Company title is a term used to describe a conventional property title that is held by a company. The shareholders of the company have a right to occupy a part of the building or land in accordance with the constitution of the company. The company is the registered proprietor of the land.
A common misconception when purchasing a company title property (typically, though not always, an apartment) is that you are acquiring the property.
What you are actually acquiring is a share (or shares) in the company which is the registered proprietor of the property with the right to occupy a part of the property (for example, the apartment).
A client approached me the other day with a contract for a company title apartment. Her question to me was, “Is it a good idea for me to buy a company title property?”.
As is often the case, my answer was, “It depends on your circumstances”.
The “circumstances” for this particular client is that she is a first home buyer.
The first issue was whether she could find a lender who would lend her the money to complete the purchase.
Some lenders will provide finance provided the borrower has a large deposit (for example 30% to 50%), though some lenders will not provide finance for company title at all.
One of the reasons for this is that lenders generally take a mortgage over their borrower’s real property. As the borrower is actually acquiring a share, the lender cannot take a mortgage over the real property. The lender’s security is a mortgage or charge over the borrower’s shares. Lenders may view this as being a lesser security than a mortgage over real property.
Another factor relevant for the consideration of my client is that as a young buyer, a priority for her is capital growth. A company title property may not see the same capital appreciation as a strata property.
Constitutions of company title properties often provide that the board must consent to the new tenant or owner. This can present another issue for consideration when purchasing as the constitution of the company may prevent you from renting out the property as an investment, or require board approval of any prospective tenant.
Whilst some may see this as a disadvantage, other owners consider this a benefit as they have an element of control over who may occupy the building which is not possible in a strata building,
The point is, that there is no simple answer to the question about purchasing a company title property.