Buying a Unit Title property

Buying a unit title is different to buying a freehold title property.  A unit title is generally used for apartment titles or groups of properties on one piece of land where there is shared facilities (“common property”). The common property could be simply a driveway or could be as extensive as gym facilities, lifts, and swimming pools.  Within such developments, each unit is allocated a share of the underlying piece of land that the unit title development is built on.

Before you buy a unit title property you need to ensure you have reviewed the body corporate thoroughly and understand how the development works.  This article sets out some of the important issues you need to consider when purchasing a unit title.

Pre-Contract Disclosure Statement

Prior to entering into an agreement to purchase a unit title property the vendor has a legal obligation to give you a pre-contract disclosure statement.  That disclosure statement will contain useful information about the nature of a unit title and specific information about the unit title you are buying..  You need to ensure that you receive a pre-contract disclosure statement and that you review it carefully.

The Body Corporate

If you purchase a unit title property you will automatically become a member of the body corporate.  The body corporate owns the common property and governs and regulates the unit owners.  The body corporate will have rules as to how you can use your unit and the common property.  Because a body corporate plays such an important role in any unit title development, you need to investigate and understand how the body corporate operates.

Each unit owner is entitled to participate in the building or development decisions by being a part of the body corporate meetings.  In order to exercise your vote at body corporate meetings, you need to have paid all amounts due and payable to the body corporate.

Levies

You will have to pay levies for the annual costs of the development, including insurance, repair and maintenance, management, leasehold costs if any, and all matters relating to common property.  You should find out what these levies will be before proceeding with your purchase.  This detail should be included in the pre-contract disclosure statement.

What documents should you review before buying a unit title?

1. You and your lawyer will need to review the title and the survey plan for the development to determine what is common property and what is not and any other matters on the title that will affect your use of the unit.
2. You should request and review the body corporate minutes for the previous 2-3 years and the body corporate’s, financial reports and budgets.  These will show you how the body corporate operates, any issues that have arisen and how they were resolved, liabilities that exist and what funds the body corporate is holding for future maintenance.
3. If the unit title is leasehold, you will need to review the lease document.
4. Always check the body corporate rules to ensure you can comply with them and that they are legitimate rules in accordance with the Unit Titles Act 2010.
5. Check insurance certificates and policies to ensure any special conditions relating to insurance are not overlooked.  These are often contained in council encumbrances registered on the title relating to waivers under the Building Act 2004 (for example, a requirement for car park fire separations).  It is essential that these special insurance conditions are noted on the insurance policy otherwise the vendor may be in breach of its obligations in the encumbrance.
6. Obtain a copy of the body corporate’s long term maintenance plan to identify any potential large repair costs in the future.  Does the body corporate hold sufficient funds to meet those costs or will on-going contributions be required to cover such costs?  You should also consider whether the body corporate does regular maintenance.
7. How is the body corporate managed?  Are regular meetings held, and is it managed in accordance with the Unit Titles Act 2010 requirements?  If there is a property manager, are they charging a reasonable fee or is it exorbitant?  Has the body corporate stipulated an exclusive letting agent and what are their terms (this is probably not enforceable)?
8. Consider the earthquake rating of the property and any requirements there may be to strengthen the building.

Social living

A unit title is a social living arrangement.  When purchasing a unit title you have to accept that there may be some restrictions on what you can do to your unit and within the development.  Other owners in the development are also subject to those rules and that should make for a better living arrangement for all.  Remember, however, that body corporate members like any other neighbours can have disputes.

There may be repairs and maintenance costs for the development as a whole but the building is your investment and the state of it including the body corporate governance will affect the value of your unit.

Unit title developments are an increasingly common form of property ownership within New Zealand.  If you are considering purchasing a unit title property, it is important that you obtain legal advice before committing yourself to your purchase so that you fully understand what you will be buying into.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.