Thinking About Leasing or Buying a Company Title Unit?

Thinking About Leasing or Buying a Company Title Unit?

The law around company title buildings is different to that of strata title buildings. So it’s important to have a grasp of how company title works if you’re thinking about buying or renting a company title unit.

What is company title?

Company title is a scheme of land ownership where a company owns the title to land. Shareholders who have purchased shares in the company are entitled to exclusive occupation of a flat in a building on that land. In this regard, shareholders in a company title building do not technically ‘own’ the land. Rather, they are shareholders in the company that owns the land.

How are Companies Regulated?

Owners’ corporations of strata title buildings are regulated by a range of legislation that is specific to strata title. Companies, on the other hand, are governed by their Constitutions, and are regulated by the Corporations Act 2001 (Cth). They may also have rights and obligations under other legislation, including the Work Health and Safety Act 2011 (NSW), the Environmental Planning and Assessment Act 1979 (NSW) and its associated regulations, and Part 3 of the Local Court Act 2007 (NSW).

The Constitution

The constitution is a binding legal document that regulates the internal management of a company. Older constitutions may be known as memoranda and articles of association.

Company constitutions can be complex legal documents. Typically, they include the following:

  1. A description of the shares that have been issued in the company and the units with which those shares are associated.
  2. A specification of the rights of shareholders.
  3. Provisions empowering the company to raise levies
  4. A list of the powers of the company, including the power to carry out certain works and to enter units for certain purposes.
  5. Provisions regulating the purchase and sale of shares in the company.
  6. Provisions regulating the letting or subletting of company title flats.
  7. Provisions regulating the conduct of company meetings and elections for office holders.
  8. A specification of the duties of shareholders and directors.
  9. A provision empowering the directors to make, amend and revoke house rules.

The House Rules

The house rules are a formal policy that regulates the management of the building and the conduct of its residents on a day to day basis. They may be issued by the board from time to time, or formally adopted by the company by way of an ordinary resolution. House rules often contain provisions concerning:

  1. The use and maintenance of residential units.
  2. The use and maintenance of common property owned by the company.
  3. The process associated with the sale and letting of units.
  4. Administrative matters.

Purchasing Shares in a Company Title Building

Prior to purchasing shares in a company, prospective purchasers should ensure that they do the following things:

  1. Read and understand the constitution and the house rules. Particularly, purchasers should have a clear picture of:
    i. Their rights as a shareholder
    ii. Their duties as a shareholder.
    iii. Their potential financial liabilities to the company by way of levies and interest accrued on levies.
    iv. The extent of their ability to lease their unit and sell their shares.
  2. Explore appropriate financing options. (It is worth noting that it can be more difficult to obtain finance by way of a mortgage over shares than it is to obtain finance by way of a mortgage over land)
  3. Conduct a pre-purchase inspection of the unit associated with the relevant shares.

The process for purchasing shares in a company can be rather different to the process associated with the purchase of land. For example, constitutions generally require that prospective shareholders obtain the consent of the board prior to the registration of their shares. This generally requires prospective purchasers to submit written references to the board, attend an interview with board members, and to affirm that they have read and agree to be bound by the house rules and the constitution. This process typically takes place between exchange and settlement.

Ultimately, it’s important to understand what company title is and how a company title building is run if you’re thinking about living in one. If you’d like some more information on company title, please get in touch by calling us on (02) 9199 8597or email us for a free copy of our company title e-book.

The information contained in this post is current at the date of editing – 11 April 2025.