Strata title is a recent phenomenon, created with the introduction of legislation in 1961. Strata title now covers nearly all apartment blocks and unit properties. Prior to 1961, there was no strata title, and all these types of property were covered by company title. This is less common today and most units have converted to strata title (though company title still exists in certain places). Prospective purchasers often have an aversion to company title properties and steer clear of them. In reality, it is just another form of property title, alongside the widespread torrens title and strata title properties, although it has unique features.
What is Company Title?
Company title emerges when a company owns a unit complex. The usage of the individual units in the complex is granted by the purchase of shares in the company that owns the complex. An example would be a company that owns a unit complex that has four individual apartments. There are forty shares in the company and each owner purchases ten shares. Each owner purchasing ten shares is entitled to the use and enjoyment (but not ownership) of an apartment in the complex. It is important to re-emphasise here that the owner of the unit does not enjoy title that he/she would normally enjoy if it was a strata unit. Instead, they own a portion of the shares in the company and this allows them to use the property. The company itself has the title.
An advantage of company title is that it is valued less than an equivalent strata unit. This is because there is reduced administration fees and the nature of the title brings the value of the property down.
There may be long term advantages with company title property, as it may be converted into strata title and increase the value of the property.
The possible restrictions on the use of the property may suit some purchasers. For example in some company title properties, rules could be imposed on shareholders to regulate security of the building matters.
A disadvantage of company title is the possible restrictions on the use of the unit or apartment being purchased. As a company owns the complex, it is governed by a constitution or articles of association. This is unlike strata title, which is governed by legislation and by-laws. This means that it can be more restrictive and can limit what a potential purchaser can do. It is important for a prospective purchaser to review a company title constitution with a solicitor, so they are aware of what these restrictions will be.
Another disadvantage is the approval process that may be required to purchase the shares of the company. When purchasing a unit in company title, it is subjected to the approval of the Board of Directors. This means that while a prospective purchaser may have all the capital required to purchase a unit, it does not mean they will be able to purchase it. The approval process from the Board of Directors changes from company to company, and it is crucial for a purchaser to discuss this process with their solicitor, who will be able to advise them of the requirements.
Consulting a Solicitor
As seen above, people should not be turned off by a company title property. It is simply another form of property title with its own unique features. A potential purchaser should discuss with a solicitor whether this type of property is right for them. If you would like more information on how we can assist you with your matter, do not hesitate to contact us on 9963 9800 or via our contact page.