Types of Title to Land
From WikiProperty
When looking at purchasing a property it is important to be aware of the type of title you are dealing with. The following discusses the main types of title available in New Zealand.
Fee simple:
This is commonly understood by people as a freehold estate. The word “fee” indicates that the title can go on forever and the word “simple” indicates that it can be passed or transferred to others. A fee simple estate is perhaps the ideal to aim for but please note that there may be other encumbrances or limitations registered against a particular title which can reduce the “purity” of the title.
Cross lease titles:
A separate title is issued for each of the main buildings on a lot. Assuming two buildings on the lot then each of the two titles records the legal interests as an undivided half share in (usually) fee simple in the land and a leasehold estate in the building. The leases are typically for 999 years at 10cents per year. It is the lease which creates the rights to occupy a particular building on the land and to use a particular part of the land for exclusive use and often a driveway in common with the other owners. These titles are sometimes described as composite titles because they are made up of different interests (for example the fee simple interest and leasehold interest). They certainly have their complications and the wording of the lease is critical. There is a move to phase them out.
Unit titles:
The unit titles system exists through the Unit Titles Act 1972. By depositing a unit plan an estate called a “stratum estate in freehold” (or it can be a stratum estate in leasehold if the underlying land is leasehold) is created. Essentially the title is to a space or shape situated below on or above the surface of the land. For this reason they are useful in apartment tower blocks, but also commonly used in industrial commercial multi unit developments. A body corporate is established to administer common areas, common exterior maintenance, building insurance etc etc. The body corporate levies the individual unit owners for their share of the costs. If you are looking to purchase a commercial property it is quite likely that you will come across this type of title.
Leasehold:
You may occasionally come across a situation where the underlying fee simple is owned by one person or organisation (e.g. a council or a church) and a lease is registered on that title which allows someone else to own and use the building on the land. The lease is able to be transferred and typically is for 21 years with perpetual rights of renewal. In that situation the rent would be usually reviewed every 21 years so can leap up significantly on review.
Summary
The above discusses the more common types of title to land in New Zealand. There are others (for example time sharing, licences to occupy, company share structures etc) You should not rely upon this Item of Interest in making any decision to purchase. Titles are complicated and if you have any doubts you should take appropriate advice.
Philip Dreadon, solicitor - greig.bourke@xtra.co.nz
Return to Items of Interest
