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Purchasing A Unit Title Property Or Apartment

September 2020

Anyone who has had any experience with an Agreement for Sale and Purchase of Real Estate will have noticed the different ways that property can be owned in New Zealand. The most common ways of owning property include freehold, cross lease and unit title, the latter of which can be either stratum in freehold or stratum in leasehold. 


As New Zealand’s population continues to grow, and the land available to build houses on quarter-acre sections shrinks, one of our best options is to build upwards instead of outwards. This is resulting in many unit title properties being listed on the market. Problems can arise as a result of this as not everyone has encountered a unit title before. It is important for a potential buyer to understand not only how this type of ownership works, but also what is involved in the day-to-day life of owning a unit title.

What is a unit title?

Unit titles are regulated by the Unit Titles Act 2010 (“the Act”) and the Unit Titles Regulations 2011 (“the Regulations”). The Act sets out that a unit title allows a person to own a principal unit, which is defined as a unit that is designed as a place of residence or business – for example, an apartment or office block. A unit title also allows the owner to own an accessory unit/s, which can include areas such as carparks and storage spaces. Both the principal and accessory units must be shown on the unit plan.


An interesting feature of a unit title that is not seen in other types of ownership structures is that an owner of a unit title will share common areas with the other unit title owners. Using an apartment as an example, this area can include such spaces as elevators, corridors, swimming pools and gardens. 


It is important for potential purchasers of a unit title to be aware that, not only will they have to pay the normal Regional and District Council rates, but they will also have to pay an annual levy to the body corporate. This annual levy is used by the body corporate for the upkeep of the common areas, as well as any maintenance on the building itself.


As stated at the start of this article, a unit title can be either stratum in freehold or stratum in leasehold. This is determined by whether the land that the building sits on is owned by the collective unit title owners or by a third party. In the case of the latter, the body corporate will pay rent to the third party for the use of the land.

Body corporate

Every person who owns a unit title automatically becomes a member of that building’s body corporate. A body corporate has several powers and duties which are set out in the Act. Importantly, these powers and duties include, among others, setting and enforcing the operational rules, preparing the annual financial statements and ensuring that the building and common areas are adequately maintained and repaired when necessary.


While every unit title owner forms part of the body corporate, there are a number of additional roles that can be held within the body corporate. These roles include the body corporate chairperson and the body corporate committee. Both the chairperson and the members of the committee are elected during the annual body corporate meetings. As stated in the Act, a body corporate must hold a meeting at least once a year, where the owners of the unit titles each get to vote on any issues raised. 


The body corporate chairperson has several specific duties which are set out in the Regulations. Some of these duties include preparing the agenda and minutes for each meeting, keeping the financial accounts and records, and signing documents on behalf of the body corporate. If the body corporate chooses to elect a body corporate committee, it must set out exactly what it wishes to empower said committee to do. Any decisions made by the committee must be by majority vote.

Pre-contract and pre-settlement disclosure statements

Not only is the ownership of a unit title different from that of a freehold or cross lease estates, but the process of selling or purchasing a unit title requires a few additional steps from that of a freehold or cross lease transaction. 


Importantly, the vendor of a unit title must provide a prospective purchaser with both a pre-contract disclosure statement and a pre-settlement disclosure statement. The pre-contract disclosure statement provides a purchaser with information about the property before an Agreement for Sale and Purchase is signed by either party. The information included in the statement is set out in the Regulations. It includes information such as the amount of the contribution levied by the body corporate for the unit, the details of any proposed maintenance on the building including how the body corporate will fund said maintenance, the body corporate rules, and whether the unit or common property has any water tightness issues.


A pre-settlement disclosure statement must also be provided to a purchaser at least five working days before settlement of the property occurs. This statement provides more detailed information to a purchaser, including the body corporate number, the amount and due date of any unpaid levies and fees, and whether there have been any changes to the body corporate operational rules since the pre-contract disclosure statement. Again, the information that must be contained in the pre-settlement disclosure statement is set out in the Regulations.


While selling or purchasing a unit title can be somewhat intimidating due to the list of additional steps in the transaction itself, as well as the duties and responsibilities involved in owning a unit title, we hope that this article has provided some insight into how they operate, and what a purchaser might expect upon purchasing a unit title. The message we need to convey is “see us at as earlier stage in the process as possible”. Our guidance should remove any concerns you may have regarding this form of ownership. It is the way of the future.