Purchasing an apartment or a unit (known in New Zealand as a ‘unit title’) is different from buying a freehold property, and additional laws apply in respect of these sorts of properties. One reason for this is that often (but not always) units are physically joined to each other, and this brings with it a raft of different considerations and rules. If you are considering purchasing a unit title, it is crucial to get good legal advice to help you with the specific circumstances of the unit development you are looking to buy in.
In this article, we summarise just a few of the important matters you should be aware of when you purchase a unit title in New Zealand.
You will have to pay body corporate levies in addition to your rates
In addition to paying rates to your local and regional Council, you will also need to pay what is called ‘body corporate levies’. These are an additional cost which is charged to all unit owners by the body corporate that governs the unit development your unit is comprised in. These levies often include the cost of insurance for the buildings in the unit development, maintenance costs (both short term and long term) and cleaning and gardening fees for common areas within the unit development.
Body corporate levies are usually set annually, though payment terms vary between unit developments. There can also be special levies that can arise where the Body Corporate needs funds for projects (including unforeseen maintenance). It’s essential to understand your obligations in respect of the body corporate levies, as well as what costs those levies relate to.
You should check the building(s) in the unit development are sound and weathertight
When you purchase freehold land with a dwelling on it, it makes sense to check that the dwelling is structurally sound and weathertight. However, when you buy a unit, you need to consider not only the particular unit you are looking to purchase but the whole building comprising that unit (which may well include several other units). This is because there are particular repair and maintenance works that the body corporate must undertake, which means even if your unit is not directly affected, you may still be liable for some of the costs as part of your body corporate levies.
When looking to purchase a unit you should obtain and review the body corporate minutes from the meetings for at least the three years prior, together with the financial statements, long term maintenance plan and any resolutions passed by the body corporate during that time, to understand what issues the unit development is currently or has been facing, and what upcoming maintenance works there may be. This may help you get a feel for how those matters may affect the body corporate levies in the future.
There are body corporate rules that you must comply with
Every unit development is subject to rules, and some unit developments have more extensive rules than others. The rules of the unit development should be reviewed prior to your purchase of a unit. Some examples of body corporate rules that we have seen include not being allowed to have pets (or limitations in respect of permitted pets), restrictions on short-term rental use and restrictions on the types of flooring permitted in a unit for noise reduction reasons. The rules can also change from time to time through a voting process. It is important to note that even though you may vote against changes to the rules if they are appropriately passed, you will still have to comply with them.
In addition to the body corporate rules, there are other restrictions and obligations set out in legislation. The Unit Titles Act 2010 (“Act”) is the legislation that governs unit titles in New Zealand. The Act provides for many different matters, including the obligations of unit owners, for example, unit owners must notify the body corporate before commencing additions or structural alterations to their unit and must permit the body corporate access to check the unit owner is complying with the Act. It is essential to be aware of these additional obligations which don’t apply to ownership of freehold properties.
For more information
There are many other factors to consider when looking to purchase a unit title. At Morrison Kent, we assist purchasers with buying unit titles every day and are well experienced in this (sometimes complex) area of law.
If you would like to discuss your purchase of a unit title, or if you have already purchased a unit title and need assistance with a related matter, please do not hesitate to contact our Wellington Property Lawyers; Jamie Nunns (email: firstname.lastname@example.org ph: (04) 495-8912) or; Zaneta Aislabie (email: email@example.com ph: (04) 495-8911).