25 Mistakes to Avoid When Buying a Company Title Property in NSW

Buying a company title property in NSW is legally different from buying a strata apartment. The company owns the land and building, while the buyer acquires shares that carry a right to occupy a particular unit. Consequently, the buyer’s rights may depend on the company’s constitution, share class, occupancy agreement, records and directors—not simply the contract for sale.

What Laws Govern Company Title Property in NSW?

Section 140 of the Corporations Act 2001 (Cth) gives a company’s constitution and applicable replaceable rules contractual effect between the company, its members and its officers. If the replaceable rule in section 1072G applies, the directors of a proprietary company may refuse to register a share transfer for any reason. That power must, however, be read alongside the particular company constitution, directors’ duties and available statutory remedies.

Under section 1071E, a company refusing to register a transfer must notify the transferee within two months. Section 1071F permits the Court to order registration where the refusal or failure to register was “without just cause”. Sections 232–233 may also provide remedies where company conduct is oppressive or unfairly prejudicial, while section 246B regulates the variation or cancellation of rights attached to a class of shares.

A company title occupancy entitlement may also be a land use entitlement for NSW duty purposes. Transfer duty can therefore arise under sections 8, 11 and 32 of the Duties Act 1997 (NSW), even though the buyer acquires shares rather than a separate land title. Section 21A of the Land Tax Management Act 1956 (NSW) also contains specific rules for company title units.

What Does the Case Law Show?

In the matter of Meglo-Yowrie Flat Units Pty Ltd [2023] NSWSC 1634, the Supreme Court considered directors’ refusal to register shares carrying occupancy rights in a Manly company title building. The original refusal was not without just cause. However, continuing to refuse registration after the circumstances changed became oppressive, and the Court ordered registration. The decision demonstrates that board approval powers can be substantial without necessarily being unlimited.

In John Melick Investments Pty Limited v Harbourview Mansions Pty Limited [2017] NSWSC 1132, the Court considered the proposed conversion of a Point Piper company title building to strata title. The case illustrates that occupancy and associated rights may constitute rights attached to a class of shares and be protected by section 246B of the Corporations Act.

The 25 Mistakes Company Title Buyers Should Avoid

1. Treating company title as strata: you acquire shares and occupancy rights, not separate title to the apartment.
2. Signing before obtaining specialist advice: the transaction requires both property-law and corporate-law analysis.
3. Reviewing only the contract: the constitution and occupancy documents may be equally important.
4. Failing to match the shares to the unit: verify the exact share numbers, class and occupancy entitlement.
5. Assuming parking or storage is included: these areas may only be licensed or informally allocated.
6. Ignoring transfer restrictions: existing shareholders may have pre-emptive or first-refusal rights.
7. Assuming board approval is automatic: references, financial information or an interview may be required.
8. Accepting a weak approval condition: the contract should address deadlines, refusal, termination and return of the deposit.
9. Seeking finance after exchange: confirm that the proposed lender accepts the particular company title property before signing.
10. Relying on generic pre-approval: approval for an ordinary apartment does not necessarily extend to company title shares.
11. Overlooking lender conditions: the lender may require company consent, additional documents or a tripartite agreement.
12. Ignoring a missing share certificate: replacement procedures can delay settlement and expose defects in the company’s records.
13. Not checking the register of members: the vendor, shares and company records must correspond.
14. Skipping company searches: investigate ASIC records and relevant security interests affecting the company.
15. Failing to examine company debt: loans, mortgages and litigation can affect the company and its shareholders.
16. Ignoring financial weakness: review accounts, budgets, arrears, contributions and anticipated major works.
17. Not reading meeting minutes: they may reveal defects, disputes, governance problems and planned expenditure.
18. Skipping a building inspection: company records do not replace an independent physical inspection.
19. Assuming insurance is adequate: check the policy, exclusions, insured value and claims history.
20. Assuming strata repair rules apply: the constitution may allocate maintenance responsibilities differently.
21. Assuming leasing, Airbnb or pets are permitted: company title restrictions can be strict.
22. Planning renovations without approval: even internal work may require company and regulatory consent.
23. Forgetting duty, land tax and surcharges: obtain advice before deciding how the shares will be owned.
24. Treating settlement as the final step: the share transfer must be registered and the company’s records properly updated.
25. Ignoring future resale risk: limited lender availability and approval procedures may reduce the future buyer pool.

How Can Buyers Reduce the Risk?

Before exchanging contracts, obtain a specialist review of the contract, constitution, occupancy arrangements, share certificate, register of members, company searches, financial records, insurance, meeting minutes, approval procedure and lender requirements.

The contract should also protect the buyer if finance or board approval is not obtained. An attractive purchase price can quickly be outweighed by an undisclosed restriction, significant company debt, defective records or an unsuccessful transfer application.

CM Lawyers advises on company title contract reviews, due diligence, board approval requirements, settlement and post-settlement share registration. Obtaining advice early gives buyers the best opportunity to identify restrictions, negotiate contractual protections and avoid costly mistakes.

This article contains general information only and is not legal, financial or tax advice. The law and Revenue NSW requirements may change, and advice should be obtained for the particular transaction.