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Freehold Title, Unit Title

3 February 2010

Comments and Issues

Freehold Title

The bundle of rights which represent ownership of a property is recorded on a title in a computer register. The title document will record a number of interests (previously known as Memorials) which should be carefully scrutinised as they can impact on an owners rights and the value of the property interests.

Types of interest that can impact on rights of occupation can include Compensation Certificates, Easements (including rights of way and height restriction), Consent Orders and Body Corporate Rules.

This is not an all inclusive list but is indicative of the interests that can impact on the value of a property. Our comments are those of a valuer and not legal experts. If you have any doubts please refer to your legal advisor.

Title Area

The area shown on the face of the title of, say: 660 square metres more or less, may not be the residual area of the registered ownership.  Check the interests on the Computer Register for possible area deductions, such as for roading.

Along with Proclamations and Gazette Notices it is important to review Compensation Certificates for their potential affect on site area.  These certificates are a taking authority's equivalent of a Caveat and denote the presence of an agreement between the taking authority and registered property owners.  The actual document will not necessarily show the details of the agreement, in which case it may also be necessary to obtain a copy of that document either from the owner or the taking authority.  Such agreements can cover a wide variety of interests from the acquisition of all or part of the property through to air or subterranean rights, easements.  Furthermore they may witness vesting or adding of land area from adjoining lands which may have become surplus to a public work.

Briefly in passing beware of freehold stratum estates where a title provides rights to a defined area above, below or between reference levels and not to a full interest. The ownership is of a unit or portion of a larger property.

Easements

Easement documents are usually fairly self explanatory, but on occasions it may be necessary to obtain copies of the relevant survey plans to fully understand who has what rights over what.

Consent Orders

It is important to view all consent orders as they can have quite a dramatic affect on value.  Consent orders are generally created at subdivision or development and usually record territorial authority requirements that impact on property utilisation. Some examples are:

• Specified minimum floor levels (to hopefully ensure a building is above flood plains)
• Requirements to design and build foundations in accordance with engineering design which must be submitted for approval in accordance with geotechnical reports held by the territorial authority
• Limits on building within site areas identified as flood plains
• A restriction on selling surveyed lots separately when they are straddled by a building complex

Unit Title

A unit title is the subdivision of land into units to be individually owned by proprietors with common property to be owned by all of the unit proprietors as tenants in common in undivided shares.  The use and management of the common property will be controlled by a body corporate.

Body Corporate Rules

When considering purchase of a unit title the Body Corporate Rules and amendments thereto need careful scrutiny.  In many cases they alter the management structure and body corporate rights within a unit development, sometimes extending to, specifying, or limiting uses within all or parts of the complex. 

One example which had a considerable impact on value relates to a commercial property where the apparent total site area was some 1,600 m² but about 80% of that was taken up by an accessory unit.  Hidden away in two separate amendment documents to the body corporate rules were requirements that this accessory unit of some 1280 m² be reserved solely for car parking and be available for joint use by all other unit holders.  The significance of these documents had apparently been overlooked by previous owners over a number of years and also did not come to light when the property owner sought and obtained territorial authority concept plan approval to develop a quite substantial commercial building on the property.  Remedies lay in accepting the status quo or the potentially costly and time consuming exercise of obtaining other unit title holder consents to the accessory unit being merged with the principal unit, the unit title plans and titles being changed and the necessary pre-requisite territorial authority consents.

Body Corporate Minutes

It is essential to view the Body Corporate minutes as the registered proprietors (unit owners) are responsible for the costs of common property including the structure as managed by the committee. The minutes will highlight any issues or liabilities for costs to be met by levy charges. Along with the minutes a copy of the annual accounts should be obtained. It is essential that within the accounts is provision for an adequate and protected sinking fund to cover future maintenance of the common property and evidence of an active long term management plan.

 If this is not the case there may be costs by way of unexpected levy. This will have an impact on value.

Unit Title Footprints

While still on the subject of unit titles, it is important to compare the principal unit and accessory units as defined within the Computer Register with their physical counterparts on site, to ensure there is a match.  Dealing with principal units in the first instance, we have identified at least two properties where the principal building extends beyond the boundaries of the defined unit plan principal unit area.  This will impact on perceived value as values will be restricted to actual principal unit area. The costs to remedy the title can be extensive and involve a large number of unit holder consents.

Equally important is the permitted use for accessory units, whether they be for car parks, storage cupboards, stairway or sole or shared use lobby.

An experienced valuer at TelferYoung will be able to help you with these issues and help prevent expensive mistakes

Lewis Esplin

This monthly paper reflects the views of the writer and may not represent the views of all TelferYoung staff.