Both land and buildings are owned by a company. Company share title gives the individual owners an equity
share in the company. You occupy your dwelling with a ‘license to occupy’ which is granted by the company.
Each company will have different rules regarding maintenance of the building. Company Title ownership comes
under the Companies Act and, as such, there are no specific rules regarding how the company should manage
maintenance and levies.
In essence, the company owns the whole of the land and buildings. It sells shares in identified and inseparable
blocks and issues a 'license to occupy’ individual units. Rights and obligations are set out in the Company
Constitution (previously called the Articles of Association) and these are also spelled out in the occupation
agreement. Individual flat owners' rights are more of a contractual nature, than those associated with real estate.
Prior to 1964 a flat owner's only title was their share certificate, which could not be borrowed against.
Subsequently it became possible to have a Certificate of Title issued in respect of the ‘license to occupy’, which
was encumberable (i.e. you could register a mortgage against it). Nonetheless this Certificate of Title does not
constitute a state guaranteed 'indefeasible' title.
This lower form of security means that lenders are more reluctant to lend on them. The lesser
security the less the bank is prepared to lend. Some have traditionally limited their lending on this type of
security to 50%.
Within a Flat Owning Company the guiding principle is that the rights of an individual is subservient to the rights
of the community. In the event of a breech of Company rules or failure to pay levies, the board may have the right
to require a flat owner to forfeit their shares and ‘license to occupy’. The board usually has the right to veto and
select new purchasers. Very commonly, the company may require the flat to only be occupied by the owner and
not to be rented out.
There is another potential problem with the lack of separateness of flat-owners funds. Occupation rights are
dependent on the company's solvency in general and the solvency of co owners. Mortgagee's security is tied up
in co-owners solvency. Any mortgagee has first right over the land even over a shareholder that has paid cash.
Also despite issuance of Certificates of Titles to shareholders, company funding to flat owners occasionally
happens. This provides flexibility, but places the company at some risk. If some share owners default on loan
repayments, the others will have to foot the bill to prevent forcing the company into liquidation / mortgagee sale
of the property.
share in the company. You occupy your dwelling with a ‘license to occupy’ which is granted by the company.
Each company will have different rules regarding maintenance of the building. Company Title ownership comes
under the Companies Act and, as such, there are no specific rules regarding how the company should manage
maintenance and levies.
In essence, the company owns the whole of the land and buildings. It sells shares in identified and inseparable
blocks and issues a 'license to occupy’ individual units. Rights and obligations are set out in the Company
Constitution (previously called the Articles of Association) and these are also spelled out in the occupation
agreement. Individual flat owners' rights are more of a contractual nature, than those associated with real estate.
Prior to 1964 a flat owner's only title was their share certificate, which could not be borrowed against.
Subsequently it became possible to have a Certificate of Title issued in respect of the ‘license to occupy’, which
was encumberable (i.e. you could register a mortgage against it). Nonetheless this Certificate of Title does not
constitute a state guaranteed 'indefeasible' title.
This lower form of security means that lenders are more reluctant to lend on them. The lesser
security the less the bank is prepared to lend. Some have traditionally limited their lending on this type of
security to 50%.
Within a Flat Owning Company the guiding principle is that the rights of an individual is subservient to the rights
of the community. In the event of a breech of Company rules or failure to pay levies, the board may have the right
to require a flat owner to forfeit their shares and ‘license to occupy’. The board usually has the right to veto and
select new purchasers. Very commonly, the company may require the flat to only be occupied by the owner and
not to be rented out.
There is another potential problem with the lack of separateness of flat-owners funds. Occupation rights are
dependent on the company's solvency in general and the solvency of co owners. Mortgagee's security is tied up
in co-owners solvency. Any mortgagee has first right over the land even over a shareholder that has paid cash.
Also despite issuance of Certificates of Titles to shareholders, company funding to flat owners occasionally
happens. This provides flexibility, but places the company at some risk. If some share owners default on loan
repayments, the others will have to foot the bill to prevent forcing the company into liquidation / mortgagee sale
of the property.
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Innovation + Experience |
| PO BOX 9018, Wellington 6141 | phone: (04) 240-0124 | fax: (04) 232-4414 | email: valuer@ vcnz.co.nz Innovation + Experience |