"Company Title" ownership developed as a way of allowing apartments in
flat buildings to be separately owned. It is more commonly found in established
unit buildings, but this method of title is still used to endow "ownership"
in new developments or where an existing block of flats is held under a single
Company Title differs from the more common strata title for unit ownership in
that a Company Title owner does not have a title in any real estate. The Company
Title owner has, rather, a right to occupy a defined area in the company's
building (e.g., apartment no. 27) by virtue of owning a set number of shares in
the company which owns the building (the home unit company).
Benefits of Company Title
- Company Title apartments are generally not as expensive as neighbouring
apartments of comparative quality held under strata title.
- The residency of the Company Title building is controlled as, before
shares can be transferred, the prospective owner must first be approved by
the Directors of the company. These Directors are frequently themselves
residents of the building.
- It is generally far easier to access and address issues with the
management of the Company Title building than with a strata title manager.
- Generally, there is a high percentage of owner-residents in Company Title
buildings (traditionally Company Title units being for residents only).
- Where renting is permitted (it is usually in the form of a licence from
the relevant shareholder to the "lessee"), the tenant will more likely
than not also have to be approved by the company's Board.
Downside of Company Title
- The value of the unit "owned" through shares will not increase at the
same rate as units owned under strata title.
- Some lending institutions are not prepared to advance as much for a
Company Title purchase as a purchase for real estate held under Torrens
Title or Strata Title.
- The Directors must approve your purchaser when you go to sell, which can
restrict the size of your market.
- You must be thoroughly familiar with the home unit company's articles of
association or constitution, as the case may be, with failure to comply with
any particular article having potentially serious consequences, including
the forfeiture of your right to occupy the building.
- The law does not look upon a Company Title unit "owner" in the same
way as a Strata Title unit owner, which may limit the extent to which you
will be awarded relief should trouble arise.
Aspects of Company Title
- No prospectus is required when advertising and selling your shares in the
company. This is specifically exempted by the Corporations Law.
- Stamp duty legislation provides for standard ad valorum rates on the
stamping of Company Title shares so that stamp duty is paid as if the unit
is held under Strata Title (i.e., between 3% and 5% of the purchase price).
- Under conveyancing laws, the Vendor must make the same statutory
warranties and attach the same disclosure documents to any contract for sale
as are found in a contract for the sale of real estate, e.g., a zoning
certificate under section 149(2) of the Environmental Planning and
Assessment Act 1979.
- "Cooling off" provisions, which normally apply to residential sales by
private treaty, do not automatically apply in Company Title sales as the
sale of shares representing the Company Title unit is not caught by the
definition of "residential property" under section 66Q of the
Conveyancing Act 1919.
A Purchaser's Position
In addition to carrying out the normal inspections and searches associated
with buying a property, a purchaser considering a Company Title acquisition
should also inspect the books and records of the home unit company and consider
such issues as :
- restrictions on transfers;
- whether the company's articles prescribe an interview for potential
- whether renting is permitted;
- the purchaser's own approval by the Board of Directors;
- restrictions that will be placed on any tenant and tenancy itself;
- how the right to exclusive possession of the unit is described, e.g., by
the company's articles of association and/or by licence arrangements;
- a shareholder's obligations to make contributions and whether this
obligation is at the discretion of the Directors;
- the current liabilities of the company;
- the adequacy and currency of the insurance effected by the company over
- the provisions made for ongoing maintenance and repairs;
- rights and obligations pertaining to common areas, parking space and
storage space and the use of balconies, etc;
- possible restrictions on auctions and sale/letting advertisements;
- the extent of the Directors' powers.
The purchase of a Company Title unit should not be undertaken lightly, though
nor should the purchase of a Strata Title unit. The relative rarity of Company
Title "conveyances", however, behoves you to have a solicitor cognisant with
the law in this area advise you on your Company Title purchase.
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