Company Title Units Different to Strata

21/12/2015

Strata laws were first introduced in New South Wales in the 1960s and now most units and townhouses or other community accommodation are Strata and are subject to the Strata Schemes Management Act 1996 as is amended from time to time. 

Prior to 1960 when blocks of flats were divided and “sold” they were divided and sold by way of either company titled units as they were known or by way of tenants in common agreements.  Company title units were the most common. 

If you own a strata lot then you are the registered proprietor of a lot within the building.

However, if you acquire a company title unit the arrangement is that:

(a)      The company owns the building and the land on which it is constructed;

(b)      A person who “buys” and “owns” a company title unit acquires shares in the company. The Owner of a particular class of shares obtains a right to live in a particular unit/flat in a block of units/flats.

The company Memorandum and Articles of Association set out the rights of the person who owns different classes of shares and it is usually a right to live in a particular unit within the block.  There are some company title units in which the units can be let out. However, there are many units in which the company’s Articles of Association only allow for the owner of the shares to personally reside in the unit with their family. 

The purchasing and selling the company title unit is very different to that of any other real estate purchase or sale.  We are experienced in this area.  There are company title units in the older established areas where blocks of flats were converted to company title units before the 1960s.  There are some benefits as the rules and regulations are set out in the Memorandum of Articles of the Company and rules made by the Company. 

When agreement is reached between a purchaser and a seller and the contract is entered into, it is then subject to approval by the Company of the purchaser.  The other owners of shares in the company usually have an option for the first right of refusal to purchase the other shares when sold.  Our experience indicates that if the purchaser is aware of all the circumstances the purchaser will be approved by the company and the contract will proceed.

If you are contemplating purchasing or selling a company title unit then contact Richard Watson to discuss the arrangements. 

If you are an occupier or owner of a company title unit and there are difficulties in the management of the unit please contact Richard Watson to discuss the issues and how they can be resolved.