scheme fits must be a whole or complete freehold land parcel i.e. it cannot be in separate portions. In some cases, a Deposited Plan of amalgamation of more than one parcel is the forerunner to registering a strata titles scheme e.g. where party wall lots are involved on parent titles, the party wall lot(s) must be included into the new subdivisional lot with the interests (easements for party wall rights) either being brought forward, removed or modified as applicable.

5. Types of Schemes

A strata titles scheme may be either:

• a freehold scheme; or
• a leasehold scheme.

The majority of the Strata Titles Act 1985 (STA) applies to leasehold schemes in the same way as it applies to freehold schemes. freehold and leasehold schemes can be strata (built strata) or survey-strata schemes.

5.1. Freehold Schemes

A freehold scheme is a strata titles scheme where none of the lots in the scheme are subject to a strata lease or have a leasehold certificate of title. All schemes registered before the commencement of the 2018 amendments to the STA are freehold schemes. In a freehold scheme:

• there is no separate title for the parcel subdivided by the scheme; and
• each lot is a freehold lot; and
• the parcel cannot be dealt with (including by registration of a mortgage) or disposed of under the Transfer of Land Act 1893 (TLA).

5.2. Leasehold Schemes

A leasehold scheme is essentially a strata titles scheme that is set up for a fixed term of between 20 and 99 years. The scheme, all of the lots in the scheme and the strata leases for each of the lots all expire on the expiry day for the scheme. The owner of a lot in a leasehold scheme has a long-term lease of the lot (a strata lease), which they can transfer and mortgage the lot without the lessor’s consent, the lessor being the owner of the parent parcel of land.

A leasehold scheme is registered when the following scheme documents are registered

• a scheme notice (which must specify the expiry day for the scheme);
• a scheme plan;
• a schedule of unit entitlements;
• scheme by-laws;
• a strata lease for each lot.

Refer to STR-02 Lodgement and Registration of New Strata/Survey-Strata Plans

5.2.1. Benefits

Crown land in station precincts can be converted to freehold land and transferred to a State agency (e.g. Housing Authority). The State agency can then subdivide that land with a leasehold scheme and sell the lots, using that money to offset the cost of building the station. The leasehold scheme and strata leases in the station precinct will end on the expiry day for the scheme at which point the land and buildings revert to the State agency. With leasehold schemes the State can retain control of strategic sites at station precincts and still generate much needed revenue.

Leasehold schemes give the freehold land owner an opportunity to develop land which they otherwise wouldn’t or couldn’t develop. This is of particular benefit to organisations such as churches and universities who need to retain ownership of their land and make it available for development. Leasehold schemes also offer an alternative form of tenure for retirement villages.

Further advantages of leasehold schemes include:

• local government rates and land tax liability will be specifically addressed, removing uncertainty that can exist in a leasehold environment
• a leasehold certificate of title will simplify financing, as lending bodies recognise certificates of title and mortgagees will have the protection of a power of sale.

5.2.2. Features of a Leasehold Scheme

In leasehold schemes:

• a lot within a leasehold scheme will have its own certificate of title
• there will be a separate certificate of title for the registered proprietor of the parcel of land (owner of the leasehold scheme/lessor) over which the leasehold scheme is registered
• the scheme is created for a fixed-term (from 20 years to a maximum of 99 years)if the scheme has appropriate leasehold by-laws approved by the Western Australian Planning Commission, the expiry day of the scheme may be postponed to a later day specified in the leasehold by-laws provided the later day is not more than 99 years after registration of the scheme
• people can buy and mortgage a lot within the leasehold scheme
• an owner of a lot (lessee) within the leasehold scheme can easily sell that lot, without needing the consent of the owner of the leasehold scheme (lessor)
• the owner of the leasehold scheme is entitled to the reversion in the land upon expiry or termination of the scheme.