Different types of property titles

Understanding the property market and all the legal terminology surrounding it can be daunting, especially when it comes to the complexities of property titles. There are multiple types of property titles, including fee simple, leasehold, cross lease and unit titles. These titles determine who is responsible for property maintenance, how long the title lasts and what restrictions are applied to it. With the range of different ways titles can be held, it’s important to know the key differences, whether you are a current owner or a prospective buyer.

What is a property title?

Put simply, a title is a legal record outlining the key details of a property. These details can include the owners, lot number, size of the section, and any registered easements or covenants. Traditionally, New Zealand's property titles were paper documents called Certificates of Title, but in 2002, they were all converted to electronic records. 

Now, property titles are called Records of Title and are available on request from Land Information New Zealand (LINZ), whether they’re current or historic. 

A current Record of Title will show the following: 

• The existing owner(s).
• A legal description.
• A diagram or plan of the land. 
• Registered rights and restrictions on the property. 

A historic Record of Title will show the following: 

• All interests that have been registered against the current title since it was issued. 
• A diagram or plan of the land. 
• Digital copies of the original Certificate of Title where applicable.  

You can find out more about the digitalisation of property titles through the Land Transfer Act 2017 or speak with a licensed professional. 

Types of property titles

There are various ways a title can be held over property, including fee simple, cross lease, leasehold and unit title. 

Fee simple or freehold titles

Freehold is the most common type of title in New Zealand and is also the least restricted. Essentially, there are no constraints on the ownership meaning the legal owner is the exclusive stakeholder and does not have any complicated terms to abide by. 

Leasehold titles

A leasehold is when someone owns the right to occupy a property for a prescribed time but the land itself still belongs to the original owner. This type of lease can be residential or commercial and usually requires the occupant to pay annual rent on top of the initial purchase price. Leasehold titles are not a popular option because they are known for being complicated and causing disputes between the landowners and occupants. 

Complications of leasehold titles include: 

• The rent value is frequently reassessed based on the local market meaning the occupant could be obligated to pay a rate they can’t afford.  
• They require higher deposits that can be difficult to get finance for.  
• The agreed terms are more complex and require intensive assistance from a property lawyer. 
• The title holder will not benefit from an increase in land value because, at the end of the lease, they have no rights to the property.  

In New Zealand, leasehold titles have been used frequently on Maori land, giving people a certain amount of years to live on the property until interested parties reassess at the end of the lease. At that point, there is sometimes an opportunity for the occupant to buy the property rights in which case it would become a freehold title. 

Cross lease titles

A cross lease is when there are multiple people invested in the land as agreed upon in the property title. Each person is a part owner of the overall property and is obliged to follow the agreements set out in the title. Typically for a term of 999 years, these titles give each owner a leasehold claim on the particular area of the land and building they occupy. A common application of cross lease titles is when multiple houses share a right of way, such as when a house is built on the back of an existing house's section. 

Cross lease titles tend to be the most complicated type of title because they involve more people and more conflicting agendas. To mitigate this, there are a set of obligations for each owner to meet, to ensure everyone’s interests are safeguarded. For example, it’s common for cross lease titles to restrict the occupants from running a business on the property to minimise unwanted disruptions for others. Likewise, it is often mandatory to get formal consent from the other owners before making changes like building a fence or painting the exterior of the house. 

Unless the co-owners consent, it is not possible to extend the outline of the buildings beyond what is shown on the title plan. If they do agree, you’d still need to get a new survey plan and title which is often expensive. 

Unit titles

When a person owns a unit title, also known as a stratum in freehold, they own a defined space within a building as well as shared ownership of common areas. This is mostly applied to apartment buildings because it gives each owner full rights to their own apartment along with shared access to areas such as the entrance, stairwell and garden. Unit titles require all owners to pay fees to a Body Corporate which is responsible for insurance, rates and ongoing maintenance of the building. It is common for the Body Corporate to enforce strict rules, such as having a prescribed external paint colour or not being allowed to have pets.

It’s crucial to understand these rules in full before investing in a Unit title because they will influence the value and liveability of the apartment. If you are unsure whether the Body Corporate rules are reasonable or suitable for you, we recommend discussing your legal options with an experienced property lawyer.  

Understanding property law

Property law can be confusing and when it comes to such a big investment, it’s important to have the right support. Regardless of which title you currently have or opt into, a property lawyer will have the skills to guide you through the process and find the best solution for you. 

If you want to make an informed decision about your property title, contact our dedicated team at Halliwells via Legal Path. They have years of expertise in property law and can help you with all your conveyancing and title transfer needs.