Understanding the types of ownership
There are different types of land ownership in New Zealand. The type of ownership has a direct impact on what you can and cannot do with the property.
Summary of important things to know
There are four main types of property ownership in New Zealand - freehold, leasehold, unit title and cross lease.
Each type means different rights, responsibilities and restrictions for the owner.
For any type of property, you should ask your lawyer or conveyancer to review the record of title (also known as the certificate of title). This is the legal document that contains the property’s legal description, details of its ownership and the rights and/or restrictions registered against it.
Freehold. This is also known as fee simple and is the most common ownership type in New Zealand.
Leasehold. Someone else owns the land. You purchase an exclusive right to possession of the land and the buildings on it for a specific period of time according to the terms of the lease.
Unit title ownership. This is most common in a building development where there are multiple owners.
Cross lease. You own two interests in the property:
- A share of the freehold title in common with the other cross lease holders; and
- A leasehold interest in the particular area and building that you occupy.
This page provides general information only and should not be relied on. You should always get advice from your own lawyer and other registered professionals – what is written here is not intended to replace that advice.
Freehold, also known as ‘fee simple’, is the most common kind of ownership in New Zealand. It is usually the simplest kind of ownership.
If you have a freehold property, you own the land and (generally) anything built on the land unless there are any registered or unregistered interests. Examples of interests that might restrict your use of the property include:
- easements that give neighbouring property owners or utilities providers rights to use part of your land to pass over or connect to services
- covenants that limit what type of property you can build on the land
- whether the land is Māori freehold land.
With leasehold ownership, someone else owns the land and you pay rent to them. You purchase an exclusive right to possession of the land and the buildings on it for a specific period of time according to terms set out in a lease. In some cases, you will own the buildings or other improvements on the land.
If you buy a house or apartment that is built on leasehold land, the terms of the lease will set out:
- the amount of rent you have to pay to the freehold owner - this is usually called ground rent
- how often the ground rent is reviewed by the freehold owner
- rates and other expenses relating to your property.
At the end of the lease term, you will need to return the land and the buildings to the freehold owner in the condition specified in the lease.
Ground rent can change and will usually increase. Increased rent and a shortening lease term can have a serious impact on your ability to sell your leasehold interest at a later date.
Unit title ownership is most common in a building development where there are multiple owners. As a unit owner you own:
- your particular apartment or unit and any accessory units, like garages, car parks, private courtyards and storage areas contained in the record of title
- an undivided share of the ownership of the common property (lifts, laundries, lobby areas and gardens).
Becoming a unit title holder means you automatically become a member of the body corporate, which consists of all the unit owners acting as a group. Most day-to-day decisions of the body corporate can be made by a body corporate committee or with the agreement of 50% or more of the unit owners. Some decisions will require the agreement of 75% or more of the unit owners.
You will usually pay an annual fee (a levy) to the body corporate, which will go towards budgeted body corporate expenses like insurance and management expenses, contributing to a long term maintenance fund (LTMF) and any services the body corporate arranges for its members (for example, rubbish collection and cleaning communal areas). Any costs of the body corporate that have not been included in the budget are also payable by the unit owners usually by way of a special levy.
If you are interested in buying a unit title property, you should obtain a copy of the body corporate’s rules, which will set out how you and the other owners can use your units and the common areas. You should also get copies of the minutes from the body corporate’s annual general meetings and the body corporate’s maintenance plan to ensure the LTMF has enough money in it to pay for the ongoing expected repairs and maintenance detailed in the plan. Chat to other unit owners within the complex to see how the body corporate operates.
The seller must also give you the following information about the unit and the body corporate:
- A pre-contract disclosure statement, which the seller provides before entering into an agreement for sale and purchase.
- A pre-settlement disclosure statement, which the seller provides after entering the agreement for sale and purchase but before settlement of the sale.
- If requested, an additional disclosure statement containing further information about the body corporate, which the buyer may request at their cost.
If you hold a cross lease you own two interests in the property:
- A share of the freehold title in common with the other cross lease holders.
- A leasehold interest in the particular area and building that you occupy. These leases are usually for 999 years for a nominal rent like 10 cents per annum (which is usually not demanded to be paid).
A cross lease title will include a plan showing the footprint of the building you are entitled to occupy, called the flats plan. You should check this to see:
- whether it matches the physical location of the property you are looking at
- areas that any of the cross lease holders have the exclusive right to use
- any common or shared areas.
Cross lease ownership usually means that any structural changes made to any area you are entitled to use exclusively (like the building you occupy or your separate garden) or to the shared areas must be agreed upon by all or a majority of the owners. Depending on the terms of the cross lease, you may need to get the other owners’ consent for things like painting the exterior or making non-structural changes to the building you occupy, building a deck or putting up a fence. There may be restrictions on what you can do with the property under the terms of the lease registered on your title.
Cross leases are a complicated type of ownership. If possible, talk to the other cross lease holders and find out how well the arrangements work.