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Company Title
Report
Prior to the implementation of strata titles in New South Wales in 1961, the major form of ownership of multi-occupancy residential complexes or units were managed through a company title, which is very different from strata title units. The title to a strata unit is defined by areas on a strata plan which form a lot on the strata plan. Owners are given title to that lot. In other words, it is a defined area.
On the other hand, owners of company title units hold shares which give them the right to the exclusive occupancy of an area in a building. commonly known as a specific unit number. There is generally no plan describing the dimensions of the area lot, that is, the boundaries are simply walls of the lot.
Generally, the value of company title units is approximately two-thirds of strata title units. That means that owners of company title complexes often convert their units to strata title, which can be a time-consuming and expensive undertaking.
Age-related repairs and maintenance
Because most company title complexes were constructed over 60 years old, age- related repair and maintenance considerations are generally more important than those of strata complexes. Without current legislation requiring owners to set aside money for repair and maintenance expenses, this consideration is even more important.
It is rare that capital works fund reports indicate when expensive works, such as exterior and interior painting and recarpeting will be necessary, including the likely cost. Therefore, it is often difficult for inspectors to accurately predict cashflow requirements.
This issue is further complicated by company title owners who do not have a statutory duty to maintain their complexes, unlike strata unit owners.
Therefore, expensive repairs and maintenance work can be either ignored or deferred.
To identify these types of issues, it is important to employ the services of an experienced inspector trained in company tile inspections to obtain a building report.
Unlike strata complexes, many company title complexes require prospective tenants of units in the complex to be approved by management of the company title. This often requires interviewing tenants and providing references.
Often investors have problems with buying into company title complexes because tenants refuse to go through the process that enables the investor to rent out their unit in the complex. This results in a reduced number of tenants available to investors.
Once again, employing the services of a trained inspector to review the memorandum and articles of association is necessary for the owner/investor to understand the approval process when leasing their company title unit.
If a dispute arises in a strata title complex, a well-defined set of procedures enables the dispute to be adjudicated by NCAT, which is generally a cost effective jurisdiction. However, there is no such set of procedures for company title complexes. That can result in a difficult and expensive dispute to resolve, particularly if the argument is referred to the federal court.
Therefore, company title complex with ongoing disputes of material significance will not be favoured by potential buyers.
In NSW, from a buyer’s perspective, it is important to note that company title complexes are not required to provide detailed records of activities for inspection. Therefore, information may be difficult to obtain, such as proposed expenditure, breaches of rules and the past history of repairs and expenditure.
It is essential to engage the services of a trained and experienced inspector to investigate the records of company title complexes.
Pink Inspection Services is a division of The Pink Group (ABN 71 002 697 805). We’re Sydney’s leading provider of pre-purchase property inspection reports.
Our clients include more than 600 conveyancing specialists and law firms, ranging in size from sole practitioners to national firms. And we’ve performed more than 100,000 pest and building inspections over more than 20 years in the business.
Our staff includes 20 technical and inspection professionals assisted by 8 experienced support personnel.
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