What is Company Title

Company Title is a form of property ownership for units. This concept was used before “strata titles”. It is sometimes used in current times where Strata Title is not permitted.

A Company Title property is, in many ways, similar to a Strata Title property. The main difference is that each owner has “shares” in the Company which entitle exclusive rights in a unit/townhouse.

A Company is incorporated with ASIC. A Constitution (previously known as Memorandum and Articles of Association) is the foundation of the Company. It sets out its rules and regulations.

The Constitution typically includes:-

• A table of shares issued by the Company;
• Specific share entitlements – and how they confer a right to occupy a particular a portion of land or building;
• Director’s and Shareholder’s responsibilities; and
• Proxies and General Meetings (similar to strata Owners Corporation meetings)

As the owner of shares, an owner may transfer the shares when they sell the property occupancy rights. Such transfer normally requires the consent of the Directors of the company. Furthermore, an owner can mortgage its shares with most lenders.

Most constitutions also provide for an owner can lease its property, alter the external appearance of the property and exercise other rights similar to other property ownership – provided the written approval of the Company Directors is given. This is similar to obtaining approval from an Owners Corporation in a Strata situation.

Summary of Main Provisions of Company Title

• A Company owns the land
• Shareholders own shares in the Company
• There can be no mortgages against the title to the land
• The ownership of a block of shares gives the exclusive right of occupancy to a defined area of land.
• The shareholder has the right to sell shares or mortgage his shares
• Mortgages are secured against the shares – not the land
• The shareholder has the right to let the land
• The Company has obligations to insure and maintain the property
• A set of “Rules” – similar to the bylaws of a Strata scheme

Restriction on sale of Shares

A Company cannot unreasonably refuse a transfer of shares to any purchaser.

Right to Lease

A constitution might restrict individual dwellings to be leased.

Land Tax

Company Title units similar to a strata lot. Although a Company would normally be liable to pay land tax, a Company Title corporation is treated differently. It is not treated as the owner of the land. Each individual lodges a Land Tax return for his/her unit and it is dealt with in the same fashion as any normally titled residential property.

Ongoing Costs

The company is required to lodge an annual return with ASIC.

Saleability

There is not necessarily any reduction in value because of the “company title”. In fact, some “art deco” buildings are proudly “company title”. The shareholders consider the ownership structure to be prestigious.

Conversely, other buildings would benefit from a conversion to “strata title”. This would incur considerable expense to enhance the structure (fire regulations etc). In this circumstance one would expect the value to be compromised. Each shareholder is then issued with a strata title for its unit. The Company structure is wound up.

Capital Gains Tax

The Income Tax Assessment Act definition of dwelling does not indicate an interest of land but rather “a unit of accommodation”. Provided an owner lives in the dwelling purchased by Company Title,the same provisions of Capital Gains relief apply to that shareholding as would apply to a conventional residential dwelling.

Sale of shares

Upon the sale of the shares/property, the Company will, if requested, issue a Certificate setting out details of ownership, insurance, levies, etc.

Summary

There is no such thing a “standard” company title property. There is no legislative frame work (as there is with strata title) to define the characteristics of each such property – and obligations of respective parties. Such properties vary with the Constitution under which it operates – and, in particular, how professionally it is managed. Nothing can be taken for granted when buying into a company title property.

WRITTEN by Paul Denny

Paul denny has over 45 years conveyancing experience and has assisted over 30,000 clients with their property transactions.

Contact us today on 02 48 111 554 or email info@bowralconveyancing.com.au to discuss how we can assist you with your conveyancing needs