Strata Titles Amendments – Leasehold Strata Schemes

FREEHOLD AND LEASEHOLD SCHEMES

We all know about Freehold Strata Schemes. Each lot in a freehold strata scheme is a separate lot with a separate title and the common property is managed by a Strata Company, with some exceptions.

A leasehold scheme, on the other hand, is something new (in WA). In a nutshell, a strata leasehold scheme is very similar to the freehold strata schemes except that:

  • the lots in the scheme are called leasehold strata lots;
  • the lease of the lots in the scheme are for a duration of between 20 and 99 years; and
  • all leases in the scheme will expire on the same day.

FEATURES

The features of leasehold strata lots are similar to freehold lots, ie:

  • the lots are purchased like freehold lots for a lump sum purchase price and duty will be payable based on the purchase price.
  • the lessees are responsible for the payment of rates and taxes.
  • the lessees are free to sell and mortgage their lots just like freehold lots without the consent of the lessor.
  • each leasehold lot will have its own certificate of title.
  • the landlord has very limited rights of re-entry and have no responsibility for the management and upkeep of the lots.
  • each scheme will have a strata company which will manage and insure the common property and generally police the by-laws.

On expiry of the term, the titles for all the strata lots will be cancelled and the land on which the scheme lies will revert to the owner of the strata scheme, unless the scheme is extended, if permitted by the by-laws.

So, for all intents and purposes, it is exactly like a freehold strata lot except for the duration of ownership.

WHY?

Why introduce the strata leasehold scheme?

  • The explanatory memorandum states “affordable housing” and “development of freehold land on strategic sites that the government wishes to retain control over the long term”.
  • It allows for future planning and strategy in terms of land use. For example, if the government owns land which is converted into a leasehold scheme, the land can be redeployed to a different use after the expiry of the scheme.
  • In some countries, strata leaseholds are more common than freehold tenure. In Singapore, for example, leasehold strata ownership is the prevailing method of providing for the housing needs of the population. The principal objective is to provide low cost housing in designated towns in the City.

This article is designed as a brief outline of the some of the amendments to the Strata Titles Act 1985 and is for general information only. It is not legal advice.

The information in this article is derived from various sources, but mostly from Landgate. If you have any questions regarding the amendments, please contact Narinder Jessy on 0421 979 858.

Narinder is the principal of Jessy Legal, which is a property and commercial practice with emphasis on property transactional and commercial leasing advice and representation. For more information on Jessy Legal, visit the website www.jessylegal.com.au