Article: Law & Finance
Different Titles For Owning Land with Ian Reeves
There are a number of different titles for holding interests in land. Here are four of them.
Freehold Title
This is the simplest and least complicated method of owning land. It is called an “estate in fee simple” which is the description of the ownership dating back to at least the Norman Conquest of England in 1066 AD.
The owner is recorded on the title which states that it is “an estate in fee simple”. It has a legal description and a plan to identify the land, and is computer-generated in the Land Registry administered by LINZ.
The owner theoretically owns the land down to the centre of the earth and up into the sky, but the reality is different - legislation alters that position. Sometimes the Crown, or somebody else, owns the minerals under the ground. Aeroplanes can enter the airspace above the land etc.
A freehold title gives more freedom to do what you like on the land. The land is not subject to restrictions in relation to neighbouring properties, unless there is specific record on the title e.g. rules for gated communities, height restrictions through covenants et cetera.
Leasehold Title
The land is owned by someone else. The right to occupation of the land exists through a lease between the owner and the lessee. Not all leased land can obtain a title for the leasehold interest, for example, if the lease is for part of the land only.
Cross Lease Title
This is a hybrid of the freehold and leasehold ownership.
It was devised to make subdivision of land less expensive, but the need has largely passed as the savings no longer exist. There are very many cross lease titles in existence, and they remain a valid form of ownership of land.
The owner has title to a share of the freehold e.g. a quarter share, but does not have the right to a specific area of the land.
The right to occupy a specific area comes from a lease of the part on which a building stands. There is normally a licence giving exclusive right to occupy a defined area around the building. So a cross lease title comprises firstly a share of the freehold, secondly a lease of part of the land, and thirdly a licence to exclusively occupy an area around the building.
The lease normally contains restrictions on the use of the land, because it is shared with other owners e.g. restrictions to altering the building without consent of the other owners, what pets can be owned etc.
Unit Title
Also known as a “strata title”. It is a creature of statute law, designed to regulate ownership of multi level buildings. A new Unit Titles Act 2010 has recently come into operation.
An easy way to visualise the concept is as a box of airspace (if above the ground), or an area underground, within which the physical structure of the unit is constructed.
There will generally be a body corporate to administer the development, with unit holders having voting rights. Insurance, maintenance and other matters are regulated by the body corporate subject to body corporate rules.
Conclusion
Each title form has its special features, benefits and complications. When buying it, is advisable to understand these by discussing them thoroughly with your solicitor.
Ian Reeves LLB has been a partner of Henderson Reeves Connell Rishworth, for 27 years. His law experience extends over 40 years of practice in New Zealand, England and Australia. Ian leads the property team at Henderson Reeves and has broad experience in commercial and business law, with a special interest in farming and trusts. He has been a presenter at an Auckland District Law Society trust seminar. He also acts as a consultant to the litigation and environmental law teams.
