Property Lawyers, Sydney and NSW

What is Company Title and Strata Title?

Company Title grew in popularity in the 1920’s and 1930’s as a way to provide for separate ownership of apartments. With Company Title the owner does not have title in real estate but owns shares in a company. The shares entitles the owner the right to occupy a defined area (usually an apartment in the building) owned by the company. Unlike with strata title, the buyer of a company title home unit does not receive a certificate of title to the property. Instead, they receive a share certificate.

The Company constitution sets out the rules for the transfer of shares, and often may require the transfer of shares to be approved by the Director of the Company. There may also be various limitations set out in the Company constitution.

In contrast, Strata Title was developed in the 1960’s and allows for a legal interest in the real estate, defined by the registered strata plan, to be purchased. The purchaser receives a Certificate of Title for the lot number (of the Strata Plan) that they have purchased. Note that a strata title purchaser does not need the permission of the Owners Corporation (Body Corporate) to purchase a strata apartment.

Advantages Of Company Title

• Company title apartments are generally not as expensive as comparable strata apartments
• If you are one of the Directors of the Company owning the property or have influence over the Directors, you have control on who may reside at the units/apartments as any prospective owner must first be approved by the Directors of the company
• 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.
• It is often easier and simpler to address issues with the management of the Company Title building than with a Strata Title manager

Disadvantages of Company Title

• Prospective purchasers of company title units should also be aware that some lenders are reluctant to lend as much for a company title purchase
• Conversion from company title to strata title is possible although the process may be time consuming and costly
• The value of the unit owned through shares is unlikely to increase at the same rate as units owned under strata title
• Some lending institutions have more restrictive lending criteria for units subject to company title
• The company directors must approve the incoming purchaser of the company title unit and this can restrict the size of the market for the seller
• A company title owner would be advised to be thoroughly familiar with the company’s constitution as failure to comply with the constitution may have potentially serious consequences, including the forfeiture of the right to occupy the property
• “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.

Additional Searches Required for Company Title Properties

When buying a Company Title Property, additional searches and investigations should be done. At Taylor and Scott Lawyers, we have the experience and expertise to assist you when buying a Company Title property.

At Taylor and Scott Lawyers we investigate the Company Constitution and Registry if there are any:

• restrictions on transfers;
• whether the company’s articles prescribe an interview for potential purchasers;
• whether renting is permitted and if allowed if there will be any restrictions;
• how the right to exclusive possession of the unit is described;
• shareholder’s obligations to the company;
• insurance held by the company for the building;
• provisions for maintenance and repair;
• obligations and requirements for common areas, garage spaces etc
• the extent of the Director’s powers.

Property is a physical or intangible entity that is owned by a person or persons. In this article, we determine what is real estate, which is a combination of land and improvements to or on the land which a persons owns by right. This can be a strata unit, warehouse, residential dwelling, commercial property, vacant land, Crown title, leasehold interest and perpetual leasehold interest. We will not go into great details as to all of these systems, but discuss the main property types here.

Title systems under the Real Property Act 1900 cover such titles as Strata Titles, Community and Neighbourhood title, Torrens Title.

Generally:
At the time of colonisation in Australia, all land was owned by the Crown (1791 to 1831). The governors of the time (Macquarie and Phillip) issued land grants on behalf of the Crown. A great development took place in 1825 when the system for selling land to individuals for value was introduced. Free grants were abolished however the Crown still retained rights under the initial grants, which is most cases ran with future owners of the land (i.e. notification on the Certificate of Title stating “Reservations and Conditions under the Crown Grant” or “land excludes minerals and is subject to a right to mine” which provided that all minerals below a certain level were owned by the Crown, gold, oil). There are also certain statutory rights, or easements that you cannot disturb the soil to such as extent that it interferes with your neighbours statutory right of support. Natural acts of God such as erosion are an exception.

Torrens Title
The Torrens system registration was introduced by Sir Richard Torrens in 1858 to establish a system of registration of land and in NSW in 1900. Upon registration of the land at the Land Titles Office, the owner received a Certificate of Title authenticating ownership of the land. The NSW Government guarantees the validity of the title. This is the most common form of title and is a system of title by registration and security of title is not guaranteed until it is recorded in the Land Titles Office. This is an important issue as it not only refers to the transfer of land, but also to any mortgage, discharge of mortgage, caveat, naming a few dealings, attached to the land.

Old System Title
This transfer of title was known as a “Conveyance” in that the vendor must “convey” good title to the purchaser. This system of transfer, was done by way of Deeds and recorded at the NSW Land Titles Office and are recorded in the General Register of Deeds and gives the owner a legal right rather than an equitable interest. This system of transfer of land differs from the Torrens Title in that the Torrens title system is proof that you own the land on registration at the Land Titles Office and you receive a Certificate of Title evidencing your ownership, which is not the case with Old System title. A good root of title of a minimum of 30 years must be established after which the purchaser is deemed to “accept” any defects in title (such as boundary definitions).

The Land Titles office is currently transferring old system titles (most commonly found in the inner city suburbs such as Randwick, Surry Hills) to the Torrens title system. These are recorded as a Folio Identifier with exceptions such as “Limited or Qualified Title”. Limited title is noted by the Land Titles Office where they have not been satisfied that the boundaries of the land are accurate (uncertain as to survey) and qualified title being if no transactions. Qualified title is one in which the title is inconclusive, and subject to subsisting interests.

Strata Title was developed in Australia in 1961 and is a form of title that is in most cases, a vertical system of title and gives you the legal ownership of a portion of a building or structure. It can also comprise ground level villas, duplexes or townhouses, commercial, retail etc. With apartments or units, you only own the area within the unit to the layer of the coat of paint, wallpaper after which it is owned by the Owners Corporation. Strata title still falls under the gambit of Torrens Title.

Community Title is not a separate form of title, but is a sub-section of Strata Title. Put simply, it is a subdivision of horizontal land (like strata) with vertical areas but has “vertical” areas of “community association” such as gyms, swimming pools, parklands to be used by all members of the association (as opposed to your own Lot) and is in a sense, an estate. You own your lot, but also have right to greater lifestyle should you wish.

Not all home purchases run smoothly.  Recently, our conveyancing team, led by Evelyn Gardis, Partner and expert in property conveyancing, acted for a purchaser who did not want to settle the purchase on the contracted completion date.

The Reason:

At final inspection, the purchaser pointed out to Evelyn, the vendor had removed a fixture, which in accordance with the contract, should be retained with the home and should not have been removed.

Action Taken:

Evelyn and her team contacted the vendor’s solicitor and pointed out that what had been removed, was in fact, a “fixture” and needed to be returned before settlement.

Outcome:

Fortunately, common sense prevailed and the vendor returned the item to the home.  This allowed the purchase to proceed and ensured that all parties complied with the contract.

Evelyn commented “it is important when acting for a party in a sale/purchase of a home, to fully explain what stays and what is allowed to be removed by the vendor, prior to settlement.

Fortunately, we had indicated to the vendor’s legal representative, just what had been taken.  They agreed with our interpretation of “fixtures” and the item was returned prior to settlement.

If you are intending to sell or buy, please contact Evelyn Gardis and her conveyancing team for a fixed fee quote.  Call 1800 600 664 or complete the contact form on this page.