By Jackson Not every home in New Zealand comes with a freehold title to its own patch of land. Cross-leases and unit titles are two common alternatives, particularly in older suburbs where sections were split to fit a second dwelling, and in apartment and townhouse developments. Each comes with rules that shape what an owner can do, and what a buyer ought to check before committing.
Cross-lease ownership
Under a cross-lease, the owners of the flats on a site jointly own the whole piece of land as tenants in common. Each owner then holds a long-term lease of their own dwelling from all the owners together. The lease commonly runs for 999 years, and it comes with a flats plan showing the outline of each building and any areas set aside for an owner’s exclusive use, such as a courtyard or carport.
That flats plan matters more than many buyers realise. If an owner adds a room, encloses a deck, builds a garage or otherwise changes the footprint of their flat without the agreement of the other owners and without updating the plan, the title can become defective. Fixing it usually means obtaining consent from the other owners, having a surveyor prepare a new flats plan and registering it, all of which takes time and money. Lenders and buyers’ lawyers tend to pick up on this.
Comparing the flats plan with the house as it stands today is therefore a key step. An extension, conservatory or enclosed area that does not appear on the plan should be raised with a lawyer before going unconditional.
Cross-lease documents often contain other covenants too, such as restrictions on alterations or obligations to share the upkeep of driveways and services. Neighbourly disputes are more likely where these duties are unclear or ignored.
Some owners choose to convert a cross-lease into separate freehold titles. That is generally possible, but it is a subdivision process involving every owner’s agreement, a surveyor, the council and the land registry, and it can take a considerable time. Buyers who like the idea should treat it as a possibility for the future rather than a given, and price the property as the cross-lease it currently is.
Unit title ownership
Unit titles are governed by their own legislation and apply to apartments, many townhouses and some commercial premises. An owner holds title to their principal unit and shares ownership of the common property with the other owners through a body corporate.
The body corporate manages common property and building-wide matters, and owners pay levies to fund running costs and long-term maintenance. A long-term maintenance plan sets out expected work on the building over the years ahead. Before signing, buyers should receive a pre-contract disclosure statement, and further disclosure follows before settlement. Reading recent body corporate minutes can reveal disputes, planned special levies, weathertightness claims or maintenance that has been put off.
For a unit, an inspector can usually assess the interior and whatever is visible of the exterior and shared areas, but not the entire complex. A building report on a unit should therefore be read alongside the body corporate records, since major issues with roofs, cladding or structure tend to be shared problems with shared bills.
Both forms of ownership can work well. They simply call for a little more homework than a standalone freehold property, and sound legal advice earns its fee here more than almost anywhere else in a purchase.