How to - Unit title ownership of apartments and other NZ properties

Introduction

A "unit title" is created by the New Zealand UNIT TITLES ACT 2010 to provide for multiple ownership of common spaces and facilities, such as driveways and lifts.

How is unit title different from the standard form of land ownership?

A unit title development (such as an apartment block) consists of:

• two or more principal units (to be used as a residence or business)
• the accessory units to be attached to the principal units (such as a garden, garage, pool or carparking space)
• any common property (that is, common spaces such as lawns and driveways, and common facilities such as lifts and laundries)

As a form of ownership, unit title is similar to other property in that it can be bought and sold, or leased or mortgaged. But unlike other forms of title, it is made up of three components:

• ownership in the particular unit
• an undivided share in the ownership of the common property
• an undivided share in the ownership of the units if the unit plan is cancelled

Other names for unit title are "stratum estate" or "strata title".

Ownership of accessory units

An accessory unit is an inseparable part of the principal unit and therefore ownership of the accessory unit accompanies ownership of the principal unit. The accessory unit can be let under a monthly or weekly tenancy, but it cannot have a totally separate owner.

Ownership of the common property

The unit owners own the common property as "tenants in common". This means that, when a unit owner dies, the share of that owner passes to his or her estate and therefore according to his or her will. This is in contrast with ownership as "joint tenants", whereby an owner's share passes to the other owners if he or she dies.

Each owner's share in the common property is proportional to their "unit entitlement".

The unit entitlement

Each unit has assigned to it a "unit entitlement". This is a figure fixed by the Valuer-General or a registered valuer calculated on the basis of the relative value of the unit in relation to the other units on the plan.

The amount of the entitlement is very important as it determines:

• the unit owner's share in the common property
• the unit owner's voting rights
• the unit owner's obligations to contribute to the fund of the "body corporate"

The "body corporate"

The body corporate is a unique feature of the unit title scheme, and consists of all the owners of the units acting as a group.

The body corporate has two main duties:

• to organise and maintain insurance for all buildings and other improvements
• to keep the common property in a good state of repair

The body corporate also has duties that apply under its rules (see below for the rules).

In larger developments there is usually a Manager or Management Committee employed to carry out the body corporate's duties.

The body corporate's fund for administration expenses

The body corporate establishes a fund from which payments are made for insurance, rates, maintenance and other expenses. The body corporate levies the owners in proportion to their unit entitlement.

The fund usually runs to a set budget. However, if work or levies are required over a certain sum a Special General Meeting of the body corporate is called to discuss this.

The rules of the body corporate

A body corporate has rules, which govern the unit owners' relationships with each other and with third parties. The UNIT TITLES ACT 1972 sets out rules in its Second and Third Schedules; these will apply to any unit title development unless they are varied by the body corporate.

The rules in these Schedules include the powers and duties of the body corporate, and also the responsibilities of unit owners.

Responsibilities of unit owners under the rules

The Second Schedule of the Act sets out a number of rules that automatically apply unless they are varied by a unanimous resolution of the body corporate.

These include the following duties of unit owners:

• Unit owners must allow the employees or agents of the body corporate to enter at reasonable times in order to:
  • check the unit's condition
  • maintain and repair pipes, cables and so on that are also used by other units
  • maintain repair common property
  • ensure that the unit owner is complying with the rules
• Unit owners must comply with all laws and bylaws relating to the use of the unit.
• Unit owners must immediately carry out any work ordered by local councils or public bodies.
• Unit owners must pay all rates, taxes and so on payable to local councils or public bodies, and all amounts levied by the body corporate.
• Unit owners must repair and maintain their units to avoid damage to common property or other units.
• Unit owners must have the consent of the body corporate before they make any additions or structural alterations to the unit.

The Third Schedule sets out rules relating to unit owners that can be amended by a majority resolution of the body corporate:

• Unit owners must not use the unit, nor allow it to be used, for any purpose that is illegal or that might harm the reputation of the building.
• Unit owners must not make undue noise in or about any unit or common property.
• Unit owners must not keep any pets on the unit or the common property without the consent of the body corporate.
• Unit owners must not use the common property in any way that unreasonably interferes with the use and enjoyment of the other owners.
• Unit owners must not use the unit, nor allow it to be used, in such a way as to cause a nuisance or disturbance to occupiers of other units.

Creating a unit title development

To create a unit title development you will need to subdivide the land into units by depositing a plan with the local office of the Land Titles Service, which you can contact through the regional offices of Land Information New Zealand.

The plan is called a "unit plan". Your unit plan will need to show the principal units, the accessory units, and the common property.

Once the unit entitlements are set and you have obtained the necessary consents of any parties who have an interest in your land (anybody who has lent you money or who has a charge over your title), you will be able to deposit the plan.

You will need to address the issue of what additional rules will be needed over and above the standard rules.

Things to consider when buying a unit title property

If you are intending to buy an apartment or other unit title property, you should consider the following issues:

• Is there adequate insurance for the whole of the unit title development?
• Is there anything in the body corporate rules that is contrary to the rules in the Second and Third Schedules of the Act? If so, what is the effect of this?
• Is the seller liable for any unpaid levies?
• Are there any weekly or monthly tenants in any of the accessory units? For example, is someone hiring a garage or storage space?
• You should check the land transfer register at an office of the Land Titles Service to make sure that there are no separate dealings in relation to the common property by the current registered owners.

Cautionary notes

• If you are creating a unit title development, it is important to get the advice of a lawyer. Not only will your lawyer draft the necessary documents, including the rules for the body corporate, but he or she will also advise you generally as to the merits of creating a unit title plan.