Converting your property from Company Title to Strata Title

In our previous article of Land Ownership – What do you Own?, we set out the various types of property ownerships commonly found in New South Wales (NSW) and one type of ownership was company title.

In a company title, a company has title to the land and owns the units on that land. Shareholders who have shares in the company have exclusive use and occupation of their apartment in accordance with the company’s Constitution – which means that the shareholders are not actually the owners of the land, they just have exclusive occupation.

A company title may be converted into strata title if the shareholders of the company agree. Before taking a decision to convert to strata title the company should review its Memorandum of Association to ensure that the company has the necessary power to convert. If not, the Memorandum of Association of the company should be changed to provide such power. The company should hold an Extraordinary General Meeting for the members to vote to add the power to convert (if needed) and it is recommended that the company also passes a special resolution approving the conversion process. In many companies the Board of Directors may make the decision to proceed with the conversion, however it is recommended that all the members vote in favour of the special resolution. The consent of all shareholders should be obtained to avoid the process being obstructed or litigation.

Conversion is a lengthy process however it is similar to a strata division of land owned by a company. We set out the following key steps of the conversion process once it has been agreed by all of the shareholders of the company:

Have pre-lodgement discussions with the local council. This is not necessary, however recommended to ensure that the local council’s requirements are met in the Development Application to be submitted.
Consultation with a surveyor to prepare the strata plan that identifies each shareholder’s lot and the unit entitlements for each lot. The strata plan needs to be approved by the directors of the company and a copy must be sent to all the shareholders for approval. The surveyor also needs to provide a surveyors certificate to accompany the strata plan.
If there are any mortgagees on title, the mortgagees must be duly notified to also provide consent to the conversion to strata title and a copy of the draft strata plan may need to be provided as part of the consent process.
Prepare and submit a Development Application and the strata plan with the relevant local council.
Obtain a completed strata certificate from a registered certifier or the local council.
The strata plan is then lodged for registration with the Land Registry Services of NSW. The strata plan should be executed by the company before lodging for registration.
Once the strata plan is registered, a folio will be created for each apartment and a folio will also be issued for the common property. Each apartment will need to be transferred to its respective owner’s name. Revenue NSW will need to be notified about each transfer and duty may be payable.
A strata corporation will need to be engaged to manage the affairs of the strata. The common property folio and any other assets of the company will need to be transferred to the new strata corporation.
Once all the assets have been transferred from the company title to the strata title, the company can be wound up and the company will cease to exist.

Company title is an older form of ownership and strata title is generally more popular than company title as it gives an owner more control over its property without the need for company approval.

For more information about company title, or the conversion process, please contact one of our people.

Ron Zucker 0410 590 111

Eollyn Cortes 0478 727 395

Sagang Chung 0431 435 333

Julia Zou 0426 670 202