A Property Lawyer’s View of Strata Title

Strata title is a form of real property so you’d think that it fits conventional notions of property law.  But it doesn’t. And, as strata title law continues to develop and get developed by the people using it, it diverges more and more from conventional property law.

But is this right?  Should it be more like property law?  Or should it be unique?

At the Griffith University 2011 Conference on strata and community title Cathy Sherry presented a paper on a few aspects of this vexed property law question. 

Called ‘A bigger strata footprint: are we aware of the implications?’ the paper argues that strata title divergences from orthodox property law have the potential to cause serious economic and social harm and identifies two of the ways in which strata and community title differ from orthodox property law.

First, strata and community title fragment titles, creating a quasi-feudal form of ownership where too many people have powers of veto over land and where acquisition of title automatically imposes a range of positive and negative obligations on owners.

Second, strata by-laws go beyond the ordinary principle of land regulation to prevent harm to others, controlling private, self- regarding acts.

It’s a well argued and compelling discussion of the issue that I recommend to anyone with a serious interest in the broader socio-political implications of strata title property.

Cathy Sherry is a Senior Lecturer in the Faculty of Law at UNSW.

Francesco …

11,000 More Strata Owners Coming to Sydney

As soon as the developopers and builders can get them built there will be another 11,000 strata owners in Sydney ... so welcome everyone to Strata Land!!!

Latest figures reveal that 11,025 units were appreoved for construction in 2010 (up to the end of November).  That's more than houses (where 7458 hourses were approved in the same period) and more units than were approved the previous year.  Which is not bad given the real estate challenges NSW experienced last year.

The most popular area for apartment development approval in Sydney was in the central west (mainly in Auburn, Greystanes, Merrylands, Granville and Parramatta where more than 2600 units  were approved). Other hot spots were the St George/Sutherland area (particularly Rockdale and Bexley), Ryde and St Ives.

Despite that, these numbers are still way short of the NSW Government target for urban growth in high density - which is at least 25,000 new units per year.  So, we've got some catching up to do.

Nevertheless, its good news for everyone working in strata since that's 11,000 more people needing strata services of all kinds.


Francesco ...

Tall Tales in Strata Living

Living at the top of the strata title world is exciting but tough.

In Dubai, they've developed the tallest apartment building in the world.  Called Burj Khalifa it's the tallest man-made structure ever built at 828 metres in height.

Construction began in September 2004, the exterior was completed in October 2009 and the building officially opened on 4 January 2010.  It's part of the new 2 square kilometre development called Downtown Dubai near Dubai's main business district.  That's a large-scale, mixed-use development that would include 30,000 homes, nine hotels such as The Address Downtown Dubai, 3 hectares of parkland, at least 19 residential towers, the Dubai Mall, and the 12-hectare man-made Burj Khalifa Lake.

The building includes the Armani Residences which sold for over US$37,500 per m².

That's amazing living at the top of the world (height and prestige).

But the project finished just as the global financial crisis of 2007–2010 started, and with vast overbuilding in the United Arab Emirates, led to high vacancies and foreclosures.   So, rents in the Burj Khalifa dropped more than 40% and 825 of the 900 apartments in the tower around 825 were empty for more than a year.

I'm sure it's fantastic to live there but it all comes at a price.

See you in your apartment in the clouds.

Francesco ...

NSW Tenants get Fresh Laws next Month

New tenancy laws (under The Residential Tenancies Act 2010 and associated Regulations) will commence in NSW on 31 January 2011.

NSW Fair Trading received over 100 submissions from the public and key stakeholders in response to the invitation to comment on the draft Residential Tenancies Regulation. All of these submissions were carefully considered and a number of changes were made to the draft as a result of this consultation. The final Residential Tenancies Regulation 2010 has been approved and published. To view the Regulation go to the Tenancy reforms page on the Fair Trading website.

A video presentation providing an overview of the Residential Tenancies Act 2010 is now available on the Fair Trading website. The Changes to tenancy laws video covers the key reforms that will impact on tenants, landlords and agents at the start of a tenancy, during a tenancy and when a tenancy comes to an end. To watch the video, go to the Tenancy reforms page on the Fair Trading website.

Also available on the Fair Trading website is a series of translated audio recordings of the tenancy video script. In ten languages, Arabic, Burmese, Dari, Dinka, Kirundi, Korean, Mandarin, Somali, Swahili, and Tetum, these resources help migrants, especially refugees and emerging language groups in NSW understand their rights and responsibilities as tenants under the new tenancy laws. The audio recordings can also be accessed from the Tenancy reforms page.

More information about the Residential Tenancies Act 2010 will be available on the Fair Trading website once the new laws commence in late January 2011.

Over 4,000 people attended Tenancy Reform seminars which were held throughout NSW between 13 September and 23 November. The video presentation now available on the Fair Trading website provides a similar level of information to that delivered through the seminars.

Francesco …

From Beer Kegs to Strata Apartments

Just a few blocks from Central Station in Sydney once stood a great symbol of Australia.

It was the Carlton & United Breweries main brewery site.  Occupying a whole block of 5.8 hectares, with buildings over 10 storeys and fronting the mighty Paramatta Road.  I can only image how many millions of gallons of beer left that place and found homes in hearty and healthy Australians.

But things have changed (and are virtually reversed).

Instead young Australians are now finding homes on the site as it is redeveloped into a new symbol of Australia's high density living spaces in an inner urban village.

Frasers Property Australia has been developing Central Park Sydney on the site for a few years now.  But just a few days ago the next stage of the $2 billion development has been approved.  The new approved buildings add 319 one and two bedroom units to the 600 apartments already approved and they expect completion in early 2013.  The new buildings will include elevated neighbourhood gardens, green walls and use solar energy. Plus the development will have its own water recycling and blackwater treatment plant.

And (interestingly despite recent gloom and doom predictions for property) the managing director of Frasers Property Australia, Dr Stanley Quek, said he has “every confidence in the Sydney market” and “there's a great shortage of apartments, there's pressure on rental properties and pressure for people who want to live in the city,".

So maybe we can share a beer or two on the balcony of your new Central Park apartment in a few years.

Francesco …

Here’s your Christmas Present … Cheaper Real Estate

I’ve got a Christmas present for everyone … Cheaper real estate !

Well at least that’s what the real estate media is telling us.

Over the last week I’ve found more than 10 articles reporting falling real estate prices in various suburbs, cities, regions, states and nationally.  Some of them include.

From the New York Times an article called Value Sinking Fastest on Homes Priced Low to Start.

From partick.net an article called Housing Crash Continues -- It's A Terrible Time To Buy An Expensive House.

And, from the Sydney Morning Herald Domain 2 articles called National housing prices set to fall in 2011 and Market Going Down but Softly.

Oh, BTW the present is courtesy of the global financial prices, the US sub-prime market, political instability in Australia, the Reserve Bank and the Big Four Australian Banks.

Enjoy playing with your new presents.

Francesco …

Santa has to live somewhere too …

Now we all know that Santa lives in the North Pole but what if he decided to move … where would he move to and what would he be looking for in a home ?

This paparazzi video catches Santa at a recent open for inspection.

And, the YouTube link is here.

I wonder … could (or would Santa) live in a strata building ???  It would need to have pet friendly by-laws.

Francesco ….

Strata Owners can’t be happy with this News

Amidst the never ending talk (or gossip) about Sydney real estate in the mainstream media is this story in the Daily Telegraph called Real Estate Poison – Where not to buy your home.

In the story property analyst Terry Ryder of Hotspotting nominates Byron Bay, Breakfast Point and Sutherland Shire as places where people should not buy.  And, real estate in those places is variously described as ‘toxic’, ‘no go zones’, having ‘overheated prices’, and experiencing ‘social issues such as pollution, noise and environmental concerns’.

Closer to our strata hearts the article reports that Breakfast Point should have been a real estate hotspot but had failed because of ongoing community disputes about the development.

Breakfast Point is a showpiece large scale re-development of a former industrial site on the Parramatta river by Rosecorp.  So it’s terrible to see such bad publicity for it.

At least Canada Bay Mayor Angelo Tsirekas was positive saying “it was the passion of the people of Breakfast Point, where homes go for a median $1.7 million, that gave residents such a good life".

No-one can be happy to read that stuff about strata apartments.  Not the owners of those apartments and not all of us who work to improve high density real estate outcomes.

Francesco ….

How many times do I need to tell you ?

Are you listening ???

The future of real estate is strata, community and other group titled property. 

No doubts !

No questions !

No arguments !

And, wherever you look at the data, it just proves it more (and more).

Recently information published by RP Data reveals the following interesting high density facts.

• 15 years ago only 25% of capital city home sales were units or apartments whilst today they account for about 35% of home sales
• Despite the proportion of unit and apartment sales moving down since 2005 (after the last significant property boom) from 2009, due to the First Home Owners Grant and sharply dropping interest rates, first home buyers returned to the market resulting in a rebound in demand for units and apartments
• The proportion of unit and apartment sales in the combined capital cities is, as you would expect, higher than across the rest of the nation
• As at August 2010 unit and apartment sales across the combined capitals accounted for 35% of sales compared to the 30% nationally
• In Sydney and Melbourne, there is an even greater proportion of unit and apartment sales. In August, unit and apartment sales in Sydney accounted for 43% of all dwelling sales and 37% in Melbourne

The following graph shows volumes of house versus unit and apartments sales since 2001.

Contact me if you want a full extract from the article.  And, get on the high density craze with me.

Francesco ….

Let's Discuss Mortgage Interest Rates

Everyone’s been very excited about interest rates in Australia and what Reserve Bank action will do to mortgage rates.  And, rightly so since it affects the real estate and property related markets in so many ways (adversely when interest rates increase).

But, that made me think of another issue around mortgage interest … their tax deductibility.

Most countries do not allow taxpayers to reduce their taxable income by the interest paid on a loan which is secured by their principal residence (or, sometimes, a second home).  Australia is one of them.

But some countries do allow it … and they are the Netherlands, Sweden, Switzerland, and the United States.

It’s an interesting proposition with arguments for and against as follows.

Reasons why mortgage interest should be deductible

• Deductibility incentivises home ownership
• In countries that impute tax income on home ownership the deduction is for income-producing purposes
• The increased number of owned properties and the likely higher prices/values of properties will create other taxable income

Reasons why mortgage interest should not be deductible

• Deductibility does not significantly impact home ownership either way
• It allows taxpayers to circumvent the general rule that interest on personal loans is not deductible
• The deduction disproportionately favours high-income earners

Whilst I think that there are social equity issues, in an economy and society where home ownership is a cultural requirement and the key wealth development strategy for most people … I think we should allow home mortgage interest to be deductible.

See you at the ATO refund counter queue.

Francesco …