What is Company Title?
Company Title vs Strata Title – I’d be happy to receive suggestions for a better illustration!
Company Title was the primary legal structure for apartment ownership in NSW (and elsewhere) before Strata Title became the dominant structure after being introduced (in NSW as it happens!) in 1961. Strata Title as a concept spread across the globe, taken up by other jurisdictions such as New Zealand, Singapore, Canada and has become the dominant force.
However Company Title, or similar, still exists as a common apartment ownership structure in some jurisdictions. A similar concept, the “Housing Cooperative” prevails in New York City, of which The Dokata Building is a famous example.
Accordingly while it is not common in NSW, it is very common elsewhere, and should not be looked upon with skepticism. Importantly, it’s legal elements should be understood and you should understand how it differs from Strata to ensure you are comfortable with its different legal structure if you are considering purchasing into a Company Title apartment.
Where are Company Title apartments located?
In Sydney Company Title properties are located in older estabished suburbs in the East, the lower North Shore and the CBD. Quite a few stretch along the train line in Killara to Turramurra. Famous buildings include The Astor on Macquarie Street, the Macleay Regis and Franconia in Potts Point, and the Mewdon, Ashdown, and Oceania each in Elizabeth Bay. Company Title apartments are no longer being established. Some Company Title apartments are being converted to Strata Title. Such an activity is a significant and costly exercise.
What do you own?
When you buy into a Company Title apartment, you acquire shares in a company, not “real property”. The owner (registered proprietor) of the real estate is the company in which you own shares. The Company will (generally) own a Lot in a Deposited Plan.
The Constitution of the company (or most likely its Articles of Association and its Memorandum of Association, given the time at which the relevant company was incorporated) determines which of the “Units” or “apartments” an owner of certain shares is entitled to occupy, and the rules which apply. For example, the owner of shares 1 – 4999 will be entitled to occupy Unit 1, the owner of shares 5000 – 9,999, to occupy Unit 2.
Is it risker?
There’s a generally accepted view that company title apartments trade at a discount of 10 – 20% compared with a similar type apartment in a Strata Title building, generally attributable to the degree of risk associated with the asset.
Consent to the Transfer of Shares
It is comon for Company Title constitutions to confer on the Board of Directors of the Company the power to refuse consent to the transfer of the Shares in a company title property to a proposed purchaser. In Strata Title the Owners Corporation has no power to refuse the transfer of title from one registered proprietor to another. This difference gives uncertainty to the conveyancing process.
For Company Title at a legal level this is a not insignificant risk and a dispute about that consent must be heard in the Supreme Court of New South Wales, a costly exercise. This means that “simultaenous settlements”, commonly undertaken in conveyancing transactions (not without its own risk frequently underplayed) need proper advice before proceeding.
Viewed practically it would appear that a refusal to consent to the transfer of units is in practice very rare, but lawyering is all about understanding the worst case scenario, and it does happen. A recent case, In the matter of Meglo-Yowrie Flat Units Pty Ltd [2023] NSWSC 1634, concerned the refusal to give consent to the transfer of shares in relation to an apartment block in Manly.
Consent to Renovations
Strata legislation provides a very clear process for renovations or improvements to a strata lot, which works can be done without Owners Corporation consent, and how consent is to be obtained for other types of works. The Act says that an Owners Corporation can’t unreasonably refuse a by-law and provides a legal process for disputes about such things which commences with mediation.
In contrast, the Board of a Company Title apartment has greater powers to refuse consent.
Dispute Resolution in the Local Court
Parliament has passed laws to confer jurisdiction to the Local Court for resolution of some Company Title apartment disputes. Helpfully it provides powers to decide disputes about the right to lease or license the premises, the right to keep pets, and rights about repair and maintenance, and design and appearance. These powers are set out in Section 34A of the Local Court Act 2007 (NSW).
However in that section Parliament specifically excluded certain types of disputes including relevantly disputes about the refusal to transfer shares.
The Conveyancing Process
There is no Law Society contract for the sale of Company Title shares. Your solicitor should have experience in such transactions. The process is performed by the old style ‘paper settlement’ and not on the PEXA network. Bank Cheques will be handed over as well as original share certificates and signed transfer forms. Banks will take longer to provide approval for finance. Care needs to be taken to ensure you get good title to the shares.
You should contact us if you are considering purchasing shares in a a Company Title apartment.