Should Company Titles Be Avoided?

Zaxxon on 07/01/2017 - 13:56
Last edited 08/01/2017 - 08:38

Hi OzBargainers.

I'm considering buying a pre-built duplex in Sydney that will be under Company Title (ie 1 half, 50% share). From what I've heard very few banks will lend to Company Titles. The few that do are asking 30% deposit, not the normal 20%. So my first concern is why do the majority of banks consider these titles such a bad risk that they wont lend to? I've also heard you may need permission from the other 50% shareholder if you want to rent out your half or even sell in the future. If that's true that sounds like a major hassle to me. What about making alterations/renovations (given DA approval) or putting a pool in etc? Would this require the other half to agree or can I just go ahead with these changes? What are the other pitfalls or traps associated with these titles or are they not such an issue once you secure the loan? Lastly, could I, in the future try to get the title changed to strata or Torrens or is that solely up to the local council?

Yes of course I will send the "share plan" off to a solicitor but even finding one that specialises in these contracts isn't easy I've heard. This will be my PPOR.

Any insight would be appreciated. Thanks all, have a great day.

Financial

Comments

  • Vollterr on 08/01/2017 - 16:20
    +2

    The title of the property is Company title..
    Read this: http://www.realestate.com.au/advice/strata-title-company-tit…

  • djkelly69 on 09/01/2017 - 21:45
    +1

    There is no one answer with company titles - it all comes down to what is written in the constitution/rules/whatever. It can say almost anything, and certainly things such as needing approval for new owners, setting maximum LVR (or even no mortgages being allowed) and only allowing owner-occupiers are common. You need to have your solicitor review it and discuss it with them.

    Banks don't like them mainly because of the restrictions on sale/use, which limits the market for them and therefore the value.

    Some company titles can be converted to strata title, but you would want to speak with someone very experienced in doing so to discuss if that is what you want to do.

    • Zaxxon on 10/01/2017 - 09:07

      Thanks djkelly. Good advice.

  • megamilinda on 11/01/2017 - 15:18
    +1

    Companies don't get the 50% CGT discount, you should see an accountant before you purchase any property in a company.

    • Zaxxon on 11/01/2017 - 15:23

      You mean if you sell before 12 months from purchase date you don't get a 50% discount on the profit made, hence you pay more CGT? What if you sell after 12 months?

      • megamilinda on 11/01/2017 - 15:59
        +1

        Regardless of time, companies don't get the discount.

        https://www.ato.gov.au/General/Capital-gains-tax/Working-out…

        CGT discount method:

        For assets held for 12 months or more before the relevant CGT event.*

        Allows you to reduce your capital gain by:

        50% for individuals (including partners in partnerships) and trusts
33 1/3% for complying super funds.

        Not available to companies.

        • Zaxxon on 11/01/2017 - 16:09

          Understood. Yet another important thing to consider. Thanks for the info.

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