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Company and Strata Title – How are they different?

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.

At Taylor & Scott “ We Care For You.”