When purchasing a property in New Zealand, there are several types of land ownership available (i.e. fee simple, leasehold or unit title).
In this article, we examine five frequently asked questions when purchasing a company share property.
A company share property is an ownership arrangement whereby a Company owns the land and building on the land. When looking to buy the property, purchasers would purchase shares in the Company and enter into a licence to occupy with the Company, which gives them the right to live at the property.
Company share properties were more prevalent pre-1972 before the first Unit Titles Act came into force; however, they are still around and are transacted in the market often.
Do company share properties have proper titles?
In a typical property transaction, you will obtain legal title to the property. With a Company Share property, you purchase shares in the Company and enter into an occupation licence which gives you a right to occupy a particular apartment. Sometimes title to the licence is included on the land register, other times it isn’t. Title to the shares, while different, is an adequate title to the property.
Are there any rules for purchasing or living in a company share property?
When you contract to buy or sell shares in a company share property, the sale will almost always be subject to the company directors’ approval, which often involves an interview.
Furthermore, you will also be subject to a particular set of rules, which are usually set out in the occupation licence or the constitution to the Company. For example, there may be restrictions on the right to lease your unit (i.e. only owners can live there) or the right to have pets in your unit.
As a shareholder, you may also be involved in the approval process of any future shareholders in the Company (and residents in the building), so if the certainty of who you live with is of high priority, then a company share property may appeal to you.
How do I finance the purchase of a company share apartment?
Financing company share properties can be more challenging than most other kinds of properties.
Certain lenders provide finance on them; others do not. The lenders who do provide finance sometimes require a higher deposit than they would with another kind of property.
Also, it is unlikely that you will be able to use KiwiSaver First Home Withdrawal to purchase a company share property, though you should always check with your Kiwisaver provider.
Should I expect to pay the same amount for the purchase of a company share property as compared to a similar unit title apartment?
While every case is different, there is a fairly clear pattern that reflects company share properties as being valued lower than their equivalent unit title counterparts.
Presumably, this is a reflection of the restrictions outlined above. Whatever the reason is, we often see buyers of company share properties who consider that market to have better value and have deliberately chosen to buy in that market.
Are there different costs in living in a company share unit as compared to a unit title apartment?
With a company share property, like a unit title, there are levies to pay. One difference is that company share levies typically include council rates, as the whole property is usually rated, rather than the individual components. Company share levies are also not structured around a legal statute (like the Unit Titles Act) and the components of the levy can, therefore, be quite different, not just to unit titles, but to other company share properties.
As such, there is a bit more to look at when buying a company share property, as you can’t take for granted that certain things are included or not. Being aware of what isn’t covered is usually the difficult part of any analysis, and proper experience in assessing those matters is essential.
For More Information
If you would like to learn more about the different types of property ownership or discuss the purchase of a company share property, feel free to contact Jamie Nunns on firstname.lastname@example.org or call 04 495 8912 or Frederick Dunphy on email@example.com or call 04 495 8933.