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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.  Thereare four main types of land ownership in New Zealand: fee simple, cross lease,leasehold and unit title.  Each form isoutlined briefly below.  

FeeSimple (also known as freehold)

A fee simple title is the highest form of landownership in New Zealand after the Crown and is also the most common.  As the registered proprietor you own theunderlying 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 thirdparty, but you may have ownership as well as a leasehold interest in thedwelling or apartment.   As part of yourtitle 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 toensure that you understand the terms and particularly the costs involved,particularly in relation to rent review and renewal, as the lease may be for alimited term or may be perpetually renewable.  

Crosslease

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

UnitTitle

Unit titles are becoming increasingly popularas apartment buildings become more prevalent with a focus on higher densityliving.  They are also an alternativeused in the conversion of cross leases. Unit titles are a complex form of land ownership and are governed primarilyby the Unit Titles Act 2010.  When youpurchase a unit title you are purchasing the principal unit (apartment orhouse) and any accompanying accessory units (eg carpark, a storage space andsometimes a share in areas such as corridors), and an interest in the commonproperty rather than the underlying land. As an owner you automatically become part of the body corporate, thebody that governs the property.  There isusually a body corporate committee that is appointed to facilitate the day today operation of the property, often a body corporate manager and a buildingmanager.  You will pay body corporatelevies to pay for the maintenance, insurance and other utility costs.  Body Corporate rules govern the use of theproperty.  As with cross lease ownership,there are two types of unit title ownership also, freehold and leasehold.  The difference is that with a leasehold unittitle the body corporate levies will include ground rent to pay for the leaseof 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 ofproperty 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.