The Advantages of Strata Title when compared with Company Title
Conversion from company title to strata title can result in tangible benefits. Unit ownership via company title is an older form of unit ownership than strata title, and was the only way to own home units prior to 1961. The owner’s right to sell or transfer his or her shareholding under company title is subject to company approval. Unfortunately, company title can deter prospective buyers:
- who are unfamiliar with this type of ownership;
- who need approval from the company to obtain a mortgage;
- if they are concerned that existing shareholders will not approve of their purchase; and
- if their financier might reject the title as inadequate security for finance.
Company units are generally harder to sell, and typically sold at a lower price, because they have issues not encountered by the strata purchaser. While there is no guarantee if an increase in price per unit after conversion, sources quote that unit prices will often increase from 5% to 15% after conversion from company to strata title.
Strata ownership is significantly more popular, as it gives property owners greater certainty and control over their property investment. In 1961, the predecessor to the Strata Schemes Management Act 1996 (NSW) came into being. Owners of strata title could now:
- own a subdivision of airspace above the ground on separate title;
- could sell, mortgage, or lease the lot itself, without the cumbersome share/unit procedure; and
- could obtain statutory indefeasibility of title to their home unit on registration of their title at the Land & Property Information Office.
How Do Unit Holders in a Company Convert to Strata Title?
As we outline the strategies involved in your conversion, we seek your input at each step.
We realise that you want to keep costs as low as possible. Therefore, we will not proceed to act without your specific instructions. At each stage, we will give you updates, and, if necessary, arrange meetings with you and other members of our conversion team. As an example, your company may have outstanding issues with repairs and cost estimates. We can also assist in coordinating any estimates and required repairs.
Our team includes a surveyor with a proven track record. It is important to assemble individuals in an established practice, with the experience and contacts to do the job effectively. Our people understand your need to receive good value for your money, and offer a high level of service. We will make every effort to ensure you are satisfied with the quotes received.
Although we attempt to anticipate your needs, questions and concerns, you will undoubtedly have issues and suggestions not covered that you wish to raise with us. We can schedule telephone conference calls or face-to-face conferences. We are also always available by phone, e-mail or fax. Our clients are our top priority.
We conduct a detailed search of your company records, and a thorough review of your Constitution or Memorandum and Articles of Association. This is an important step to ensuring that a successful conversion is possible. We review the history of the units, relationships between members, and the existence of any outstanding issues or problems. The documents we obtain include:
- Constitution / Memorandum and Articles of Association;
- Financial Documents;
- Extracts from ASIC records; and
- Shareholders register and transfer documents.
In addition to the above, we will obtain the following additional documentation in relation to your property:
- Title Search – showing the registered owner of the land;
- Deposited Plan – showing the location and dimensions of the land;
- Drainage Diagram – showing the location of sewerage services;
- Section 149 Planning Certificate – showing the zoning for use;
- Section 735A Certificate – showing outstanding notices pursuant to Local Government Act;
- Section 121 ZP Certificate – showing outstanding notices pursuant to Environmental Planning & Assessment Act;
- Section 603 Certificate – showing water rates; and
- ASIC Company Statement – showing the company directors and members.
This material is compiled in a brief, and forwarded to the surveyor to enable an estimate of the work involved to be forwarded to you.
Stages of Conversion
1. The initial stage referred to in the estimate involves “pre-lodgement discussions” with the appropriate council. These are highly recommended by most councils to ensure the professionals involved meet all requirements. Speaking to the Town Planner at the pre-development application level provides the groundwork for the phases that follow.
2. The survey and preparation of a Strata Plan begins with the work necessary to measure the units. This phase is typically more costly than other phases because the survey measurements of the lots and shape of the lots must be done in the field, (on-site) by professionals. The Strata Plan is then prepared by the surveyor from the survey information. The Strata Plan must comply with planning instruments including State or Local Environment Plans and Council’s Development Control Plan (DCP). The Development Application (DA) cannot be completed without it.
3. The Development Application (DA) and the accompanying report must be prepared and submitted to Council along with the Strata Plan. You may ask why a fully developed property needs to proceed through the same channels required for a brand new development. The answer is, quite simply, “because the Council requires it.” In a conversion to strata title, all fees, checklists and documents underlying the application, such as an Environmental Effects Plan and the DA Compliance with DCP for Residential Zone, must be submitted with the DA.
4. During the process of obtaining Development Consent, the surveyor will liase with the Council to get consent if additional items are required or changes need to be made. If Council requires a Certificate, the surveyor will select a Certifier to issue those that have been required. Compliance Certificates are used as a checking system, to determine whether or not aspects of a development comply with approved plans and conditions of development consent. The Surveyor will manage the matter until a Strata Certificate is issued.
5. If additional steps not contemplated by these estimates become necessary, we will advise you immediately. There may be additional or hidden costs associated with such steps, but we shall seek your instructions before incurring any costs not already approved by you.
Our legal assistance includes drafting your company resolutions and resolutions for your first Strata Meeting after your successful conversion to an Owners Corporation with Lots under the Strata Schemes Management Act.
If you would like to meet with us to discuss the above, and to for us to answer any questions you may have about this proposed structure and process, please contact Peter McNamara of our office.