Company Title vs Strata Title: Pros & Cons

In New South Wales, property ownership can take various forms, each with its own set of rules and regulations. One such form is Company Title, a unique and somewhat older method of property ownership which came into existence to allow shared ownership of a unit building before strata legislation was introduced.

By Sarah Newman, Principal Lawyer at Thornton + King,
Accredited Specialist in Property Law

Estimated reading time: 6 minutes

What is Company Title?

Company Title is a form of property ownership where a company owns the entire building, and individuals purchase shares in the company. These shares grant the shareholder the right to occupy a specific unit within the building as well as the use of the common areas. Unlike other forms of property ownership, shareholders do not own the unit itself but rather hold shares that entitle them to exclusive use of a particular apartment.

Company Title vs Strata Title

There are important differences between company title and strata title properties. Here are some of the key differences.

Company Title

Ownership: The building is owned by a company, and individuals buy shares in the company.
Occupancy Rights: Under the company’s constitution, shareholders have the right to occupy a specific unit and to use the common areas.
Governance: The company’s board of directors manages the building and enforces rules, in accordance with the company’s constitution.
Transfer of Shares: Selling a unit involves transferring shares, which usually requires board approval.

Strata Title

Ownership: Individuals own their unit and share ownership of common areas with other unit owners.
Occupancy Rights: Owners have a freehold interest in their unit, which also gives them a shared ownership of the common areas.
Governance: A body corporate (owners’ corporation) manages the building and common areas, and this is strictly legislated.
Transfer of Ownership: Selling a unit involves transferring the title, usually without needing approval from other owners.

Buying and Selling Company Title

What Do I Need to Know?

Approval Process: The sale of Company Title units usually requires approval from the company’s board of directors. This can often involve an in-person interview process and a review of the buyer’s references and financial standing.
Company Record Search: It is crucial to conduct a search of the company records to verify the financial health of the company and ensure there are no outstanding debts or legal issues.
Legal Advice: Engaging a solicitor experienced in Company Title transactions is essential to navigate the complexities involved.
Levies and Contributions: Shareholders are responsible for paying levies to cover the building’s maintenance and other expenses. Your solicitor will make sure these are paid up to date at settlement, and they will be adjusted between the parties.
Constitution, House Rules, Occupancy Agreement: Review the Constitution and House Rules to understand the rules and restrictions imposed by the company. Some companies also require a separate Occupancy Agreement.
Settlement: unlike the new electronic conveyancing regime in NSW, the settlement of a company title purchase or sale involves an in-person “paper” settlement with the share certificate and signed transfer being handed over in return for bank cheques (and the 3 business days to clear those funds that goes along with cheques).

Advantages and Disadvantages of Company Title

Advantages

Control Over Occupants: The company can vet potential buyers, ensuring a harmonious living environment.
Maintenance and Management: The company is responsible for the building’s upkeep, which can lead to better-maintained properties.
Community Feel: The approval process can foster a sense of community among residents.

Disadvantages

Resale Complications: The need for board approval can complicate and delay the sale process.
Financing Difficulties: Obtaining a mortgage for a Company Title property can be challenging, as many lenders are hesitant to finance such purchases.
Limited Control: Shareholders have less control over their unit compared to Strata Title owners, as the company’s board has significant authority.
Paper settlement: Settling with bank cheques means no cleared funds in your account same day.

Things to Consider When Purchasing a Company Title

Board Approval: Understand the company’s criteria for approving new shareholders and be prepared for an interview process.
Financial Health: Conduct a thorough review of the company’s financial statements to ensure it is financially stable.
Legal Restrictions: Be aware of any restrictions on the use of the unit, such as renting out the property or renovations.
Levies and Fees: Confirm the amount of levies and other fees, and ensure they are reasonable and sustainable.
Future Plans: Consider the company’s long-term plans for the building, including any major repairs or upgrades that may be required.

Amendments to Section 34A of the Local Court Amendment (Company Title Home Unit Disputes) Act 2013

Section 34A of the Local Court Amendment (Company Title Home Unit Disputes) Act 2013 was introduced to provide a mechanism for resolving disputes between shareholders and the company, as the NSW Civil and Administrative Tribunal has no jurisdiction as it does for strata properties. The amendments aimed to streamline the dispute resolution process and provide clearer guidelines for both parties.

Key changes include

Dispute Resolution: The amendments provide a structured process for resolving disputes, including mediation and arbitration options.
Legal Clarity: The changes clarify the rights and responsibilities of shareholders and the company, reducing the potential for misunderstandings.
Enforcement: The amendments strengthen the enforcement of decisions made by the court, ensuring compliance by both parties.

For more detailed information, you can refer to the Local Court Amendment (Company Title Home Unit Disputes) Act 2013.

Conclusion

Company Title is a unique form of property ownership that offers both benefits and challenges. While it can provide a sense of community and well-maintained properties, it also involves a more complex buying and selling process and potential financing difficulties. Although it is being phased out as more and more Company Title buildings apply to convert to strata title to bring their building within the strata title legislation, there are still many such buildings under this regime. Understanding the intricacies of Company Title is crucial for anyone considering purchasing or selling such a property. Engaging the experienced legal professionals at Thornton + King and conducting thorough due diligence can help navigate these complexities and make informed decisions.

Sarah Newman - Accredited Specialist in Property Law

Author: Sarah Newman

Sarah has over 20 years’ experience practising predominantly in property law, including but not limited to, residential and commercial conveyancing for purchasers and vendors, commercial, retail and industrial leasing for tenants and landlords.