What Is a Unit Title? Essential Guide for First-Home Buyers in New Zealand

Before buying a unit title, review the unit plan and record of title with your lawyer or conveyancer so you understand the unit, any accessory units such as car parks or storage, common property, and any restrictions or issues that may affect use or alterations. Unit titles are also called strata titles or stratum estates, and are common for apartments, townhouses and units in a complex.

Pros and Cons

A unit title can be a more affordable way to enter the property market and may include shared amenities, but the trade-offs include body corporate levies, operational rules, insurance arrangements, disclosure documents, future maintenance obligations and any special levies. Finance settings can vary by lender and property type; under current Reserve Bank LVR settings, owner-occupier loans above 80% LVR are treated as high-LVR lending and are subject to bank-level limits.

Unit title owners own a defined part of a building (the relevant unit and an accessory unit, which can be a carpark and/or a locker to store sporting equipment, etc) within a larger building or complex, and along with a shared ownership of the common property (lobby, gardens, pool, lifts etc). This differs from freehold ownership where one owns the land and building outright. It is similar to owning a piece of a larger puzzle, where you have your own piece (your unit) and share the rest of the puzzle (common areas) with others.

Default operational rules apply to unit title properties unless the body corporate has its own rules. MBIE guidance says default rules can be changed, removed or added to by ordinary resolution at an AGM or EGM, and must be recorded at LINZ before they take effect. Buyers should review the registered rules and any changes before signing.

Before making structural alterations, renovations or changes that may affect a unit, accessory unit or common property, check the body corporate rules, the unit plan and title, council/building-consent requirements, lender requirements and legal advice. Some changes may require body corporate consent or updates to unit-title documentation.

Insurance Requirements

The body corporate must hold a principal insurance policy covering the buildings and improvements and keep the unit title property insured to its full insurable value. MBIE also notes that in some cases unit owners hold their own property insurance for their units, and body corporate insurance does not cover personal belongings. Ask for the insurance documents and check what is, and is not, covered before settlement.

On the Unit Title plan, there are areas marked "Common Property" and all unit owners are entitled to use these areas. Any maintenance costs or other costs that are attributable to the entire property which are not directly attributable to the individual units, are payable by all unit owners in the shares allotted to each unit. Sometimes there are areas on the Plan that has been set aside for future development by the original developer of the entire property.

Maintenance Responsibilities

What maintenance is the Body Corporate responsible for and what would you be responsible for?

Maintenance responsibilities depend on the Unit Titles Act, the unit plan and the circumstances. Building elements that relate to or serve more than one unit and are necessary to structural integrity, exterior aesthetics, or health and safety are generally body corporate matters, while owners remain responsible for matters within their own units unless the Act, rules or plan say otherwise.

Shared services and utilities, whether serving units or common property, can also sit with the body corporate. Major issues such as cladding or weathertightness repairs are commonly managed through the body corporate and funded through levies, long-term maintenance funding or special levies, depending on the situation.

Decks and similar elements should not be assumed to be solely an individual-owner responsibility. If an element falls within the statutory definition of a building element or serves more than one unit, the body corporate may be responsible; get the unit plan, rules and legal advice checked for the specific property.

Legislation

The Unit Titles Act and regulations set default operational rules for unit title properties. MBIE guidance says default rules cover matters such as damage to common property, rubbish, noise, parking on common property and interference with other owners' reasonable use of common property. A body corporate can have registered rule changes, so check the rules on the title and the disclosure documents rather than assuming a general rule about pets or alterations applies.

If a unit-title development changes its default operational rules, the changes must relate to the control, management, administration, use or enjoyment of the units or common property and be recorded at LINZ before they take effect. Rules cannot override the Unit Titles Act or other law.

2024 Legislative Changes

A final set of changes intended to improve how unit titles are managed came into force on 9 May 2024. There are now new rules around long term maintenance plans, Body Corporate contracts, regulator enforcement provisions and new regulations must now be complied with.

The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022 addresses all changes to requirements for long-term maintenance plans (LTMP) and LTMP funds, the requirement for contracts between Body Corporates and Body Corporate managers to contain specific terms, enforcement provisions for the regulator, and provisions requiring regulations to be made.

New Regulations

The Unit Titles Amendment Regulations 2024 (Regulations) amending the Unit Titles Regulations 2011 are now in force implementing some of these new changes.

Long Term Maintenance Plans and Funds

The general position remains the same: all Body Corporates must establish and maintain a LTMP with no ability to opt-out by special resolution, and Body Corporates must establish and maintain a LTMP fund unless they resolve by special resolution not to.

There are some amendments to the requirements, form and content of the LTMP and LTMP funds. All Body Corporates must have an LTMP that covers at least a 10-year period, except for large unit title developments (10 or more units) which must cover a 30-year period to be reviewed every 3 years or sooner if it will have a material impact on the unit title plan. A Body Corporate of a large unit title development must, unless special resolution occurs, consult suitable qualified professionals when preparing the LTMP. The LTMP must now summarise the current state of the common property and state the sources of funding for the plan. A Body Corporate which resolves not to establish a LTMP fund will now be required to review that decision annually in accordance with the Act.

Pre-Contract Disclosure Statement (PCDS)

For an existing unit sale, a pre-contract disclosure statement should include key information such as weathertightness issues, insurance details, body corporate fees and levies, proceedings involving the body corporate, financial statements and general-meeting minutes for the last three years, and maintenance plans for the next 12 months. Off-the-plans disclosure is different and includes proposed ownership interests, estimated utility interests, any proposed service contracts and draft operational rules.

A pre-settlement disclosure statement is provided after the agreement is signed and before settlement. It can update important details such as levy amounts, unpaid levies, legal proceedings, metered charges, body corporate rule changes and, for off-the-plans units, additional information where available. Ask your lawyer what to do if required disclosure is missing, late or materially different.

What happens with unplanned maintenance?

These costs are usually paid from the operating account or, if there are insufficient funds received from the annual levies, sometimes special levies will be invoiced to unit owners. A resolution could also be passed by the Body Corporate Committee to transfer money from the long-term maintenance fund to the operating account.