The 'other' titles of Ownership (by Sue Green for The Age / Domain.com.au)

You say "strata", they say "stratum". Rather than call the whole thing off, be sure you understand exactly what your money is paying for.

For most home buyers, paying off the mortgage means holding title to your little chunk of Australia. But for some apartment owners, even paying cash does not give title to land or buildings.

Their apartments are held through a company share system popular until 1960 - a company owns the land and buildings and apartment-buyers acquire a block of company shares entitling them to live there. It is a system that these days can mean lower prices, fewer buyers and slower selling times.

''The company owns everything - the buildings and the land,'' says Andrew Whitelaw of TressCox Lawyers. ''The fact is that all you own is shares in the company.

''The shares you have give you exclusive right to a piece of the building. You don't get a title.  That's where the banks have a problem with it." In suburbs such as St Kilda and East Melbourne with heritage blocks, company share apartments are not uncommon. Less common, but still found, are stratum apartments.

The state manager for strata managers Whittles Australia, Neville Sanders, says stratum title -  a mix of company share and strata title where the owner has title but a company owns the common property - began in 1960 but was overtaken by the Strata Titles Act in 1967.

These distinctions may seem semantic. But with some banks refusing to lend on these apartments, for buyers they can mean the difference between obtaining a mortgage and not. For owners they can affect capital gain and ease of selling.

''ME Bank does not lend on company share title, because they provide less certainty in terms of security. We occasionally lend on stratum on a case-by-case basis,'' an ME spokesman said.

Some do so only case-by-case - NAB, for example - or require a larger deposit.

A Westpac spokeswoman said it would not lend on stratum apartments and loaned a maximum of 85 per cent loan-to-value ratio (LVR) on company share.

An ANZ spokeswoman said it loaned to a maximum 70 per cent LVR.

Mr Whitelaw says buyers of company share or stratum apartments should know exactly what they were buying - that company articles applied and directors would make decisions about company operations. But that need for ''eyes wide open'' also applied to owners corporations.

It was generally a good idea for company share and stratum apartment owners to convert to strata title.

''The owners corporation is a good system, which brings equity to the way that things operate,'' Mr Whitelaw says.

''You are only liable for the cost of running the owners corporation on the basis of your lot entitlement.''

Owners had to agree on significant decisions, unlike company share owners,  Mr Whitelaw says.''

If the company says, we are going to carry out a $1 million upgrade, the directors are empowered to do so, they just raise the money, they are not required to go back to the shareholders,'' he says.

The strata shuffle

Although company share apartments generally command lower prices than strata title, Biggin & Scott St Kilda director Carl Hexter says this is not an across-the-board percentage because of historic apartments' ''emotional pull''.

Mr Hexter says the larger deposit generally needed for company share apartments limit the buyer pool and they sometimes take longer to sell. ''It is just something that we work with,'' he says. ''We use a mortgage broker when needed, to help clients find their finance if they get into issues with their lender.''

Mr Hexter says some St Kilda blocks are converting to strata title (24 Robe Street did so recently), with their owners seeking to add value. But it could be difficult to get all owners' agreement, particularly if some are older, with no vested interest in potentially increasing their apartment's value.

Paul Caine, of Paul Caine Real Estate in East Melbourne, says company share flats were traditionally deemed 20 per cent less valuable, particularly as the boards of directors could refuse to allow renting. But that was now unusual and investors who had bought cheaply made an immediate 20 per cent if the block converted to strata title.

In East Melbourne, company share flats were mostly older, charming and well built, so some commanded a premium over modern flats.

Neville Sanders, state manager for strata managers Whittles Australia, says several blocks it manages have converted to strata title. Banks holding mortgages also had to agree, but were likely to prefer a modern title. The change ''would lift the value and saleability of the lot''.

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