In the realm of property ownership in New South Wales (NSW), there exist various forms of tenure, each carrying unique legal and financial implications. One such arrangement is Company Title, a distinctive pathway to home ownership that gained traction in the 1920s and 1930s. Areas with substantial company title units in Sydney include suburbs like Potts Point, Elizabeth Bay, Darlinghurst, and Kirribilli. These areas often feature a mix of older buildings that were initially developed under the company title structure.
Unlike the more commonly known Strata Title introduced in 1961, Company Title involves separate ownership of apartments facilitated by a company owning the land and building. For those considering property investment or purchasing a home in NSW under Company Title, this is what you need to know.
Ownership Structure and Governance
Company Title, unlike freehold or strata title, involves the ownership of shares in a company that holds the title to the property rather than direct ownership of the property itself. In essence, purchasers acquire shares in a company that owns and manages the property, granting them the right to occupy a specific unit within the building. Unlike the Strata Title and Community Title schemes, Company Title schemes do not have their own dedicated laws regulating them, apart from general company law, namely the Corporations Act 2001. The companies regulator is the Australian Securities and Investments Commission (ASIC), which is responsible for legal compliance by directors and shareholders.
One of the defining features of Company Title is its governance structure. The company's shareholders elect a board of directors, who are registered with ASIC, responsible for managing the property and making decisions on behalf of the shareholders. The Board convenes routine meetings to manage the company's daily operations. Additionally, shareholders gather annually and as needed to vote on significant matters, such as the yearly budget.
Considerations and Restrictions
While Company Title offers certain advantages, such as greater control over property management and potentially lower entry costs compared to strata title, it also comes with its share of considerations. Prospective buyers should be aware of the restrictions and regulations imposed by the company's Articles of Association (also known as its Constitution), which may govern aspects such as alterations to the property, subletting, and pet ownership. Investors in particular should seek to understand the tenant approval process which differs among companies, with factors ranging from minor criminal records to lack of rental history potentially impacting approval. Consequently, tenants may face rejection by the board, and there could be limitations on renting out the unit altogether.
Unlike Strata Title or Community Title schemes, which have specialised tribunals, NSW Civil and Administrative Tribunal (NCAT), to handle disputes, disagreements regarding the management of a Company Title scheme are resolved in various courts based on the nature of the dispute.
Financing and Lending Considerations
Furthermore, financing options for Company Title properties may differ from those available for freehold or strata title properties. Lenders often impose stricter Loan to Value Ratios (LVRs) for company title properties due to the challenges associated with selling in case of default. Since you don't receive a Certificate of Title for the property, banks can't secure a traditional 'mortgage over land.' Instead, they use your shares in the company as collateral.
The ownership structure necessitates obtaining permission from other owners to acquire these shares, along with additional administrative expenses. These restrictions lead to reduced demand for Company Title units meaning the selling process typically takes longer. Company Title blocks with five units or less may have additional lending restrictions, therefore it is essential for buyers to conduct thorough research and seek expert advice before proceeding with a purchase.
In conclusion, Company Title offers an alternative avenue to home ownership in NSW, characterised by shared ownership in a company that holds the title to the property. While this arrangement provides certain benefits and flexibility, it also requires careful consideration of the associated rights, responsibilities, and financial implications. As with any property investment, prospective buyers should conduct thorough due diligence and seek professional guidance to ensure a sound and informed decision. Compass Strata specialises in managing a diverse range of communities, offering unparalleled expertise and guidance to all property owners.
