This was the first type of “unit” development. While it appears to be similar to a strata unit development, it is really quite different.
The peculiarity of the company share scheme is that a company, incorporated specifically for the purpose, is the registered owner of the all the land and the whole of the building in the development.
Being a shareholder in the company gives a person the right to occupy a particular portion of the building.
Buying or selling a company share scheme property can pose major problems:
- Individual “owners” do not obtain title to the portion of the property they occupy, and so lenders will usually refuse to accept such property as security for a loan. This means that a sale must be on a cash basis.
- Purchasers often regard such properties as involving “too much hassle”, and this can affect the value of the property.
- Extensive checks must be made of the company’s Articles of Association, Service Agreement, Occupancy Agreement, Leases, Licences and Covenants to discover the rights and obligations of shareholders.
Purchasers attending auctions (without the opportunity to have the Contract and Section 32 Vendor’s Statement properly checked by a lawyer) should be particularly wary!