What does strata title property mean for the commercial sector?

By Greg Bell

Businesses looking for new Gold Coast property have a number of options available to them. With retail, office and warehouse space all available, an organisation can choose almost any type of premises they desire. However, there are also different types of ownership options available to business owners. Here we take a look at what strata titled property can mean for commercial investors.

What is strata property?

In strata properties, individuals or businesses own separate lots within the property, and share ownership of all common areas. A 'lot' is the unit of ownership, such as office space in commercial strata. A residential strata property may be split into multiple apartments. Strata titles are common in many types of property and can be mixed use.

There is usually a strata levy payable by all owners to cover general maintenance and management of common areas. Each owner is automatically part of the owners corporation – a legal body automatically created when a building contains commonly owned property. The corporation ensures that by-laws around the use and maintenance of the building are enforced, and may work to resolve owner disputes. Strata management can be quite complex and so is sometimes outsourced to a professional property management company.

Australian strata property first came about in 1961 in Sydney, and many buildings are now designed as strata properties from the early stages of development. However, a building that is not already strata but may be converted if there is written consent from all current tenants. There is no obligation for tenants to agree to the change.

What does strata title mean for commercial properties?

Benefits in time and money

In the commercial sphere, strata is a flexible option as businesses can buy a lot that suits their requirements without having to invest in an entire property. Strata properties are often cheaper than freehold options, and land tax is usually low or non-existent, which further reduces costs. Each separate title holder pays their own council rates and water rates which means they are not funding services used by other companies.

Property-wide communal services which equally affect all owners, such as security and common area maintenance, are included in the strata levy. Provision of these services is organised by representatives of the owners' corporation or the property management company, which lessens the burden on individual business owners. 

All owners usually share the cost of commercial strata insurance – a legal requirement. The insurance covers all things related to the common property such as damage, mechanical failures and legal liability. It does not replace other types of business insurance that individual owners should take care of.

Constraints of strata title ownership

Given that the exterior of the property is jointly owned by the corporation, individual businesses are not able to manage their external signage as freely as they may be otherwise. Erecting company signage will have to be approved by the owners' corporation. 

As well, any change in use of the lot or bigger structural changes must be approved, which can cause delays. Strata owners can lease their lot, but again this must be approved by the corporation and tenancy details must be supplied.

There may be some restrictions around common use areas that businesses find difficult. For example, individual title holders may have their own set allocation of car parking spaces, but no one will have priority over common spaces.

Because the exterior of strata property is jointly owned, expansion and development opportunities are reasonably limited. An owner is restricted to enhancing their own lot, or seeking the agreement of the owners corporation for bigger changes. 

If you are looking for an opportunity to invest in Gold Coast commercial property, have a chat to the Ray White Surfers Paradise team today. 

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