Does Anyone Own in a Company Title Building?

• 

  rambutann on 06/10/2023 - 13:48

  +1

  Is this a stratum title?

  Loans are difficult to get in this structure. I once looked at one and decided to walk away.

  Its more challenging to manage the complex.
  If it was larger, and there wasn't a majority shareholder i'd say it may be okay - but they will basically decide every move given that they are the majority.

  Also, with windows on a strata/stratum title - sometimes it is a shared expense, sometimes it is not. I think in this case you would not have the windows covered as the majority shareholder may simply say no.

  • 

    Hoju on 06/10/2023 - 14:27

    Not strata no, it’s a company title (my understanding is apartment blocks are either strata or company title).

    We have the lending so that’s ok however obviously down the line if selling it’s apparent that the available pool of buyers would be less.

    The window thing is already in place, ie they have installed the blinds and I guess want them to stay there.

    • 

      rambutann on 06/10/2023 - 16:04

      I think its called different things in different places.. I looked it up - it is called a stratum title in Melbourne (not strata, they are different things).

      I would definitely check with your lender that they will loan for this type of property.. strata is fine for loans, but the issue with this 'company' arrangement is that in the event that you stop paying maintenance fees AND your mortgage - the 'company' is entitled to obtain their outstanding amounts prior to the bank getting their amount.

      So if you had a property worth $500k. And you somehow owed $50k to the 'company' in what is essentially body corporate fees, but you owed the bank $475k, the 'company' would be entitled to their share prior to the bank being owed their share. So in this instance the bank would lose $25k. Generally as a result of this exact scenario, banks often only give 70% as a loan.. because of the risk.

      • 

        Hoju on 06/10/2023 - 16:07

        Yes I’m just checking on this as we should really only need to borrow about 20 to 25% of the value of the property but I would want confirmation from the lender that our current approval with still apply to this company title property

• 

  Domingo on 06/10/2023 - 14:25

  +1

  It varies state to state, so you'll need to look up the specific laws for NSW.

  I'm the chairperson for an owners corporation with 98 houses. Our committee of 7 is super pragmatic - auto approval for any internal changes that don't change the exterior view, any window furnishings allowed as long as they are white viewed from the outside, doors can be replaced as long as colours are consistent etc. Our principle is essentially allow people to set up their properties for the way they want to live, as long as it doesn't impact on others or substantially change the aesthetic of the area.

  It would be well worthwhile having a discussion with the couple that own the other 2 units and see how they feel about what you'd potentially like to do. One option is to actually change the rules, which in Vic requires a 75% majority vote. If something similar applies in NSW and the other owners are open to it, you would then be able to have rules that work for everyone locked in, and the 66% majority wouldn't be able to change them.

  • 

    Hoju on 06/10/2023 - 14:30

    Thanks. This is what we plan to do ie propose all the things we would like to do and see how rigid / open they are. Essentially a lack of common property impact is what we’re going for, and hoping that it would be a harmonious living environment. It seems like being open before offering to purchase is the best idea

• 

  Transient on 06/10/2023 - 15:44

  When we were house hunting years back, we came across a town house that was company title. It was cheaper than comparables but we still decided against it for various reasons. Basically a company owns property and you buy shares in the company, so you don't actually own it. Also, when selling, the existing majority shareholders have a say as to who you sell it to, so may make it harder to sell. Also, the reasons mentioned above by other people.

  Try also Googling the pros and cons and see if that is what you want to get into.

• 

  shaybisc on 06/10/2023 - 16:55

  +1

  Get your hands on the company's constitution or articles of association and read it. Pay particular attention to what it says about maintenance and repair of common property and renovations. It may also limit who you can sell to or rent to.

  They can also, I've just discovered, enforce a blanket ban on pets. In NSW anyway.

  https://jfmlaw.com.au/wp-content/uploads/2017/06/Company-Tit…

  This is quite good on the subject. I wish I could have found it when I needed it.

  And another one.

  https://www.bartier.com.au/insights/articles/company-title-t…

  I swear there was nothing useful online ten years ago.

• 

  brendanm on 06/10/2023 - 17:51

  +1

  Sounds terrible, buy a freestanding house and do whatever you like.

• 

  Sweet3st on 06/10/2023 - 19:38

  +1

  I've lived in a company title building (Sydney) for many years and no problems at all. As it's a company, shareholders tend to be more involved and community minded, and the company as a whole has a bigger say in how apartments are used (eg no pets, restrictions on renting etc). I think in your case you need to have a good long chat with this couple, and try to get a feel for what they'd be like to deal with. As posted above, you need to read the Articles of Association, and a recent AGM or two. I don't think you'll have problems borrowing, banks are generally OK with company title these days. Apartments in my block sell for many millions, no-one bats an eye…

  • 

    Hoju on 06/10/2023 - 20:37

    Thanks for that very helpful

• 

  valuer on 07/10/2023 - 11:32

  +3

  They are fine - until they are not.

  Yes, technically, you would be outvoted on any matter. That might be fine as they may be a very nice couple. At least until you propose something that would benefit you but not them. And if they sell, you will be at the mercy of people you have never met.

  Of course you might live peacefully for years.

  • 

    Sweet3st on 07/10/2023 - 17:57

    The Articles may require 75% majority for any vote. It will depend on them, but unlikely to be a simple majority.

• 

  Sweet3st on 07/10/2023 - 17:16

  +1

  Is strata any safer? Since the former LNP state government changed the law so that developers only need to buy out 75% to be able to take over the scheme (strata 'renewal' is the term they use), you won't hang onto your home if a developer wants it. They target smaller older blocks on a big piece of land, then build a behemoth. I've lost count of the blocks they've taken in my suburb in the past few years, at least 10.

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  Hoju on 07/10/2023 - 20:20

  Update is that it is apparently 'tenants in common' with shares allotted to each unit. Need to look into this a bit more.

  Agents have basically said that yes in theory if the owners wanted to do anything at all to the common property they would have the authority to do so and then demand 35% payment. Having said that we had the same with a strata building. A couple of larger unit owners got together (one owner had 3/10 units) and decided the building needed a $100k freshen up and we had no choice there either…