Buildings and other Strata

Buildings and other Strata

1.1 Land and Buildings

If you have built an apartment block on your land, you can transfer the ownership of individual apartments to other people. Now, these people are owners of the apartments, but you remain owner of the land on which the apartment block is built – and of the airspace above it, (unless you have specifically transferred the ground or the Airspace to someone else).

When the entire building has been disposed of (whether in separate units or as a whole), you retain ownership of the ground and airspace.

1.2 No inference that Top Floor carries Airspace and Bottom Floor carries Ground

It is sometimes asserted that the top floor of a building carries the airspace, and the bottom floor carries the ground. This is only so if the transfer of the floor in question includes the item in question. The intention to include the item would not be inferred without evidence, since there is no apparent reason to assume such an intention. It is, indeed, more logical that both would be considered to be either part of the common areas, or to be retained by the vendor as a residual property.

1.3 Freehold Interest in individual Apartments

Can you have Freehold Owners of apartments? In some jurisdictions, this is not permitted, but in ours it is.

We should bear in mind, however, a difference between freehold ownership of an apartment and freehold ownership of land. Land lasts forever, but all buildings have a limited lifespan.

1.4 How “Land” includes “Buildings”

The Registration of Title Act 1964 says that “land” includes, inter alia, “houses or other buildings or structures whatsoever and parts of any such houses … whether divided vertically, horizontally or otherwise” (S. 3(1)).

Under this definition, an apartment is included in the definition of “land” and a person can, therefore, be registered as owner of (an Interest in) an apartment.

When we come across a definition like this in an Act, we have to bear in mind that the definition only applies for the purpose of the provision to which the definition refers. In this case, an apartment is only included in the definition of “land” for the purpose of allowing the provisions of the Act relating to ownership to be applied to an apartment.

In other contexts, of course, “land” does not include “buildings.” We often say, for example, that a building is built on land. In this context, “land,” obviously, does not include “building.” In short “land” only includes “building” (and apartment, etc), where the context requires and reason permits. In all other instances “land” does not include “building.”

1.5 Units, Common Areas and Ground of Buildings

In respect of buildings, we often talk of the ownership of the land on which the building stands as a separate matter from the ownership of the building and of each separate unit of the building. In respect of a block of apartments, we have the ownership of the individual units, the ownership of the corridors, stairs and other common areas, as well as the residual ownership of the ground and airspace. Unsold apartments, or apartments retained by the Land owner, would form part of the residual property.

When we talk of “Ground Rents,” we use ground in a different sense. In this case a tenant of Land on which there is a building will hold an Interest in the entire horizontal and vertical space of the Land, including the building. “Ground Rent,” however, infers that the building was erected at the cost of the tenant, and that the rent payable to the landlord relates only to the value of the ground and not the value of the building.

1.6 Easements, Covenants and Conditions

An owner of an apartment will be able to make no use of his property if he does not have access to it, nor will he be able to enjoy it satisfactorily if he does not have access to electricity and water and other utilities. An apartment, therefore, normally has a bundle of easements attached to it. The first deed of conveyance of the apartment will inevitably contain several easements for the benefit of the apartment, as well as covenants and conditions relating to the use of the retained land by the vendor. There will also, undoubtedly, be easements affecting the apartment, requiring the passage of water and other utilities unimpeded through the apartment for the benefit of other apartment owners and the vendor, and the apartment purchaser will also be bound by covenants and conditions relating to how he uses the apartment.

1.7 Ownership of Units in Demolished Buildings

Eventually every building will be demolished or collapse.

What happens to the freehold interest in an apartment, when the building is no more? What does the apartment owner now own? There appear to be 3 possibilities:

1.    Since the apartment is no more, he owns nothing, or

2.   He owns the airspace formerly occupied by the apartment, or

3.   He owns a right to enter the Land and, in cooperation with others, rebuild his apartment.

The present Law appears to be undetermined about this. It may well be that the documents of title would need to be scrutinised to ascertain which effect was intended:

§   Did the document of title give the apartment-purchaser title to the apartment and nothing else, or

§   Did it give him an Interest in the Land carrying the right of entry in order to rebuild, or

§   Did it, indeed, intend to give ownership of a block of airspace?

If the issue is ever resolved in a court action, there is a probability that the decision would be definitive only in respect of the particular circumstances of the case at issue, and not necessarily apply to all cases. It might be said that each case would have to be dealt with on its own merits.

There is scope for the problem to be addressed by legislation.

In the next paragraph I treat, briefly, with the arguments in favour of each possibility.

1.8 The Logic, the Equity and the Practicality

The first option listed above is the most logical. The owner had an apartment. The apartment is no more. He now has nothing. If his document of title, however, gave him the right to enter on the property for the purpose of building the apartment, this right might persist, although it could be open to question whether it was exhausted on the occasion of the first building.

The second option gives rise to the difficulty of occupying and controlling his airspace in the absence of a physical entity occupying the space. Perhaps in some future time people will live in vehicles that can hover in air and will purchase blocks of airspace in which to park. At the present time, however, there appears to be no physical way of taking possession of airspace independently of the Land under it and a structure occupying it. Since possession is fundamental to the notion of ownership, logic says that this option is a non-runner.

The third option might come into play, even if a right of entry to build was not expressly granted. Perhaps the court would infer an equitable right to enter and build.

In practical terms, after a building is obliterated, there will be great difficulty in re-developing the site unless the interests of the strata owners are defined and capable of being handled succinctly. It is probable that some of the owners will be difficult to trace, since they will have taken their insurance money and relocated themselves elsewhere.

1.9 Hong Kong example: each Building has a Company

Hong Kong possibly has the germ of a solution. Each high-rise building in that municipality is required to have a company associated with it, and the owner of every apartment or other unit is deemed to have a share in this company. However, the function of the company is the repair and maintenance of the building: it is not described as owning the Land when the building is demolished or having a re-development function. A slight extension of the idea might solve the problem: if each multi-storey building were obliged to have a company attached to it which would own the residual property, then, on demolition of the building, the company would be able to redevelop the Land, and one or more missing apartment-owners would not frustrate the redevelopment project: each would have a vote in the affairs of the company, which could, however, make decisions in the absence of some members.

1.10 Claims to Apartments in Re-built Buildings

It is very unusual for a demolished building to be rebuilt exactly as it was. Let us suppose that our building has been so rebuilt, and that the second option above applies, i.e., that each apartment owner owns his own airspace.

Will your apartment-owner now own the identical apartment that now occupies his airspace? This is not certain. The new apartment, even if identical to the old one, is a new thing and not the same thing as the old apartment. In order to be certain of his ownership of a new apartment in place of the old, he (along with other apartment owners) would have to contract with and pay a builder or developer to construct the new apartment block, including his apartment. The rebuilt apartment, of course, is a new thing, which he has purchased anew by paying the builder.

1.11 The Twin Towers and 9-11

When the Twin Towers of the World Trade Centre in New York were demolished on 11 September 2001, what happened to the ownership of individual offices and apartments in the Towers?

In that instance, there was only one Freehold owner: the Port Authority of New York, which owned the land on which the Twin Towers were built. The individual offices were held under leases, which were terminated by the destruction of the buildings. The Leasehold Interests in the separate units were extinguished by the destruction of the Towers, although somecontractual aspects of the Leases may have continued to have effect.

The Port Authority had granted a 99 year lease of the sites and buildings. The Lessee was, under the terms of this Lease, released from its obligations under the Lease, but retained the right to redevelop the site[1].

There is, therefore, in the case of the Twin Towers, no legal problem with redeveloping the site. The position would be less clear if individual offices or apartments in the Towers had been held by Freehold owners. Would the courts view these units as no longer in existence and their owners, therefore, as having no further right in the Land, or would it recognise a continuing Interest in the site of every former Freehold owner of an office, thus making the redevelopment problematic? I believe that this question is still to be determined.

1.12 Ownership of Apartment bought from the Plans

Apartments are often bought off the plans, i.e., before the apartment block is built, and, on the face of it, it may appear that the purchaser is, indeed, buying a block of empty airspace.

However, in this instance, the purchaser is doing two deals, not one. He is buying an Interest in Land from the Land Owner,[2] while at the same time he is entering into a contract with a builder who undertakes to construct an apartment. What he is, in fact, buying, is not a block of airspace, but a specific physical apartment, with a specific location on a specific floor of a building. He never takes possession of his airspace, what he takes possession of is the physical apartment, when built – if he is satisfied that the contract has been completed satisfactorily (not necessarily perfectly) by the builder.

What is the position if the actual building varies in some detail from what was depicted in the plans? If, for example, the floors are physically one or two feet higher or lower than depicted, or if the latitude and longitude of the physical apartment differs by a metre or two from the position shown on the plan, or if the floor area of the apartment is a square metre or two smaller or larger than shown on the plan? (I have often heard such complaints being made). Would a court decide that the building be fixed by raising or lowering the floor and ceiling to the correct position above sea level, and the walls of the apartment be shifted to the right or left by one or two feet? I don’t think so. The court may decide that the vendor or builder has done the purchaser wrong, may allow the purchaser set aside the contract and conveyance, or may oblige him to continue with the contract, while receiving some money compensation for the unsatisfactory work. It will not, I would say, order the reconstruction of the apartment to comply with the plan.

1.13 Summary

Ownership can be claimed of a stratum division of land, such as an apartment in a multi-storey building. While a Freehold Interest can exist in such a stratum division, we must bear in mind that buildings do not last forever. The Law is undefined as to whether a freehold interest in part of a building continues to exist after the building has been demolished.