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Property News! Land Types

The four main Land Types in NZ

When buying a property there are references to different types of land ownership.  There are four main types of land ownership in New Zealand: fee simple, cross lease, leasehold and unit title.  Each form is outlined briefly below.  

Fee Simple (also known as freehold)

A fee simple title is the highest form of land ownership in New Zealand after the Crown and is also the most common.  As the registered proprietor you own the underlying land and any dwellings on the land.  You may do what you like with the land, provided it is permitted by law (ie local planning laws and the Resource Management Act 1991).  

Leasehold

The underlying land is leased from a third party, but you may have ownership as well as a leasehold interest in the dwelling or apartment.   As part of your title you purchase the right to occupy the land for a period of time.  You will pay ground rent to the lessor (owner) as part of the occupation right.  It is important to read the lease prior to purchasing the property to ensure that you understand the terms and particularly the costs involved, particularly in relation to rent review and renewal, as the lease may be for a limited term or may be perpetually renewable.  

Cross lease

Cross leases were originally formed as a way of getting around tough subdivision laws.  There are two types of cross lease, fee simple and leasehold.  With a cross lease (fee simple) the owners of the flats each have a undivided share of the underlying land, the fee simple title.  The owners then lease their respective flats.  A cross lease (leasehold) is a situation where the underlying land is leasehold rather than fee simple.  Rather than owning a share of the underlying land, you, as lessee lease the underlying land from the lessor with the other cross lease owners with certain occupation rights.  You then also lease the flats from each of the other respective lessee owners.  The leases for cross lease properties are registered against the title and outline the restrictions and rights that you have in relation to the property and how you use it.  Some of the issues with cross leases relate to unauthorised building works in breach of the terms of lease and not shown on the cross lease flats plan and insurance as it is preferable for all flats to be insured by the same insurance company.  

Unit Title

Unit titles are becoming increasingly popular as apartment buildings become more prevalent with a focus on higher density living.  They are also an alternative used in the conversion of cross leases.  Unit titles are a complex form of land ownership and are governed primarily by the Unit Titles Act 2010.  When you purchase a unit title you are purchasing the principal unit (apartment or house) and any accompanying accessory units (eg carpark, a storage space and sometimes a share in areas such as corridors), and an interest in the common property rather than the underlying land.  As an owner you automatically become part of the body corporate, the body that governs the property.  There is usually a body corporate committee that is appointed to facilitate the day to day operation of the property, often a body corporate manager and a building manager.  You will pay body corporate levies to pay for the maintenance, insurance and other utility costs.  Body Corporate rules govern the use of the property.  As with cross lease ownership, there are two types of unit title ownership also, freehold and leasehold.  The difference is that with a leasehold unit title the body corporate levies will include ground rent to pay for the lease of the underlying land, unless it has been paid in advance.  

It is important to understand the rights, responsibilities and restrictions that come with the different forms of property ownership.

Jacinda May - Pidgeon Law

For more information and to contact Jacinda please visit their website www.pidgeonlaw.co.nz

Pidgeon Law is NZ Advice Group's preferred legal partner and have written this blog in good faith for the knowledge of our readers.