Company Title Property: What Prospective Purchaser Need to Know

KEY TAKEAWAYS:

• Understand what you’re buying: With a company title, you generally purchase shares in the company that owns the building, rather than owning an apartment as an individual strata lot.

• Do your due diligence: Review the company’s constitution, financial position, rules, proposed works, leasing and renovation restrictions, and share-transfer requirements before committing

• Check finance and ongoing costs early: Company title can have different lending requirements and potential tax or company-related costs, so confirm finance, land tax implications and ongoing expenses before signing a contract.

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When buying an apartment in New South Wales, most purchasers are familiar with strata title. However, some older apartment buildings are held under a different ownership structure known as company title.

Company title properties can be appealing because they are often located in established and highly sought-after areas and may offer spacious, character-filled apartments. However, company title ownership is fundamentally different from strata title and comes with its own legal, financial and practical considerations

If you are considering purchasing a company title property in NSW, it is important to understand exactly what you are buying before signing a contract.

 

What is company title?

Under a company title structure, a company owns the land and the building containing the apartments.

Rather than purchasing a particular apartment as a separately registered parcel of land, the purchaser generally acquires shares in the company. Those shares give the shareholder the right to occupy a particular apartment within the building.

The NSW Law Society describes company title as a less common form of apartment ownership where the purchaser buys shares in a company which, in turn, gives them the right to use an apartment.

In simple terms:

Strata title: You purchase and own a particular lot.

Company Title: You purchase shares in the company that owns the building, with those shares giving you the right to occupy a particular apartment.

This distinction is important because your rights are determined not only by the sale contract but also by the company’s constitution and other corporate documents.

 

What do you actually own?

This is one of the most important questions to understand before purchasing.

When purchasing a company title apartment, you generally acquire a specified number of shares in the company. Those shares are associated with the right to occupy a particular apartment.

The NSW Government explains that the company’s constitution establishes the rules, rights and obligations applying to shareholders.

Therefore, a prospective purchaser should not simply look at the apartment itself.

You should also understand:

• The number of shares being purchased

• The rights attached to these shares

• Your right to occupy the particular apartment

• The company’s constitution

• Any shareholders’ agreements

• Any house rules or regulations

• The company’s financial position

• Any restriction on transferring the shares

 

Company title vs strata title in NSW

The difference can be summarised as follows:

Company Title	Strata Title
Company owns the land and building	Owners own individual strata lots
Purchaser generally acquires shares in the company	Purchaser acquires a registered strata lot
Shares provide the right to occupy a particular apartment	Ownership of the lot provides the right to occupy the apartment
Company constitution is particularly important	Strata legislation and by-laws govern the scheme
Company approval may be required for certain transactions or changes	Owners corporation processes generally apply
Financing may be more difficult with some lenders	Generally more familiar to residential lenders
Older apartment buildings are common	Common across modern and older apartment buildings

Company title properties are outside the NSW strata management systems. In particular, company title apartment owners do not have access to the dispute-resolution framework available under the Strata Schemes Management Act 2015.

This makes understanding the company’s own rules and governance especially important.

 

Potential disadvantages and risks to consider

1. Obtaining finance can be more difficult 

Finance is one of the most important issues for a prospective purchaser.

Because you are purchasing shares rather than a conventional strata lot, some lenders may have different requirements when assessing a company title property.

The NSW Government has historically noted that lenders can be more reluctant to finance company title properties because the purchaser does not acquire a conventional title to the individual apartment.

If you require a mortgage, speak with your lender or mortgage broker before committing to the purchase. 

Ask whether the lender will finance the specific company title property and whether any additional conditions apply

2. Restrictions on selling the property

Selling a company title apartment generally involves transferring the relevant shares.

The company’s constitution may contain provisions concerning the transfer of shares and approval of a prospective purchaser

A purchaser should understand these requirements before buying

3. Restriction on leasing 

If you intend to rent out the apartment, carefully investigate the company’s rules.

Some company title buildings may restrict leasing or require company approval.

Before purchasing an investment property, establish:

• Whether the apartment can be rented

• Whether board or company approval is required

• Whether minimum lease periods apply

• Whether short-term accommodation is permitted

Do not assume that the apartment can be leased in exactly the same way as a strata property.

4. Restrictions on renovations 

Thinking about renovating?

Check the company’s constitution and rules before purchasing.

There may be requirements for company approval before making alterations to the apartment, particularly where the proposed work could affect common areas, the structure or the external appearance of the building.

5. Pet restrictions

Pet ownership can also be subject to the company’s rules.

If you have a dog, cat or another pet, check the applicable documents before purchasing rather than assuming that the rules are the same as those applying to a strata property.

6. The company’s financial position is important

With company title, the financial health and management of the company owning the building are particularly important.

A purchaser should investigate matters such as:

• Company financial statements

• Existing debts

• Cash reserves

• Insurance

• Maintenance expenditure

• Proposed major works

• Outstanding contributions

• Building repairs

• Existing disputes

• Any proposed special contributions

A company title apartment may appear inexpensive, but significant building expenditure could result in additional costs for shareholders.

7. Dispute resolution is different from strata

Company title properties are not governed by the NSW strata management framework in the same way as strata schemes.

The NSW Parliament has noted that company title buildings fall outside the NSW strata management laws and therefore owners do not have access to the dispute-resolution options provided under the Strata Schemes Management Act 2015.

 

What about land tax in NSW?

Company title also has specific treatment for NSW land tax purposes

Revenue NSW explains that shareholders of company title units are generally treated as the owners of the particular part of the building they have the right to occupy for land tax purposes. The company-title unit is effectively treated as a strata lot for these purposes.

This means a purchaser should not assume that company title means there are no individual land tax implications.

For example, if you already own other taxable land in NSW, the value attributable to your company title unit can be relevant when determining your overall land tax position.

If land tax is an important consideration for your purchase, obtain advice from an accountant on your individual circumstances.

 

What documents should a purchaser review? 

One of the most important aspects of buying company title is due diligence.

Before committing to the purchase, your conveyancer should review the relevant company and property documentation.

Depending on the particular building, this may include:

The company’s constitution

This is one of the most important documents.

It can establish rules concerning:

• Occupation

• Sale and transfer of shares

• Leasing

• Renovations

• Pets

• Voting

• Company management

• Shareholder obligations

• Approval requirements

 

Share certificate and share register

Confirm that the shares being sold correspond with the particular apartment and establish what rights attach to those shares.

Revenue NSW specifically identifies shareholding documentation as relevant evidence of ownership for company title land tax purposes.

 

Company financial records

Review the company’s financial position and determine whether there are significant upcoming expenses.

 

Company meeting minutes

Where available, meeting minutes can provide useful information about:

• Proposed building works

• Disputes

• Insurance issues

• Repairs

• Financial concerns

• Proposed changes to the building

 

Building and insurance information

Understand how the building is insured and whether there are any known building defects, major repairs or other issues.

 

Is company title right for you?

Company title is not necessarily better or worse than strata title. It is simply a different form of property ownership, with different rights, obligations and considerations.

For the right purchaser, a company title apartment may provide an opportunity to own a character-filled property in an established location.

However, the purchaser needs to be comfortable with the company’s rules, financial position, restrictions and the way the ownership structure operates.

Don’t purchase a company title apartment based solely on the apartment itself. Understand the company behind the apartment.

The shares, constitution, financial position and rules can be just as important as the property’s location, size and condition.

 

Conclusion

Most importantly, obtain independent legal and financial advice before signing a contract. The specific documents and rules applying to each company title building can differ, so the particular property should always be assessed on its own circumstances.

 

This article is general information only and is not financial, tax or legal advice. Tax outcomes can vary depending on your ownership structure, property history and individual circumstances. Speak with a qualified tax adviser or accountant before making an investment decision.

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ABOUT KAY VITOGIANNIS:

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For further information,n please don’t hesitate to contact:

Kay Vitogiannis
Licensed Conveyancer
info@couttslegal.com.au
1300 268 887

Contact Coutts today.

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.