Torrens or Strata Title? What Victorian Buyers Should Check

The listing says 'strata title', the townhouse down the street says 'Torrens', and you're trying to work out which one is the safer buy. In Victoria those two labels overlap, and three documents will show you what you'd be buying.

The short answer: Once the plan of subdivision dividing the land into lots is registered, a Victorian strata lot has its own folio (the official record of ownership) under the Torrens system, as a separately registered house block does. What you're really comparing is whether the lot comes with common property, meaning areas shared with the other owners, and an owners corporation, the body that manages those areas. Confirm that from the register search, the plan of subdivision and the Section 32 statement before you sign.

What does Torrens title mean in Victoria?

Torrens title is Victoria's system of registered title to land. It's regulated by the Transfer of Land Act 1958, and each lot or parcel registered under that Act has its own folio in the register. A land title, now called a 'folio of the register', is the official record of who owns a piece of land.

A folio can also show mortgages (a lender's security over the land), covenants (registered promises limiting how land is used), caveats (notices that someone claims an interest in the land) and other encumbrances, meaning interests or restrictions affecting the land. So 'Torrens' tells you how ownership of registered land is recorded. It won't tell you whether you'll share anything with your neighbours.

What is strata title in Victoria, and is it separate from Torrens title?

A Victorian strata lot sits on the same register, so it's registered under the Torrens system once its plan is registered. Consumer Affairs Victoria describes strata title as individual ownership of each unit, with all the owners sharing ownership of the common property, which is managed by an owners corporation. If you'd like the everyday version, here's what strata title means in simple terms.

When a plan of subdivision is registered, it becomes the title diagram, or official drawing, for the new folios. Consumer Affairs Victoria says a buyer of a strata unit receives a certificate of title for the unit at settlement, which may be electronic, and becomes a joint owner of the common property.

What's the real difference to compare?

Compare a lot with no common property against a lot that shares common property. Common property includes parts of the land, buildings and airspace that aren't lots on the plan of subdivision, and may include gardens, passages, walls, pathways, driveways, stairs, lifts, foyers and fences. What counts in any one case depends on the plan.

Your share of the common property goes with your lot. Under the Subdivision Act 1988, the general position is that lot owners hold common property as tenants in common, meaning each has a separate share, in proportion to their lot entitlement (the measure that sets each owner's share of the common property and voting rights). You generally can't sell or otherwise deal with that share apart from your lot. The common property has its own folios in the owners corporation's name, as nominee for the owners (on their behalf), and no certificate of title is produced for them.

Suppose two townhouses look identical from the street. One sits on a plan that marks a shared driveway as common property, and the other's plan creates no common property and no owners corporation. The first buyer becomes a member of an owners corporation and the second doesn't, whatever the brochure says. Read the title documents first, then look at the conveyancing differences when buying a townhouse.

How do you tell which one you're buying?

Three documents answer this, and you should read them together before you sign. Start with the register search, then follow it through to the plan and the Section 32 statement.

1. The register search statement. A title search gives you this document, which shows the current registered proprietors (the owners named on the register), a land description, any encumbrances and the location or source of the diagram. For a lot on a registered plan, that diagram is the plan of subdivision.
2. The plan of subdivision. A plan may create easements (rights for others to use part of the land), owners corporations and restrictions on use, so check the plan for the lot you're buying. If it creates common property, an owners corporation is created automatically on registration. Reading the plan of subdivision shows you where your lot ends and what's shared. Once a plan is registered, lot entitlements and lot liabilities (each lot's share of the owners corporation's expenses) are publicly searchable in an owners corporation search report.
3. The Section 32 statement. This is the seller's disclosure statement under the Sale of Land Act 1962. If the land is affected by an owners corporation, the seller must set out the prescribed information (the details required by law) or attach a current owners corporation certificate, and attach the documents required to accompany a certificate. If the owners corporation is inactive, the seller says so instead, and that includes one that hasn't held an annual general meeting, fixed any fees or held any insurance in the previous 15 months.

If the listing says one thing and these documents say another, raise it before you sign. Our contract and Section 32 review covers these documents together. Some subdivisions have no common property and no owners corporation, and buying a home with no owners corporation raises its own questions about insurance and shared repairs.

What changes with an owners corporation, and what are the disadvantages of strata?

The practical disadvantages of strata title are ongoing fees, rules, shared decisions and insurance arrangements that depend on the owners corporation. The owners of the lots are its members, so you become a member when you become the owner of a lot. Consumer Affairs Victoria says members must pay annual owners corporation fees, levies and charges and obey its rules, which may cover renovations, pet ownership and noise.

You also share decisions about the common property. Your lot entitlement determines your voting rights, and your lot liability sets the share of expenses you must pay. Rules vary between owners corporations, so read the ones that apply to the lot you're considering.

Insurance works differently too. Consumer Affairs Victoria says all owners corporations, except two lot subdivisions, must take out reinstatement and replacement insurance, which is cover to rebuild or replace, for all buildings on the common property. A two lot owners corporation doesn't have to take out that insurance or public liability insurance (cover for claims by other people) for the common property, but those owners risk legal and financial liability and should insure.

If an owners corporation certificate is attached to the Section 32 statement, read it closely before you sign. Consumer Affairs Victoria says it details current fees, insurance cover, maintenance works, proposed works, fee increases and potential or existing legal claims. Our guide on how to read an owners corporation certificate goes through it in more detail.

Frequently asked questions

Is Torrens title better than strata title?

Neither label is better on its own, because a strata lot is also registered under the Torrens system once its plan is registered. You're comparing a property with common property and an owners corporation against one without them. Weigh the fees, rules, shared decisions and insurance shown in the documents for that lot against what you want from the home.

Does strata title mean I don't own the land?

You own your lot, and Consumer Affairs Victoria says you also become a joint owner of the common property. The plan of subdivision shows which parts are yours alone and which are common property. Check where your lot's boundaries sit on the plan before you rely on a floor plan or brochure.

About the Pearson Chambers Conveyancing team

Pearson Chambers Conveyancing looks after residential purchases, sales and title transfers across Melbourne and Victoria. Reading the register search, plan of subdivision and Section 32 statement together is part of reviewing a contract for a home on any type of title.

Sources we consulted

• Victorian Law Reform Commission: Easements and Covenants consultation paper, on the Torrens system and the register
• Consumer Affairs Victoria: owners corporations definitions, including strata title and common property
• Consumer Affairs Victoria: buying an apartment or unit checklist
• Consumer Affairs Victoria: owners corporation insurance
• Sale of Land Act 1962: owners corporation information in the Section 32 statement
• Subdivision Act 1988: owners corporation membership and common property

Check the title before you sign

If you're comparing a unit or townhouse with a house on its own title, our team can read the register search, plan of subdivision and Section 32 statement for you as part of a complimentary contract and Section 32 review before you sign.

Email contact@pearsonchambers.com.au.

General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.