Extra documentation needed
While many mortgage brokers aren’t familiar with the intricacies of the company title property ownership structure, some of the country’s most prestigious apartments are changing hands using this method of allocating proprietorship.
Shore Financial’s senior credit adviser Fane Levy (pictured above) said when compared to standard strata and Torrens title, the company title structure is uncommon, with more legwork required for brokers and less lenders to choose from when securing a loan.
Levy, who was named in MPA’s top 100 list in 2022, said company title ownership is, as the name suggests, where a prospective purchaser acquires shares in a company.
“The classes of shares correlate to real property assets with exclusive rights, such as units and car parks,” Levy said.
“You will also receive non-exclusive rights, such as shared use of communal facilities.”
Levy said rather than buying a particular unit as a freehold interest, the purchaser will become a shareholder.
“Consequently, they receive a share certificate corresponding to their proportionate ownership in the company,” Levy said.
Thousands of company title buildings in Australia
Levy said the company title structure is no longer utilised to title, or separate, a building into units.
“There are still thousands of company title buildings in Australia, however this represents a vast minority,” Levy said,
Sydney-based Levy said many apartment blocks in some of Sydney’s most sought-after suburbs, such as Potts Point, Darlinghurst and Kirribilli, are owned under the company title structure.
Levy said about 5% of the loans he writes as a broker involve company title properties.
Many lenders, brokers not keen on company title
Some lenders and brokers balk at working on loans for company title apartments.
“There are only probably half a dozen or so lenders that will finance company title units,” Levy said.
“Of these they all have some restrictions, such as limiting LVR to a maximum of 80% (no LMI) and others may limit this to 70%.
“Some lenders will have specific post code restrictions to limit the property too and also require at least a minimum of five units within the block.”
Company title sales tedious for brokers
Levy said rates and fees remain the same regardless of the structure.
“Dealing with company title can be somewhat more of a tedious process as there is a lot more paperwork required not only for the application, but the valuation and final mortgage documents,” Levy said.
“This is because the banks and valuer will require the share certificate from the company secretary as well as other company documents.
“Lastly when signing the mortgage documents the banks also require a document to be signed by the company secretary which can add an extra layer of time/complexity to arrange.”
Despite the complexities associated with company title properties, the unit market remains popular for home buyers and investors.
The median price for units has been rising at a faster pace compared to housing prices, according to the Real Estate Institute of Australia’s latest Market Real Estate Facts report.
Additionally, capital cities Sydney, Brisbane, Adelaide, Perth and Darwin, have also experienced strong rental growth.
Are there any complications you have encountered when securing a loan for a company title apartment? Share your thoughts below
