Home Unit Company Registration (Company Title)

Yes, the Patricia Holdings Home Unit Company is considered a special purpose company according to ASIC and is eligible for the reduced annual review fee.

The legal requirements for a special purpose not-for-profit company are set out in section 3(e) of the Corporations (Review Fees) Regulations 2003 under the Corporations Act 2001 (Cth). The regulations state that:

• the company is the proprietor of land on which a building divided into separate residential areas and areas for common use is erected;
• the members of the company are entitled, because of the shares they hold in the company, to the exclusive occupation of 1 or more of the residential areas and to use of the common areas; and
• the company only operates to facilitate and enforce the rights of company members in relation to exclusive occupation of the residential areas and to maintain the common areas.

The Patricia Holdings Home Unit Company complies with these regulations.

A company can issue different classes of shares with the rights and restrictions attached to them relating to distributions, voting and receiving notice of meetings, distinguishing it from other classes. Shares in a home unit company represent the flats or units within the block and are generally split into different “share groups”. The unit entitlements are expressed as a percentage and the share groups denote a particular lot or unit to which the shareholder(s) are entitled to. It is for this reason that we believe issuing different classes of shares would be futile. As such, the Patricia Holdings Home Unit Company Constitution only allows for ordinary class shares to be issued at the time of registration.

A home unit company is a type of proprietary limited company that involves a group of people (directors or members) who own or live in a block of flats or units. The company exists as a body corporate to administer the property. The company will qualify for reduced ASIC annual review fees if:

• the company is the proprietor of land on which a building divided into separate residential areas and areas for common use is erected;
• the members of the company are entitled, because of the shares they hold in the company, to the exclusive occupation of 1 or more of the residential areas and to use of the common areas; and
• the company only operates to facilitate and enforce the rights of company members in relation to exclusive occupation of the residential areas and to maintain the common areas.

Per the Patricia Holdings Home Unit Company Constitution, if the company is wound up and the property of the company is more than sufficient to pay all debts as well as the costs, charges and expenses of the winding up, the excess must be divided among the members in proportion to the unit entitlement held by them. The liquidator may divide among the members the whole or any part of the company, and, determine how the division is to be carried out.

The Patricia Holdings Home Unit Company does not allow for directors to be paid any fees or remuneration for their services as director. Directors of home unit companies are lot owners and not professionals employed for the purposes of managing the company title building.  This follows the situation with strata title committee members.

Of course you can. In order to meet ASIC’s eligibility requirements of special purpose home unit companies and take advantage of the reduced annual review fee, you will need to make sure that:

• the company is the proprietor of land on which a building divided into separate residential areas and areas for common use is erected;
• the members of the company are entitled, because of the shares they hold in the company, to the exclusive occupation of 1 or more of the residential areas and to use of the common areas; and
• the company only operates to facilitate and enforce the rights of company members in relation to exclusive occupation of the residential areas and to maintain the common areas.

Should you choose not to use the Patricia Holdings Home Unit Company Constitution, due to the complexity of this particular company type, we suggest having the constitution drafted by a property law specialist.

Company title schemes were introduced in NSW around 1920 with strata schemes introduced in the 1960s. Generally speaking, the main difference between company title and strata title schemes are that unlike with strata title, in company title the company title owner does not have the title to any real estate but has, through ownership of shares in the home unit company, the right to occupy an apartment or unit in the building owned by the home unit company. A strata title owner on the other hand will obtain a legal interest in the real estate defined by the registered strata plan.

Company title is less common than strata title, as most buildings have chosen to change to strata title but in some areas, company title remains the norm. The shares in the company should correspond to the value of the units based on the size and location of the units in the building. Unlike with strata title, the buyer of a company title home unit does not receive a certificate of title to the property but instead they receive a share certificate.

In company title properties, the Board of Directors is also required to approve the share transfer to a prospective buyer whereas this same approval process is not a requirement of strata title properties.

Company Title Pros

• They are typically more affordable than strata title properties
• Money is saved on strata costs like insurance and administration
• With less complicated approval processes and by-laws, resolving basic disputes or addressing problems may be simpler
• The residents are typically owner-occupiers or permanent residents that have been approved by the board, which may lead to more harmonious living and less short-term occupancy
• There are very specific agreements associated with company title so you know exactly what you’re getting and what can and can’t be done

Company Title Cons

• Prospective buyers need to be approved by the company’s board which will have rules and restrictions on potential owners
• Tenants will also need to be approved if there are no restrictions on whether you can rent your place out to a tenant
• Lenders are more reluctant to approve home loans for company title compared with strata title. There are stricter LMI levels, and the lender may want to see the agreement before approving a mortgage
• Because the company directors approve the transfer of shares (the new buyer) the pool of purchasers and how quickly the unit may sell might be restricted
• Rents might be a little lower than what could be achieved for a strata property
• The apartment’s value may not increase at the same pace as strata title units

There are a few steps to take to convert from company title to strata title such as seeking local council approval, but to put it simply, yes you may convert to strata title in the future. This process is started by way of special resolution of the share group holders.

The two are related but no, they are not the same thing.

A home unit company involves a group of people (directors or members) who own or live in a block of flats or units. The company exists as a body corporate to administer the property. Company title is a scheme of land ownership through which a company (the home unit company) owns the title to the land. Shareholders in the home unit company are entitled to exclusive occupancy of their unit. The owner does not have a title deed but instead they have a Share Certificate representing their ownership of the unit. The building and land would be considered a company title property with the home unit company administering the property.

Per the Patricia Holdings Home Unit Company Constitution, to qualify for appointment, a director is required to be a member of the company either solely or jointly in one or more share groups, or, be the nominee of such member.