Types of Land Title in New Zealand

This article provides a comparison of the different types of land title in New Zealand. This information is crucial for both current homeowners and those looking to buy. Understanding these distinctions is vital, as they impact your rights, responsibilities, control over the property, and even its value and financing options.

In New Zealand, land titles are electronic records maintained by Land Information New Zealand (LINZ). While historically paper-based, they are now digital “Records of Title” that provide information about the legal owner, the type of title, and any interests (such as easements or covenants) affecting the property.

Here is a comparison of the main types of land title:

1. Fee Simple (Freehold) Title

Description: This is the most common and comprehensive form of land ownership in New Zealand. When you own a fee simple title, you own both the land and any buildings on it outright. It grants the owner the most extensive rights and control over the property, subject to Local and Central Government Rules.

Some older Fee Simple titles may be labelled as “Limited as to Parcels,” where there is doubt regarding the area and dimensions. Thus requires advice from a specialist Surveyor.

Key Characteristics:

Absolute Ownership: You have exclusive rights to use and occupy the land and the buildings on it, subject only to general rules (e.g., zoning regulations, building codes), and restrictions registered on the title.
Indefinite Duration: Ownership is for an indefinite period, offering long-term security.
Transferability: You can sell, lease, or transfer the property freely.
Inheritance: You can pass the property on to your heirs.
No Ground Rent: Unlike leasehold, there are no ongoing ground rent payments to a landowner.

Pros for Homeowners/Buyers:

Maximum Control: Greater freedom to renovate, extend, or alter the property (within council consent requirements) without needing approval from other parties.
Simplicity: Generally the simplest form of ownership, leading to fewer potential disputes with others.
Higher Value & Easier Finance: Often considered the most desirable, which can lead to higher property values and easier access to mortgage finance.
Long-term Security: Provides the most secure form of ownership.

Cons for Homeowners/Buyers:

Higher Initial Cost: Typically the most expensive type of title due to the outright ownership of the land.
Full Responsibility: Solely responsible for all maintenance, repairs, and associated costs.

2. Stratum Estate (Unit Title)

Description: Unit titles are common for apartments, town houses, and mixed-use developments. With a unit title, you own a specific “unit” (e.g., an apartment or town house) and an undivided share in the “common property” (e.g., driveways, lobbies, gardens, lifts). This type of title is governed by the Unit Titles Act 2010. This title is a three dimensional title with upper and lower limits and is designed for apartment blocks and situations where one owner is above another.

Key Characteristics:

Individual Ownership of Unit: Exclusive ownership of your defined space and any associated accessory units (e.g., car parks, storage lockers).
Shared Ownership of Common Property: Joint ownership and responsibility for shared areas with all other unit owners.
Body Corporate: All unit owners automatically become members of a “body corporate,” which is responsible for managing the common property, enforcing rules, and collecting levies.
Body Corporate Levies: Owners pay regular levies to the body corporate to cover insurance, maintenance of common areas, a long-term maintenance fund, and other expenses.
Body Corporate Rules: The body corporate has operational rules that unit owners must abide by, which can cover anything from pet restrictions to external alterations.

Pros for Homeowners/Buyers:

Shared Maintenance Burden: Maintenance and insurance of common areas are managed and paid for collectively by the body corporate, reducing individual responsibility.
Access to Amenities: Often provides access to shared amenities like gyms, pools, or communal gardens that might otherwise be unaffordable individually.
Security: Many unit title complexes offer enhanced security features.
Good for Lock-and-Leave Lifestyles: Ideal for those who travel frequently or prefer less maintenance responsibility.

Cons for Homeowners/Buyers:

Body Corporate Control: Less individual control over the property, as significant changes (especially to the exterior or common property) require body corporate approval.
Levies: Ongoing body corporate levies can be substantial and may increase, impacting affordability.
Rules and Restrictions: Body corporate rules can be restrictive (e.g., no pets, limitations on external appearance), potentially impacting lifestyle.
Potential for Disputes: Disagreements can arise within the body corporate regarding management decisions, costs, or rule enforcement.
Disclosure Requirements: Sellers must provide extensive disclosure information to prospective buyers, which requires careful review.

3. Cross-Lease Title

Description: A cross-lease title involves multiple owners collectively owning a single piece of land (often as tenants in common in fee simple) and then leasing the specific dwelling they occupy, from the other owners, for a long term (typically 999 years). This structure was once common for subdivisions but is less frequently created now due to its complexities.

Key Characteristics:

Shared Freehold & Individual Leasehold: Each owner has an undivided share in the underlying freehold land, and a leasehold interest in their specific dwelling.
Flats Plan: A “flats plan” is registered on the title, showing the outline of the buildings and often designating exclusive use areas (e.g., specific garden plots or car parks).
Mutual Consent for Alterations: Any significant exterior alterations or additions to a dwelling (or new structures) typically require the consent of all other cross-lease owners, as they affect the shared freehold interest.
Joint Responsibility: Shared responsibility for common areas like driveways and fences, and often for maintaining the overall appearance of the property.

Pros for Homeowners/Buyers:

Potentially More Affordable: Can be less expensive than a comparable fee simple property, particularly older cross-lease developments.
Some Sense of Community: Can foster a closer relationship with neighbours due to shared responsibilities.

Cons for Homeowners/Buyers:

Complexity & Disputes: Often considered the most complex type of title, leading to potential disagreements between owners over maintenance, alterations, or shared costs.
Lack of Control: Significant restrictions on what you can do to your property’s exterior without neighbour consent.
Defective Title Risk: If alterations have been made to a dwelling that change the building footprint, and these are not reflected on the “flats plan” registered on the title, the title can become “defective.” Rectifying this requires updating the flats plan, which is a costly and time-consuming process requiring surveyor input, Council consent (usually a subdivision consent), and the agreement of all other cross-lease owners. A defective title can make it difficult to sell or mortgage the property.
Joint Liability: While rare, if a co-owner defaults on their obligations (e.g., maintenance), it could potentially impact other owners.

4. Leasehold Title

Description: With a leasehold title, you own the building or improvements on the land, but not the land itself. The land is owned by a separate landowner (lessor), and you (the leaseholder or lessee) have the right to occupy and use the land for a specified period under a lease agreement.

Key Characteristics:

Separation of Ownership: The land and the buildings are owned by different parties.
Fixed Term: The lease has a defined term, which can range from several decades to 999 years.
Ground Rent: The leaseholder pays regular “ground rent” to the landowner for the use of the land. This rent is subject to periodic reviews, which can lead to increases.
Lease Agreement: Rights and obligations (e.g., restrictions on alterations, maintenance responsibilities) are governed by the terms of the lease agreement.
Depreciating Asset: As the lease term shortens, the value of the leasehold interest typically decreases, especially when approaching the end of the lease.

Pros for Homeowners/Buyers:

Lower Initial Cost: Significantly more affordable upfront than freehold properties, making them accessible in prime or desirable locations.
Access to Prime Locations: Often found in city centres or waterfront areas where freehold land is scarce or prohibitively expensive.
Potentially Lower Rates (depending on the value allocation): As you don’t own the land, your rates might be lower (though this varies).

Cons for Homeowners/Buyers:

Ongoing Ground Rent: Ground rent can increase significantly at review periods, impacting long-term affordability.
Uncertainty: The future cost of ground rent can be unpredictable, making budgeting challenging.
Resale Challenges: Can be harder to sell, especially if the remaining lease term is short, or if ground rent increases are high. Mortgage lenders may be reluctant to lend on short lease terms.
Limited Control: Lease agreements often impose restrictions on renovations, alterations, and property use, requiring landowner consent.
Loss of Property at Lease Expiry: Unless extended or purchased, the property (including the buildings) reverts to the landowner at the end of the lease term.

5. Māori Land Title

Description: This refers specifically to land that is held by Māori in accordance with tikanga Māori (Māori custom and practice) or where Māori customary interests have been converted to freehold by the Māori Land Court. It’s subject to the Te Ture Whenua Māori Act 1993 and is distinct from general land. Maori Land is not generally bought and sold on the open market in the same way as other titles. There may be leasing options available. You should consult an expert on this.

Summary

Comparison of New Zealand Property Ownership Types

Feature	Freehold (Fee Simple)	Unit Title	Cross Lease	Leasehold
What is Owned	Land + Buildings	Specific Unit + Undivided Share of Common Areas	Share of Freehold Land + Leasehold Interest in Building/Area	Buildings (land leased)
Key Characteristics	Perpetual ownership, simplest form, most common	Body Corporate governance for common areas	Shared freehold land + long-term lease (e.g., 999 years) for specific dwelling	Fixed term lease (e.g., 99 years), land reverts at end
Key Financial Implications	No ground rent, typically higher upfront cost	Body Corporate fees (levies), potential special levies	Shared maintenance costs	Ground rent payments (can increase), lower upfront cost
Control/Flexibility	Full control (subject to Council and Goverment law)	Subject to Body Corporate rules, shared decision-making	Requires other cross lease owners consent for changes to footprint/shared areas	Restricted by lease terms, landlord consent often required
Common Property Types	Houses, farms, commercial real estate	Apartments, town houses, multi-unit complexes	Town houses, free standing homes	Apartments, some free-standing homes

Key Considerations for Homeowners and Buyers

When considering any property in New Zealand, regardless of the title type, it is essential to:

Get a Title Search: Your lawyer or conveyancer will do this, but you can also request one directly from LINZ. This document will show the exact type of title, the legal description of the property, and any registered interests (such as easements, covenants, or mortgages).
Review the Land Information Memorandum (LIM): This report from the local council summarises information held about the property, including consents for work, flood risk, and rates.
Obtain a Property File: The council’s property file may contain additional plans and details not found in the LIM. This is important for defective cross lease titles.
Consult with a Lawyer/Conveyancer: This is paramount. A good property lawyer will explain the implications of the specific title, any associated risks, and ensure all necessary due diligence is completed. They will advise on the lease terms for leasehold properties, the body corporate rules and associated financials for unit titles, and the cross-lease agreement and “flats plan” for cross-lease properties.
Get a Building Inspection: This is crucial for any property to assess its physical condition.

In summary, while Fee Simple (Freehold) offers the most straightforward and comprehensive ownership, other title types exist in New Zealand, each with its own benefits and drawbacks. Buyers and homeowners must thoroughly understand the implications of the specific title type, before committing to a purchase, to avoid potential issues and ensure their expectations align with the realities of ownership.