Are you thinking of selling your unit contained in a Company Title Building? There are a slightly different set of disclosure requirements imposed on vendors when selling a Company Title unit.
The first thing to remember is that, you are selling the ‘eligible shares’ pertaining to the unit in the building. The Company Title Building is known as a ‘Real Estate Company’. Thus, the Corporations Act 2001 (Cwlth) (‘the Corporations Act’) is relevant.
The Relevant Law
The legislative instrument known as the ASIC Corporations (Real Estate Companies) Instrument 2015/1049 governs the sale of shares in a Real Estate Company.
That instrument exempts the vendor from preparing a prospectus for the sale of shares. It also allows a licenced real estate agent to sell the shares.
What are my obligations?
As a vendor, you must satisfy each of the following requirements:
- Make an offer to sell the shares;
- At the time of making the offer, ensure that a draft contract of sale is available;
- Ensure that the terms of the contract refer to each of the following:
- The area and title to which the shares relate to;
- Reference to occupancy and usage rights to which the shares relate to.
What are the essential terms?
There are a number of essential terms to be included in the contract of sale. Those terms are:
- That the purchaser will be the registered holder of the shares; and
- The title of the Company to the property will be unencumbered upon settlement.
Are there any vendor warranties?
The Contract of Sale provides that the vendor warrants that after having made reasonable enquiries with the Directors of the Company:
- All actual and contingent liabilities have been disclosed;
- The Company is not being wound up and no action has been taken to wind up the Company, unless it is disclosed in the contract; and
- The company is not subject to any legal proceedings that could affect the value of its assets, unless it has been disclosed in the contract.
What documents are required to be attached to the Contract of Sale?
In order to fulfil your obligations as a Vendor, we would recommend that each of the following documents are annexed to the Contract of Sale:
- The Memorandum and Articles of Association;
- Any minutes approving renovations and future capital works;
- Any minutes approving levies that may be payable after sale;
- Any significant liabilities that the company may have taken on.
If you’re a company or shareholder selling a company title unit, we can assist you in fulfilling your vendor obligations. Just call JFMLAW on 02 9331 0266 for a chat.