Labour Law

Why Was Strata Law Required?

Before 1961, there were three main schemes of flat or unit ownership. The first was company title. This was the name given to the most popular form of unit ownership prior to strata legislation. By this method the land and building which usually had title under the Real Property Act 1900 (NSW) was owned by a company specially incorporated under a new South Wales Companies Act. This company would sell shares to a person who would then be entitled to exclusively occupy a specific flat in a building. The shareholder therefore did not own the flat but merely the shares and the Articles of Association of the company declared that the owner of specific shares could occupy and use the flat. The articles would also state that common areas of the building such as footpaths, stairs and gardens were available for common use by all of the shareholders of the company. This scheme still has some popularity, especially in the eastern suburbs of Sydney.

The second type of title involved the owner of the land and building under Torrens title granting a lease of a flat for long periods such as 99 or 999 years, for a nominal rent payable by the lessee. The lessee then made an initial payment at a substantial premium, often equivalent to the estimated market value of the leased flat. Each lease usually allowed use of the common areas by the lessee.

The third type of title involved several people purchasing land and a building containing flats under Torrens title as tenants in common in agreed shares. Each of the owners would then execute a co-owernship or management agreement, simultaneously with the purchase by which the owner would forgo occupational rights in respect of the other flats of the building in exchange for the right to exclusively occupy a specific flat in the building. The agreement usually allowed use of the common property by the tenants in common.

Although it seems strange, all of these schemes still exist today although they have begun to be superseeded by a range of other schemes where were the result of new legislation which was established in New South Wales in 1961 and 1973. To understand why this happened, it is necessary to look back into the history of world war two in Australia which led to a dramatic slow down in the construction of new residential dwellings in Australia as the supply of building materials was directed towards the war effort. Also, there were national security based rent controls which deterred developers from investing when only very limited profits were available from rental returns. After the war, Australia’s capital and labour were redirected towards rebuilding the economy and there was a dynamic demand of the erection of multi-storey residential buildings and falts. However, the three schemes above could not provide the owner of a flat with the same security of title and ownership which was available for freestanding houses. This led to the introduction of the strata schemes management legislation.