What are Company Titles?
Company Titles are a form of property ownership pre-dating strata titles (which were first introduced in New South Wales in 1961 and then 1968 in South Australia) where under the Real Property Act the only way to divide ownership upon a single property was through company and moiety titles.
Company Titles are complex structures for home unit owners whereby the Company owns the entire property and the ownership of the company is broken into shares. By purchasing a home unit share the shareholder receives a share certificate and has the right to use the space that is assigned to that share and the common areas.
In a Moiety Title, sometimes referred to as a cross lease, the ownership of a unit comes from being the registered owner of a share of the land the group of units sits on. The owner is leasing the right to occupy their unit and use common areas from other owners which is registered over all of the titles which comprise the scheme. The rules for this home unit scheme are set out inthe covenants of the leases.
Being a company, owners need to lodge company ownership details and annual returns with ASIC and the company may have onerous rules in the form of Articles of Association in place which makes this a complex form of property ownership.
Over the years, our team have assisted multiple Company and Moiety title properties with their ongoing operation and while we have noticed some benefits for purchasers with stamp duty we have witnessed some rather large issues with rules and finance.
A large issue with company titles is the inability of many potential purchasers to borrow requisite funds in order to purchase the property. There have been many financial institutions who have set their maximum borrowing amounts at 70% of the property value due to the type of ownership as the purchaser buys a share, not the property or any of the land which is held by the company or secured by the lease.
Limits on the finance prevent large parts of the pool of potential purchasers from being able to place offers on the property which may result in the purchase price being lower than similar strata or community titled properties in the area or properties sitting 'on the market' for sale for longer than other multi dwelling units.
We have also noted some company titled properties with rules preventing children living within the home unit, others have had the requirement for prospective owners and tenants to be vetted by the existing residents prior to accepting either a sale or lease of a home unit share and others that further restrict sales or prevent leases.
Company titled properties are not for everyone and while Strata titles may not be universally popular they have been a fantastic step in the right direction toward a balance between control by the corporation over anti-social behaviours and the freedom to use your property as an investment.
2018 Update - We have had some interesting cases over the past 4 years and one relating to a company title property which ended up in the Supreme Court over a dispute concerning pot plants. Given the complexities we have found with the people involved in such schemes (there is a reason these properties have chosen not to convert by now) we are no longer offering management services to Company Titled properties and are simply keeping to Strata and Community Titles.
If you are in a Company Title property and are seeking to convert the property to a Community we recommend speaking with a conveyancer or development consultant and we can assist in pointing you in the right direction for this.