Buying Property At The Spit: Understanding State Leasehold & Company Title

The Southport Spit is entering a new period of development, with The Mantaray Marina and Residences under construction and the Marina Mirage precinct undergoing a substantial redevelopment.

This is not the first time that development on the Spit has reflected a broader transformation of the Gold Coast. Christopher Skase’s Qintex group opened the Sheraton Mirage in 1987 and Marina Mirage in 1988, positioning the precinct to capitalise on the influx of visitors attending World Expo 88. Dedicated helicopter and hovercraft services linked the Mirage precinct with Brisbane Airport and the Expo site.

Those developments helped establish the Spit as one of the Gold Coast’s principal luxury tourism destinations. Nearly four decades later, the next phase of development reflects a broader evolution of the Gold Coast itself: from a place marketed primarily to holidaymakers into a city where affluent purchasers increasingly seek permanent or part-time resort-style living.

For purchasers, the significance of this new phase lies in its ownership structure. Unlike an ordinary freehold apartment development, the underlying land is held from the State under a long-term lease, while individual occupation rights are delivered through a company-title arrangement.

Understanding both parts of that structure, and how they operate together, is essential before signing a contract.

Why Do the New Spit Developments Use State Leasehold and Company Title?

Much of the Southport Spit is State-owned land with significant environmental, recreational, tourism and maritime functions.

The Queensland Government’s Spit Master Plan seeks to accommodate appropriate commercial development while protecting public open space and maintaining access to the coastline and Broadwater. Under the associated site-release program, the State retains the freehold land and grants successful developers long-term leasehold interests.

This allows development to proceed while the State retains an ongoing interest in how the land is used and managed.

The State lease may regulate matters such as:

the permitted use and development of the land;
public access through parts of the site;
environmental protection and coastal management;
the operation and maintenance of marina facilities;
insurance and maintenance obligations;
alterations and further development; and
dealings with the lease, including transfers and mortgages.

For example, a waterfront development may be required to maintain a publicly accessible boardwalk through part of the site. Although the public can use that area, responsibility for its maintenance, insurance and associated liability may rest with the development company.

Those obligations, and the cost of meeting them, are relevant to purchasers because the company will ordinarily obtain its funding from the participating shareholders.

Most apartment buyers are familiar with community titles schemes. In those schemes, each purchaser acquires a separately registered freehold lot, while a body corporate administers the common property.

That structure is not available where the development land remains leasehold. Section 9(2) of the Body Corporate and Community Management Act 1997 (Qld) provides that a community titles scheme can only be established over freehold land.

Company title provides an alternative structure. A company holds the underlying State lease, and purchasers acquire particular shares in that company. Those shares carry rights to occupy specified residences and use the development’s shared facilities.

Company title is now uncommon in Queensland, but it is not entirely new to the Spit. The residential condominiums at the Imperial Hotel in Main Beach, formerly Palazzo Versace, provide an existing example of the structure.

Its renewed relevance arises from the distinctive tenure of the new Spit developments rather than any broader return to company title as the usual form of apartment ownership.

What Are You Actually Buying?

A purchaser of a company-title residence does not acquire a separate freehold title to the residence itself.

Instead, the purchaser ordinarily acquires:

shares or a particular class of shares in the company holding the State lease;
rights associated with those shares to occupy a specified residence;
rights to use identified shared facilities; and
any associated rights to parking, storage, marina facilities or other areas.

Depending on the development’s structure, the occupation rights may be recorded in the company’s constitution, the terms attached to the shares, an occupation agreement or a sublease.

The contract and supporting documents should clearly identify the residence and every additional area or facility included in the purchase. Marketing descriptions and architectural plans should not be assumed to create enforceable rights unless those rights are reflected in the transaction documents.

The purchaser also becomes a shareholder in the company. Voting rights, participation in management, financial obligations and the ability to influence future decisions will depend on the company’s constitution and share structure.

The sale contract, company documents and occupation arrangements must therefore be reviewed together to establish precisely what the purchaser will acquire.

How Does the State Lease Affect the Purchaser?

The purchaser’s occupation rights sit beneath the company’s interest under the State lease. The security and duration of those rights are therefore connected to the continued operation of the lease.

Before purchasing, buyers should understand:

the commencement date and remaining term of the State lease;
whether the lease contains renewal or extension provisions;
whether renewal is automatic, discretionary or subject to further agreement;
what happens to occupation rights when the lease expires;
the conditions the company must comply with;
the consequences of a breach by the company;
whether State consent is required for particular dealings; and
how lease-related expenses are allocated between shareholders.

A long lease term may mean that expiry appears remote. Nevertheless, the treatment of the lease at the end of its term can affect the long-term value and marketability of the shares and associated occupation rights and should not be left unexplained.

The documents should also establish how shareholders can ensure that the company continues to meet its obligations under the lease.

What Rules Will Apply to the Residence?

The rules governing a company-title residence may differ from the by-laws applying in a conventional community titles scheme.

Section 180 of the Body Corporate and Community Management Act 1997 (Qld) restricts what body corporate by-laws can regulate. Among other limitations, body corporate by-laws cannot prevent or restrict transfers or other dealings with lots. Apart from exclusive use by-laws, they also cannot impose monetary liabilities on owners or occupiers.

A company-title arrangement operates under a different combination of corporate and contractual documents. Its constitution may include an annexure containing by-laws informed by familiar body corporate principles, but those by-laws are not governed by the body corporate legislation in the same way.

Depending on their terms and applicable law, the company-title documents may regulate:

approval of purchasers or occupiers;
long-term and short-term letting;
alterations to a residence;
use of shared facilities;
pets, parking and storage;
conduct within the development;
transfers and other dealings with shares; and
contributions towards particular services or expenses.

These controls may support the closely managed residential environment intended for a luxury development. However, purchasers should ensure that the rules are compatible with their own plans.

A buyer intending to let the residence, undertake alterations or hold it through a company or trust should determine whether approval is required before committing to the purchase.

What Expenses Will You Be Responsible For?

The purchase price is only part of the financial commitment.

The company requires funds to meet its obligations under the State lease and operate, insure and maintain the development. The company documents should explain how contributions are calculated, when they are payable and how they may be increased.

Relevant enquiries may include:

the amount of current or estimated contributions;
responsibility for repairs within each residence;
the cost of maintaining, repairing and replacing structural elements, shared areas and facilities;
rent and other amounts payable under the State lease;
maintenance and insurance of publicly accessible areas;
marina, concierge, security and other service costs;
reserves for major maintenance and replacement works;
existing or proposed borrowing by the company; and
the consequences if a shareholder fails to pay.

Can You Obtain Finance and Transfer Your Interest Later?

Lenders may apply different requirements to company-title purchases because the purchaser is acquiring shares and occupation rights rather than a conventional freehold lot.

A lender will generally require the contract and supporting company-title documents, including details of the occupation rights and underlying State lease, before deciding whether to finance the purchase. Because finance approval may depend on the lender’s review of those documents, any finance condition should allow sufficient time for that review and should not be waived until the lender has accepted the company-title structure.

The company documents and State lease may also regulate a later transfer. They may require approval by the company or State, impose eligibility criteria for a new purchaser, prescribe transfer documents and fees, or restrict ownership and occupation. These requirements, together with lender acceptance of the structure, may affect how readily the shares and associated occupation rights can be sold.

Buying Off the Plan on the Spit

Many residences within the new Spit developments are being offered off the plan. The general considerations applying to these contracts are discussed in our article, Things to Consider when Buying ‘Off-The-Plan’.

For these developments, the State lease and company-title documents may still be in proposed form when the contract is signed. The contract should therefore be reviewed for the developer’s power to amend those documents before settlement and whether any amendment may alter the occupation rights, services, facilities or financial obligations attaching to the purchase.

Need Advice?

Purchasing within a State leasehold and company-title development involves a combination of property, contract and corporate considerations that does not arise in an ordinary apartment conveyance.

ABKJ Lawyers combines experience with Southport Spit development arrangements and State lease requirements with extensive work in Queensland property law, company law, contracts and conveyancing.

We can assist prospective purchasers by reviewing the contract and supporting documents, explaining the proposed ownership and occupation arrangements, identifying matters requiring clarification and managing the transaction through to settlement.

If you are considering purchasing a residence within a State leasehold development on the Southport Spit, contact ABKJ Lawyers on (07) 5532 3199 or submit an enquiry online before signing the contract.