Ownership of Land

Unit Standard 23134
Unit Standard 23134
Demonstrate knowledge of land ownership, transfer of ownership, and
titles
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Property – Real and Personal
Unit Standard 23134
Ownership of Land
Property is everything which can be owned. It includes land and all
objects (tangible property) and rights (intangible property).
Real property, also called realty, is immovable property – i.e., land and
interests in land. This includes the surface of the land and most things growing
on it, anything permanently fixed to the land (buildings, swimming pools etc),
some airspace above the land (enough for the owner to be able to use and
enjoy the land but not so much as to impede the flight of aircraft above the
land) and anything beneath the surface (except for valuable minerals like
gold and oil which belong to the Crown).
The term “real property” arose in English law after the Norman
conquest (1066) from the kind of court action that an individual was
able to take against another who deprived him of his land. The owner
of the land could bring an action to recover the land, because the
land itself is indestructible and so can be recovered. The owner was
entitled to recover the land, and the action was called a real action.
Personal property is all other property which can be owned. Personal
property can be divided into two main categories:
Choses in possession
Choses in action
The word chose is French for thing, and in law is applied to personal
property.
Choses in possession are tangible items – we often call them goods or
chattels. They are things that a person can own, touch and move and
include such items as cars, jewellery, furniture and livestock. As the owner,
you have possession of these things.
Choses in action are intangible, they do not have a physical presence.
Therefore, as the owner you do not have possession, but the right of legal
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action. Choses in action are rights, not items, and include company shares,
intellectual property, trademarks, patents, goodwill, debts and cheques.
(Whilst a cheque is a piece of paper which has a physical presence the value
of the paper itself is negligible, it is merely evidence of a right against the
payer.) If you wish to enforce your legal right over this kind of property you
must do so by court action - hence the term choses in action.
There is a third category of personal property which relates only to
leasehold land: chattels real.
Chattels real means leases in leasehold land. When land is held under a
leasehold title the lease itself is considered personal property (rather than real
property) because there is no ownership in the land itself, there is merely a
right to use the land.
As the term realty refers to real property, so the term personalty refers to
personal property.
Ownership and Possession
Ownership is a status that confers on a person the greatest range of rights
over property.
Property rights may include:
1. The right to control the use of the property
2. The right to give possession to another
3. The right to any benefit from the property (such as rent)
4. The right to transfer ownership or sell the property
5. The right to exclude others from the property
In law, having ownership means having title to the property.
Ownership can be obtained by purchase, through a gift, by a devise (gift)
in a will, by the establishment of a trust or by operation of law.
Possession is the right of control over a property and usually includes the
right of use. If an item is obtained under a hire purchase arrangement
ownership remains with the seller until the item is paid for, while the buyer has
possession.
Possession may be obtained legally or illegally. The law will protect a
person’s rights of legal possession. However, possession can be turned over
by someone else’s legal evidence of ownership. For instance, if a car is stolen
and then sold to an innocent party, the innocent party (the buyer) has
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possession. However, the owner is still the person from whom the car was
stolen. The buyer, as an innocent party, has rights against the person who
sold the car, but no legal rights to the car itself.
In relation to land, ownership means having title to the land and
possession means having the rights to control and use the land.
Land Ownership in New Zealand
In New Zealand land can legally be owned by anyone, assuming that
person has the legal capacity to do so, and if the purchaser is an overseas
resident that the purchase is not in breach of the Overseas Investment Act.
A Certificate of Title (C/T) is issued for each parcel of land, which gives the
names of the owners and is updated every time the land changes hands.
These title documents have been for many years held in the Land Titles Office
(LTO) for the district in which the land is situated. The LTO in Auckland is in the
Price Waterhouse Centre in Federal St. However, in recent years the title
information has been computerised, and is now available online. If you apply
for a title search today you will receive a “Computer Register” copy from LINZ
(Land Information New Zealand).
The Certificate of Title will always show an identifying number (called
“identifier” on the computerised titles) and the legal description of the land
(the lot number, and the reference number for the deposited plan (the plan
which was deposited showing the subdivision of the land into the relevant
lots). The Certificate of Title will also show any other interests registered
against the land, such as mortgages, easements or leases. (These registered
interests were known as “memorials” on the original Certificates of Title, but on
the computer versions they are simply called “interests”.)
Most land in New Zealand is owned under a “Freehold” title, which will
show on the title as “an estate in fee simple”. This type of ownership is not
limited by time, in other words ownership is “for ever”.
If you own freehold land it is yours to keep, sell or dispose of as you wish. If
you die, the land will be passed on to your legal heirs. If however you die
without a will and with no heirs, the land will revert to the Crown.
The Resource Management Act 1991 gives local city or district councils the
right to control what you do with your land, and so before you build on it or
decide to use it as a rubbish dump you will need to obtain their approval. The
Council also has the right to levy charges (rates) against the land.
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The Torrens system and Indefeasibility of Title
The land registration system in New Zealand is called the Torrens System.
It was first introduced in South Australia in 1858 and was devised by Sir Robert
Torrens, an Irish immigrant to Australia. This system is now used, with some
variations, throughout Australia, New Zealand, the UK and Ireland, much of
Canada and some States in the USA. The system works on the principle of a
registry of titles rather than a deeds system. It is based on the principle that
title to a parcel of land cannot pass to another person, and no encumbrance
can be enforced, unless it is noted on a land register. Registered title is then
deemed to be absolute and indefeasible, i.e. it is guaranteed, or effectively
insured, by the State.
An indefeasible title is protected from claims by other parties, such
as previous owners. As long as there is no fraud involved the title is
guaranteed and cannot be displaced.
Once you have legal title to a parcel of land, that title is indefeasible. S64
of the Land Transfer Act 1952 is headed “Title Guaranteed to Registered
Proprietor” and states: Subject to the provisions of Part 1 of the Land Transfer
Amendment Act 1963, after land has become subject to this Act, no title
thereto, or to any right, privilege, or easement in, upon, or over the same,
shall be acquired by possession or user adversely to or in derogation of the
title of the registered proprietor. In other words, once the land is registered as
yours, no-one else can claim it.
The registry of titles is maintained by LINZ (Land Information New Zealand).
Some titles will include the words limited as to parcels or limited as to title.
If a title is limited as to parcels the boundaries and land area are not
guaranteed because the original survey of the land was not completed to
standards that are acceptable today. This limitation may be removed with
an appropriate survey. Land that is limited as to title may have other
ownership claims on it, and the title itself is not guaranteed.
When a property sells, the purchaser (usually through their solicitor) will
obtain a guaranteed search of the title. This guaranteed search must be
obtained within two weeks before the sale settles and will effectively
guarantee the title for two months after settlement – this means that if a claim
was in the process of being lodged on the title at the time of settlement, and
it’s existence doesn’t show up until after settlement, the Government will
provide compensation. Terranet describes it as follows:
A Guaranteed Title details all current interests in a property
and any pending transactions at the time that the Title was
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extracted. This Title is the main document used in the transfer of
the ownership of property, just prior to the transfer, to ensure
there are no transactions about to be lodged on the Title. The
Guaranteed Title has a key role in terms of the Crown's
guarantee of title of property as set out in section 172A of the
Land Transfer Act 1952.
After the house sells LINZ changes the details in the registry and
records the new owners names on the title.
The Effect of Registration
Prior to settlement, the purchaser has an equitable interest in the land.
After settlement, and registration of the purchaser as the new proprietor, the
estate becomes a legal estate. Registration is therefore essential.
In the case of competing claims on the same parcel of land, it is the
timing of registration which determines the legal interest (or lack thereof) of
each party.
The effects of registering an interest in land:
Transfer of Titles
Registration confers an interest in the land
Registration determines the priorities between competing
claims
Registration gives notice to the whole world of the interest
Registration without fraud confers an indefeasible title
Titles can be transferred several ways:
By sale
By gift
By will
By transmission/operation of law
By trust
Sale is the most common method of transfer. The real estate agent
negotiates the terms of sale and the transfer documents are drawn up by the
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purchaser’s solicitor, and once signed by the purchaser are sent to the
vendor’s solicitor to enable the final signatures.
A gift is the transfer of property from one person to another, with no
payment or other consideration taking place in exchange. It is intended that
the donee (the person who receives the gift) will keep the property and not
return it to the donor (the person who gives it).
Ownership of land can be transferred by will when someone dies, as long
as the will is valid. When a person dies, if that person was the sole owner of
the land, the land can be passed on to any other person or group of people
through a valid will.
Title can be transferred by transmission (operation of law) when there is a
joint tenancy (see paragraph on joint tenancy above) and one of the joint
tenants dies. If there were two joint tenants (such as a husband and wife),
and one dies, the survivor now becomes the sole owner. Title can also be
transferred by transmission in the case of bankruptcy where the Official
Assignee becomes the new owner.
When a property is owned by a trust there will be nominated trustees and
beneficiaries. The trustees hold the property for the benefit of the
beneficiaries. Trusts may be created so that the trustees can dispose of the
property (to the beneficiaries) during their lifetime, or, more commonly, after
their death.
Information on Title Documents
As well as specifying the identifying number for the certificate of title, the
title document will include:
The legal description (Lot and Deposited Plan numbers, and if
applicable, flat and unit numbers and deposited plan numbers for the
flats plan or unit plan)
The size of the land (always specifying “more or less”, because the size
is to the closest square metre)
The names of the owners (proprietors)
Any easements over the land (such as rights of way, rights to drain
water etc)
Any land covenants which have been registered
Fencing covenants, if applicable
Mortgages, if applicable
Caveats, liens etc if applicable
Building line restrictions, if applicable
Other registered interests which affect the property
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A mortgage is a registered security – there is a guarantee that the
mortgage will be repaid to the bank. The mortgage is therefore secure. If it
is not repaid in accordance with the terms of the mortgage, the bank has the
right to sell the property under a mortgagee sale and recover the debt
owing.
All interests registered on a title are noted on the title. This notation does
not give the full story, it just states that the interests are there. However, each
entry includes a reference number, and full details are available by searching
this reference number.
Easements and Covenants
Many titles show easements or covenants. An easement is a right to cross
someone else’s land for a particular purpose. A common easement is a right
of way – this gives another person the right to physically cross your land.
Often a right of way is designed to give access to a rear lot and appears as a
driveway. We often use the term “right of way” to mean a driveway which
provides access to a rear lot but in many cases this access is not legally a
right of way over someone else’s land, it may be a narrow access strip owned
by the owner of the rear lot and it actually forms part of the rear lot. You
therefore need to differentiate between the legal meaning of “right of way”
and the meaning in common use.
A right of way could be foot access (a path) or vehicle access (a
driveway).
Other easements may give someone the right to drain water under your
land or to pipe water or gas, or to provide power or telephone services to
their property over or under your land.
Covenants start out as agreements between the person selling the land
and the person buying it that a particular thing will or will not be done. These
covenants are registered on the title and all subsequent owners will also be
bound by them. In a modern subdivision there will often be covenants
registered on the title. These may stipulate such things as the type and style of
house that the purchaser is allowed to build or the maximum length that the
purchaser will allow the grass to grow to before the building work starts.
You may see covenants for the following:
Minimum floor size of house
Prohibited materials (eg corrugated iron, second hand
materials)
Minimum construction value
Permitted exterior colour schemes
No fencing of the front garden, or fencing of a particular type
Maximum/minimum number of storeys
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Cross leased properties often have “exclusive use” areas (see the heading
below “types of ownership”. These exclusive use areas are agreed between
the owners and recorded on the title as covenants.
Fencing covenants are common on titles. They stem from the time when
the lots in the new subdivision were released for sale. When the first lots were
sold, the neighbouring sections were probably still owned by the company
who created the subdivision (the developer). Under the Fencing Act 1978
you have the right to require your neighbour to pay half the cost of a
boundary fence, as long as it is an appropriate fence for the purpose (to hold
livestock, or to provide privacy - a farm fence would be different from a
residential fence). In the case of a new subdivision the neighbour is the
developer, and a fencing covenant allows the developer to contract out of
their obligations under the Fencing Act. The person buying the new section
agrees not to exercise their rights under the Fencing Act to require the
developer to pay half the cost of the boundary fence. If there were no
fencing covenants the developer would be paying for a lot of boundary
fences.
Fencing covenants automatically expire after 12 years.
Caveats and Liens
If a person claims to have a beneficial interest in a parcel of land, that
person may lodge a caveat. Once the caveat is on the title it gives notice to
the whole world of that interest in the land and it prevents the owner from
selling the land (transferring the title) or allowing any new covenants to be
registered, or granting any new easements over the land.
Liens can no longer be registered against titles, but existing liens may be
enforced. A lien may have been registered where someone has done work
on the land, or supplied materials, and has not been paid by the land owner.
So if a builder built an extension to the house and then was not paid for the
job he may have registered a lien against the title to ensure payment
eventually. If the house sells the lien will have to be removed, and the builder
will allow this to take place once he is paid.
Using Titles when Listing and Selling Real Estate
Every time you list or sell a property it is best to obtain the vendor’s details,
and the property’s legal description, from the Certificate of Title. You know
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the title has correct information recorded on it, and that your listing contract
and sale and purchase agreement will therefore be correct - and signed by
the right people.
The purchaser’s solicitor will always search the title in order to check that
there are no unexpected covenants or easements on the land or other
claims on the property. If the property is cross-leased or a unit title (see below)
the solicitor will check that the flats plan or unit plan is correct. The solicitor
will use the information you supply on the sale and purchase agreement as a
reference to locate the correct certificate of title.
If there are unexpected easements, covenants or other restrictions the
purchaser may not wish to proceed with the purchase and may be entitled
to object to the title.
If there are any caveats liens or claims on the property the purchaser will
probably require the vendor to have them removed. If the vendor will not, or
cannot, have these removed the purchaser may cancel the contract.
In the case of cross leased properties, or properties held under a unit title,
the relevant plan of the dwellings (flats plan or unit plan) must also be
accurate. When the solicitor searches the title the flats plan/unit plan will
also be searched, and if not accurate, may also give grounds to the
purchaser to object to the title.
Types of Ownership
As already discussed, most land in New Zealand is owned under a
Freehold title. There are however several ways of owning land.
The two main types of ownership are freehold (fee simple) and leasehold.
Freehold/Fee Simple
This is nearly absolute ownership of the land. The owner may keep the
land, sell it, gift it or dispose of it by will. Assuming council by-laws permit it,
the land may be subdivided into smaller lots, or if the owner owns an
adjoining lot the land may be amalgamated into a larger lot. However, if
the owner dies without a will and without heirs the land will revert to the
Crown.
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The legal description of freehold land will give a Lot number and a
Deposited Plan (DP) number, e.g. Lot 6 DP 103291.
Leasehold
There is not a lot of leasehold land in New Zealand. With a leasehold title
the owner of the land leases it to the person whose house is on the land. The
house and land therefore have different owners. The owner of the house will
pay “ground rent” to the land owner for the use of the land. Leases are often
for 21 years but on their expiry are usually renewable. The type of lease which
is perpetually renewable is called a Glasgow Lease, and upon renewal the
rent will be reviewed. After 21 years, you can imagine that there will be a
very large rent increase! For this reason, many newer Glasgow leases provide
for more frequent rent reviews (perhaps every five or seven years).
At the end of the lease term the owner of the house may choose to
remove and relocate the house and not renew the lease.
You will notice that when leasehold property is for sale it is usually cheaper
than comparable freehold property, and for this reason real estate agents
often charge a higher commission.
Most of the leasehold land in Auckland is in the St Johns area, owned by
the St Johns Trust and St Johns Church.
Co-ownership of land
The words “tenant” and “tenancy” are often used in connection with
land. In every-day language we use these terms to refer to rented or leased
accommodation, but these words, along with tenacious and tenure, come
from the Latin tenere which means “to hold”. Therefore the terms tenancy
and tenants when used below simply mean holding and have nothing to do
with renting or leasing.
When land is co-owned, all the owners have the right to use and enjoy the
land. The most common methods of co-ownership are joint tenancy and
tenancy in common.
Joint tenancy
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Two or more people own the land jointly. Every one of the joint tenants
has the right to possess the whole of the land and if one dies his or her
interest automatically passes to the other(s). All joint tenants have an
equal right to possession of the land and share equally their interest in the
land. No-one can sell or dispose of their interest independently of the
others nor can they will it to any person upon their death – the main
characteristic of a joint tenancy is the right of survivorship. If the land has
two joint tenants, and one dies, the survivor is entitled to be registered as
sole proprietor of the land.
Joint tenancy by spouses – the Joint Family Homes Act 1964 provides
for spouses to own the family home jointly as joint tenants. However,
more recent legislation (Property Relationships Act 1976, which has
updated the Matrimonial Property Act 1976) and the growing trend
towards family trusts has superseded most of the benefits of this Act.
Some people still own their family homes this way and will wish to settle
any new purchase under this Act, but is now infrequently used.
Tenancy in common
Again, two or more people own the land between them, but with a
tenancy in common they own defined, but undivided, shares. Shares do
not have to be equal, although often they are: two tenants in common
might each have an undivided one half share, or, if shares are not equal,
one might own, say, an undivided one third share whilst the other holds a
two thirds share.
A cross lease is an example of ownership by tenants in common.
Under the Land Transfer Act 1952, tenants in common can hold
separate title to their interest in the land, and can sell this interest, or, if
they die, will it to any other person. The legal interests of the other owners
are not affected. There is no right of survivorship.
When business partners buy land as an investment they may choose to
buy it as tenants in common because this will allow them to dispose of
their shares as and when they choose.
Maori ownership
Maori land ownership is complex. It stems from traditional use of Maori
land where ownership was tribal and decisions were made collectively.
Today Maori land ownership is governed by Te Turi Whenua Maori Act
1993 (Maori Land Act 1993) and provides for the Maori Land Court to
maintain records of ownership.
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If you are searching a title to Maori freehold land you should check
records both through LINZ and through the Maori Land Court. The court
holds all title records for all Maori freehold land.
Most Maori land is registered with two or more proprietors as tenants in
common. An owner of an undivided interest in Maori freehold land can
separately alienate that interest – but only to a certain class of alienee,
usually a blood relative.
The Property Relationships Act 1976 does not apply to Maori Land.
Cross Lease, Unit Title and Company Title
Two of the most common types of title which allow co-ownership of land
are cross leases and unit titles. We will look at these, and company titles,
below.
Cross Lease
This is confusing to a lot of people. The underlying title is nearly always
freehold so if you buy a cross leased property you are usually buying freehold
land – it’s just that you won’t be the only owner of that land. The buildings on
the land are leased. But they are leased from the owners of the land – and
you are one of them. It is a way of allowing several owners to own one piece
of land between them whilst giving each one of them the rights to use of one
of the homes on that land.
If you buy a home unit in a block of three with a cross lease title you will be
buying a “one third” share in the land, and you will also obtain a lease for 999
years (or if the lease was registered five years ago, the balance - 994 years) in
that home home unit. You therefore have a “composite” title – you have a
share in the freehold and a 999 year lease. The one third share in the land will
be described as “an undivided one third share” because there are three
owners who own the land jointly. (The land is not divided up into thirds, with
any one owner being able to identify their third, it just has three owners with
equal shares.)
A cross lease title will always include the words “Composite Computer
Register” and describe both types of estate from which the title is composed
– if the title is for a cross lease on freehold land the title document will show
the estate in fee simple and the estate in leasehold.
However, to make more sense of peoples’ rights to use the section,
outdoor living and gardens when there are two or more owners of the land,
there are often exclusive use areas associated with each of the dwellings.
This prevents the other owners from using the portion of land which has been
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allocated to your unit, hence the term “exclusive” – the other owners are
excluded from it. Exclusive use areas show as covenants on the title.
To show which owner has the rights to which home unit, in a cross lease
situation there must always be a flats plan. The flats plan shows the outline of
the buildings and the exclusive use areas, and it will also show any common
area (often the driveway) which is able to be used by all owners.
Because the title is composite the legal description for the property will
show both types of ownership: firstly the freehold ownership showing the lot
number and DP number, and indicating the share in the land (for instance,
one third), and secondly it will refer to the estate in leasehold showing the
tenure of the buildings. A cross lease title may provide the owner with, say,
an undivided one third share in Lot 8 DP 99673, together with an estate in
leasehold created by Lease L.215498.3 in Flat2 DP 104559.
Cross leases may also be registered on leasehold land although these are
quite rare. The length of the term of the cross lease will be limited by the
length of the underlying lease on the leasehold land.
Unit Title
Again, the underlying title is (usually) freehold and this is another method to
allow the land to have multiple owners. It is used most often for apartments.
A unit title is a title to a defined space (the apartment) and often includes title
to additional spaces (car park, storage cupboard etc). The apartment
owners own the land between them with their shares in the land being
determined by the size of their apartment, i.e. the largest apartment will have
the largest share in the land. There is a body corporate (i.e., all the owners)
which pays for the upkeep of the common area and is usually administered
by a body corporate manager (or secretary) and all of the owners pay their
appropriate share of these costs.
The body corporate knows that one day the building will need major
repairs or renovations, for example the roof may need to be replaced, and
this will be an expensive exercise. So these expenses are planned for in
advance and a fund is put aside to cover them. This fund is called the sinking
fund. Every year all the owners (members of the body corporate) contribute
a small amount into the sinking fund and the fund continues to grow.
Eventually, when the major repairs are needed there should be enough
money in the sinking fund to cover the costs.
All money which is contributed into the fund by owners will remain in the
fund until it is needed. If you live in an apartment block for ten years, and
contribute to the fund every year but the fund does not need to be used
during that time, you will not obtain a refund of your money when you sell
your apartment. You have enjoyed the use of the building during that period
of time, and your successor in title must also enjoy the use of the building,
even if it requires major repairs.
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On the title document the words Unit Title Register appear, and the estate
is described as a Stratum estate. Stratum in Freehold means that the
underlying title to the land is freehold. If the title stated that the estate was
Stratum in Leasehold the underlying title would obviously be a leasehold title.
The legal description for a property held under a Unit title will refer to the
dwelling as the Principal Unit and will identify it with a letter – e.g., Principal
Unit H. There may also be accessory units (the car park space, assigned
garden areas, etc) and these may be described by letters or numbers. A
typical legal description for a unit owned under Unit title could read: Principal
Unit G and Accessory Unit 7 on Unit Plan 234981. There will also be a lot
number, and number for the deposited plan on which the subdivision of lots
was lodged at the Land Titles Office, but with some unit titles this information is
not easy to find. (The letters PU, if you see them, stand for Principal Unit and
AU for Accessory Unit, and UP stands for Unit Plan.)
An apartment block, along with many types of commercial building,
requires a warrant of fitness. This must be renewed annually. The warrant of
fitness is issued once it is proven that the fire alarms, sprinklers and fire escapes
are all functioning correctly, and that such things as lifts are safe and working
as they should. The emergency lighting will also be checked to ensure that it
works. If any of these items failed the building will not be safe to live or work
in, so the warrant of fitness proves that the building is safe.
Company title
In this case the land is owned by a company, which is set up specifically
for the purpose of owning the land. This type of ownership was created for
blocks of flats, or units, and the “owners” gain the rights to their respective
flats or units by buying shares in the company.
If you sell an apartment or home unit which has a company title, you are
actually selling shares, not land. Therefore, the standard Sale and Purchase
Agreement form does not apply, because this form is used only for land, not
for shares.
Whichever kind of title is involved, Clause 5 in the Sale and Purchase
Agreement gives the purchaser the right to search the title to check that
everything is in order. If there are any problems – including problems with
incorrect Flats Plans – the purchaser has 10 working days to object to the title.
Remember, even an unconditional agreement can be voided if the
purchaser discovers a problem or fault with the title.
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Leases and Licences to Occupy
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Commercial and industrial buildings are usually held under a lease. The
tenant leases the shop, office, factory or warehouse from the landlord (the
owner of the building). Commercial leases are usually for a number of years
and often contain provisions for the lease to be renewed once or twice. For
instance, you may enter into a lease for three years with a right of renewal for
a further three years. After the first three years, the tenant has the right to
renew the lease or walk away from it. The landlord however cannot walk
away but must renew the lease if the tenant wishes.
If a tenant wants to (1) sell his or her business to another person, or (2)
vacate the premises and allow another person to take over the lease, the
lease will have to be assigned to the new tenant. Assigning the lease will
require the landlord’s approval. The Property Law Act 2007 states that a
landlord cannot unreasonably withhold consent or delay this consent.
Another form of tenure is a licence to occupy. This is the usual
arrangement in a retirement village. In exchange for a fee, and subject to
the terms and conditions set out in the licence, the elderly person has the
right to occupy one of the units in the village.
Cross Leases and Problems with Flats Plans
Because of the large number of properties which are held under a cross
lease title, and because each cross leased property must have a flats plan,
there are a growing number of problems associated with flats plans.
When the flats plan is first deposited the details are likely to be correct.
Problems arise however because people who own cross leased properties do
not realise that they must amend the flats plan if they alter the shape of their
dwelling after the plan has been lodged.
You will be bound to come across people who add a small conservatory
on to a two bedroom unit – it adds useful, light and airy space and makes the
property much more liveable. Unfortunately, many of these people do not
realise that in doing this they have changed the shape of the “footprint” of
the building, and the flats plan is now wrong. Typically, they will have
applied for a permit or consent to build the conservatory. Because they have
obtained the consent from the council, and to do this a plan was submitted,
they think that all legal matters have been completed. The council are not
concerned about flats plans – they just want to make sure that the building
complies with the by-laws and is safe and sanitary. No-one at the council will
tell the home owner that as well as getting a permit they must also amend
the flats plan on their title. Unless the home owner happens to mention the
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Unit Standard 23134
new conservatory to their solicitor (which is not very likely), it is probable that
they will not discover the shortfall in the flats plan until they come to sell the
property.
If they sell the property without attending to the flats plan the prospective
purchaser will search the title and find that the title has a fault – the flats plan
does not match what is being sold. Even an unconditional sale could fall
over because of this.
In order to correct the flats plan, the home owner will need to obtain the
legal consent of all the other owners of the land (i.e., the owners of all the
other flats in the block), and employ a surveyor to draw an accurate outline
of the flat, showing the conservatory. The resulting legal fees and surveyors
charges may push the cost of correcting the title documents to around
$3,000 – a cost which the home owner will not be expecting.
The Overseas Investment Act
The Overseas Investment Act prevents non-residents from purchasing
certain categories of land without first gaining government approval.
Ordinary suburban property is not likely to be affected by the OIA; the
purpose of the Act is to ensure that the best parts of New Zealand’s
countryside is not owned off-shore.
The Act applies to:
Land in excess of 5 hectares (approx 12½ acres)
Land/property of more than $10,000,000
Waterfront land of more than 2,000m² (approx ½ acre)
Land on certain off-shore islands
Land adjacent to certain reserves of high ecological or cultural sensitivity
If you are selling property to an overseas investor and it falls into one of
these categories it would pay to contact the purchaser’s solicitor and seek his
advice before drawing up the agreement.
Signatories to Real Estate Contracts
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If land is to be sold, all the owners whose names appear on the title must
sign the contract. If one person tells you “I can sign for everyone” you will
need to see a properly executed power of attorney as proof of this claim.
In some cases the person signing the contract may not be the person
whose name appears on the contract as vendor, but may instead be
someone who holds a power of attorney for the real owner. If the owner is
overseas, he or she may have appointed someone as their attorney and this
person will sign on their behalf. Again, you should sight the power of attorney.
When a property is owned by a family trust there will usually be three or
more owners whose names appear on the title – often a husband and wife
and a third trustee, perhaps their solicitor. All these people must sign the Sale
and Purchase Agreement, and until all have signed there is no legally binding
contract in place.
Where companies own properties you will need to establish the names of
the directors of the company, and you will also need to know if any one
director has sole signing rights, or, if none have sole signing rights, how many
directors are required to sign the contract. If a company has two directors,
and both have to sign, a listing granted by one of them may not be valid if
the other contests it.
Sometimes an additional person will demand to have the right to sign a
contract. A de-facto partner may genuinely believe that he or she has the
right to sign a contract to sell the property, however, if that person’s name
does not appear on the title they have no signing rights. If a partner, or ex
partner, believes that they have a right to a share in the proceedings from
the sale of the house they will have to make a claim under the Civil Union Act
2004 but they will not have any right to sign the contract itself.
LIM Reports, Consents and Council Records
Many people confuse the roles of the various government bodies when it
comes to details about land. LINZ holds the titles, which deal with ownership.
The local council holds records about the use of the land, and issues permits
or consents for work to be carried out on the land. They gain this right
through the Resource Management Act 1991.
Title documents do not show what is built on the land – except in the case
of cross leases or unit titles, where the outline of the building (or space to
which there is title) is necessary to help define ownership.
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Sale of Goods Act 1908
Unit Standard 23134
As you know, there is a difference between real property and personal
property. Land is real property. Chattels are personal property. The contract
for the sale of the land is covered by the Sale and Purchase Agreement and
this contract also covers the sale of the included chattels. If the house burns
down and the fire destroys the chattels, the contract provides the remedies
for both parties. Clause 4 “Risk and Insurance” in the Sale and Purchase
Agreement explains that the property and chattels shall remain at the risk of
the vendor until possession is given and taken.
In some cases, after the sale of the property has been negotiated, the
vendors will enter into a private agreement with the purchasers to sell them
some additional chattels – perhaps the purchasers are impressed by the
vendors’ lounge suite and would like to buy it. These additional chattels are
not covered by the Sale and Purchase Agreement because they are not
included in that contract. They are covered by a new unrelated contract
(which may not even be signed) and the Sale of Goods Act 1908 now
applies. The question now is, when do these additional chattels become the
property of the purchaser – and who should have them insured?
S19 of the Sale of Goods Act says that ownership is transferred at the time
the parties intend it to be transferred:
Property passes when intended to pass
(1) Where there is a contract for the sale of specific or ascertained
goods, the property in them is transferred to the buyer at such time as
the parties to the contract intend it to be transferred
Intention may be difficult to ascertain, so s20 of the Sale of Goods Act
provides the rules for ascertaining intention.
Rules for ascertaining intention
Unless a different intention appears, the following are rules for
ascertaining the intention of the parties as to the time at which the
property in the goods is to pass to the buyer:
o Rule 1. Where there is an unconditional contract for the sale of
specific goods, in a deliverable state, the property in the goods
passes to the buyer when the contract is made, and it is
immaterial whether the time of payment or the time of delivery,
or both, is postponed.
o Rule 2. Where there is a contract for the sale of specific goods,
and the seller is bound to do something to the goods for the
purpose of putting them into a deliverable state, the property
does not pass until such thing is done, and the buyer has notice
thereof.
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o Rule 3. Where there is a contract for the sale of specific goods in
a deliverable state, but the seller is bound to weigh, measure,
test, or do some other act or thing with reference to the goods
for the purpose of ascertaining the price, the property does not
pass until such act or thing is done, and the buyer has notice
thereof.
o Rule 4. Where goods are delivered to the buyer on approval, or
on sale or return or other similar terms, the property therein
passes to the buyer—
(a) When he signifies his approval or acceptance to the
seller, or does any other act adopting the transaction:
(b) If he does not signify his approval or acceptance to
the seller, but retains the goods without giving notice of
rejection then, if a time has been fixed for the return of
the goods, on the expiration of such time, and if no time
has been fixed, on the expiration of a reasonable time.
What is a reasonable time is a question of fact.
o Rule 5.
(1) Where there is a contract for the sale of
unascertained or future goods by description, and goods
of that description and in a deliverable state are
unconditionally appropriated to the contract, either by
the seller with the assent of the buyer or by the buyer with
the assent of the seller, the property in the goods
thereupon passes to the buyer. Such assent may be
expressed or implied, and may be given either before or
after the appropriation is made.
(2) Where, in pursuance of the contract, the seller delivers
the goods to the buyer, or to a carrier or other bailee
(whether named by the buyer or not) for the purpose of
transmission to the buyer, and does not reserve the right
of disposal, he is deemed to have unconditionally
appropriated the goods to the contract.
In most cases where a seller and buyer negotiate the sale of additional
chattels after the Sale and Purchase Agreement is signed, Rule 1 above will
apply because it is unlikely that the parties will have made any formal
arrangement regarding the transfer of ownership. These chattels are
therefore at the risk of the purchaser from the time they enter into the
contract with the vendor, even though they may not yet have paid for them
or have the use of them.
Unless the parties formally state a date on which ownership of the chattels
is to be transferred it is deemed that ownership transfers at the time the
contract is made.
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