There is no reason why Company Title buildings should not be converted to Strata Title. Indeed, converting Company Title to Strata Title may be in the financial interests of all existing shareholders. This is particularly relevant in the current financial market, where banks are taking a harsher line about lending to prospective owners of Company Title shares.
Where to start?
Ascertain shareholder sentiment
The Board should talk to the Shareholders at the General Meeting about whether they are interested in converting the Company Title building to Strata Title. This step will allow you to ascertain the general level of interest and engagement of Shareholders.
Our view is that it is best to always get a 100% of Shareholders to vote in favour of the conversion process for the following reasons:
- Even if, you have only one or two Members who are not in favour of the resolution, perhaps because they are concerned their right to occupy their unit will be adversely affected by the proposed strata title re-structure, this opposition may result in costly litigation against the Company.
- Furthermore, if any Member is against any proposed resolution, and they have a mortgage over their shares, they can refuse to cooperate with the Company in obtaining the mortgagee’s consent to the re-structure.
Once the general position of Shareholders has been ascertained the following steps should be considered:
- The Company should have an Extraordinary General Meeting for the members to pass a special resolution giving effect to the conversion process. We always recommend that 100% of Members should vote in favour of the special resolution for the reasons listed above.
- Consider whether the building is compliant with fire orders. It is reasonable to assume that the council will serve the building with a fire order, as soon as an application is made to convert to Strata. It could take approximately 12 months for a building to become fire compliant.
- A section 73 Compliant Certificate must be obtained from Sydney Water, which may involve the requirement that each unit is separately metered. Generally, this work can be completed during the completion of any fire upgrades.
- The building will need to be compliant with the Strata Schemes Management Act 2015 (NSW) including the installation of window safety locks and any other matters that apply to the building code. This process could take up to 12 months.
Who manages the conversion process?
As a first step, we would recommend that you organise a meeting with JFMLAW. That consultation is on a free of charge basis and allows the Board to work out exactly what steps need to be taken to manage the whole process and engage the appropriate consultants.
Once the Strata Plan has been approved by the Shareholders the following technical steps require consideration:
- All owners need a Certificate of Title. If there is a mortgage on the shares that mortgage needs to be registered on the title to each lot.
- Stamp duty needs to be paid. Every single building needs to have different processes associated with stamp duty and JFMLAW helps you with that.
- Managing the conveyancing process. JFMLAW helps you manage the conveyancing process.
Remember, patience is everything in conversion from Company Title to Strata. It can take a year at least and maybe 2 years. Some special levies may be required to upgrade the building for the purposes of building compliance.
If you would like to have Damien Lehmann or Mariam Chalak attend a Board meeting to discuss these matters, we are happy to do so on a free of charge basis. Our best contact number is (02) 9199 8597 or email Mariam Chalak – firstname.lastname@example.org.