Understanding your property title

‘Estate’, ‘ownership with others’ and ‘interests’

Before you buy a property it is important that you understand exactly what you are purchasing. Your property title records (or should record) all of the interests that affect your title. That way, you are fully informed about any rights or obligations you may have – before you buy.

Estate

The property that you buy will be an estate in freehold, leasehold, cross lease or stratum (freehold or leasehold).

A freehold estate means you own both the land and the buildings on the property.

For a leasehold estate, you own the buildings and another entity, most usually your local council, owns the underlying land. If you buy a leasehold property, you must comply with a lease; this will also be registered against the title, and you pay a lease rental to the landowner.

In a cross lease situation you own a share in the underlying land and you rent your house from the other owners. Likewise the other owners will rent their houses from you. Each owner will have a separate lease registered against their title.

It is important that each lease is on the same or very similar terms so you each have the same rights and obligations.

An estate in stratum is similar to a cross lease but applies to unit title properties. A unit title property means you own a defined part (shown on the record of title) of a building, commonly an apartment, and you share ownership in the common areas of the development such as lifts, lobbies and driveways. Unlike a cross lease, strata titles have stringent rules contained in the Unit Titles Act 2010 which restrict how the property is administered, usually through a body corporate. It also imposes disclosure obligations on you when you look at selling your interest.

Ownership with others

If you are buying the property with one or more other people, there are two main ways your ownership is registered: as joint tenants or as tenants in common.

Being registered as joint tenants is usual for two people who contribute equally to a property. If one of you were to die, the property is automatically transferred to the survivor during the estate administration. You cannot leave your interest to a third party under your will.

If two or more people share the ownership in shares, for example, you may have a half, one-third or even a five-eighths share, then you will be registered on the title as tenants in common. People registered as tenants in common can deal with their property interest independently from other interests, for example, you can leave your share in the property to someone else under your will.

If you are registered as tenants in common it is also a good idea to enter into a property sharing agreement with the other owners. A property sharing agreement details how the property can be used, who pays the expenses and when your share can be sold.

Interests

There are additional interests that may be registered against your title. These are rights or obligations, separate to ownership that may be held against your property.

Easements are a legal right for you to do something over a neighbouring property (appurtenant to) or which allows your neighbour to do something over your property (subject to). The most common easements include rights of way, driveways or walking tracks, the right to drain water or stormwater or the right to drain sewage – to name a few.

Covenants are legally binding promises. Covenants are commonly found registered against new subdivisions and can include promises to build your house to a similar design to the other properties in the subdivision or to keep your grass cut to a certain length. There can also be covenants over your farm which restrict you from keeping pigs, or require you to maintain native bush and restrict you from cutting it down for firewood.

Building line restrictions stop you from building within certain areas of your land. Formerly these were registered in favour of the local council over the front part of a property, near the road frontage. If the council proposed to widen the road, it could purchase the area protected by the building line restriction and the council wouldn’t need to remove any buildings before widening the road.

Consent notices are requirements that the local council imposes on a property when you apply for resource consent. This commonly occurs during a new subdivision and may include requirements to have the building foundations designed by a suitably qualified engineer. A consent notice may also require multiple properties to share a right of way to reduce the number of driveways on a busy road.

When you are considering making an offer on a property, talk with us early on so we can explain the implications of the various terms in the title.

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