When buying an investment property in New Zealand, the type of title matters more than many buyers realise. Freehold, cross-lease, and unit title each come with different rights, responsibilities, and implications for financing and insurance. Understanding these differences can help you make better investment decisions and avoid unexpected complications.
Freehold (Fee Simple)
Freehold is the most straightforward form of property ownership in New Zealand. You own the land and any buildings on it outright, with no shared ownership or usage rights with neighbours. The property boundaries are clearly defined, and you have full control over what happens within those boundaries (subject to council regulations).
For investors, freehold titles are generally preferred. Financing is straightforward since banks have no concerns about title type. Insurance is simpler without shared structures or party walls to consider. There are no body corporate fees or other owners to consult before making changes. Resale is typically easier since buyers prefer freehold titles.
Freehold properties often command a premium over equivalent cross-lease or unit title properties, sometimes 5-10% or more. Many buyers see this premium as worthwhile for the simplicity and control that freehold ownership provides.
The main limitation of freehold is that it does not apply to every property. In built-up areas, cross-lease and unit title structures allow multiple dwellings to share land that would otherwise accommodate only one home.
Cross-Lease Titles
Cross-lease is a uniquely New Zealand form of ownership that developed in the 1960s and 1970s. It was a way to subdivide land and create separate titles without the full cost and complexity of traditional subdivision.
Under a cross-lease, multiple owners each have a share of the underlying land as tenants in common, plus an exclusive right to occupy their specific building (the "flat") as defined in a registered plan. The flat plan shows the building footprint and often includes any exclusive-use areas like courtyards or driveways.
Cross-lease titles come with several complications that investors need to understand.
The flat plan is a legal document. Any changes to the building footprint - extensions, decks, even some types of alterations - technically require updating the flat plan and getting consent from other owners. Many cross-lease properties have "encroachments" where the actual building differs from the registered plan. These can create legal complications and affect financing and insurance.
Shared ownership of land means you need agreement from other owners for significant changes. Want to install a heat pump that affects shared areas? You may need your neighbour's consent. This can create friction and delays.
Banks treat cross-lease titles with more caution. Most will lend on cross-lease properties, but they may require a lawyer's certificate confirming no encroachments, or reduce the maximum LVR. Properties with known encroachment issues can be difficult to finance.
Insurance for cross-lease can be complicated, particularly for shared structures or where buildings are connected. You need to ensure that coverage is coordinated with other owners.
Despite these complications, many cross-lease properties make perfectly good investments. They are common in desirable suburbs of Auckland and other cities. The key is understanding what you are buying and checking for potential issues before purchase.
Unit Titles (Strata Title)
Unit titles are governed by the Unit Titles Act and are common for apartments, townhouses, and some multi-dwelling developments. Each owner holds title to their individual unit plus a share of common property (driveways, gardens, shared facilities).
A body corporate manages the common property and shared responsibilities. All unit owners are automatically members of the body corporate and must pay levies to cover shared costs like building insurance, maintenance of common areas, and any building management services.
For investors, unit titles have distinct characteristics to consider.
Body corporate fees add to ongoing costs. These can range from minimal amounts for simple developments to thousands of dollars per quarter for apartment buildings with lifts, pools, or concierge services. Always check the fee history and what it covers before buying.
Body corporate rules may restrict what you can do. Many body corporates have rules about tenants, pets, parking, or modifications. Some prohibit short-term rentals like Airbnb. Check the body corporate rules and minutes before buying - you need to comply with them as an owner.
The body corporate's financial position matters. A well-managed body corporate with healthy reserves is very different from one that has deferred maintenance and no money to pay for it. Request the long-term maintenance plan and latest financial statements. If a major repair is coming (especially earthquake strengthening or weathertightness remediation), you could face special levies of tens of thousands of dollars.
Lending on unit titles depends partly on the building. Banks have lists of buildings they will not lend on (or will only lend at low LVRs) due to weathertightness issues, earthquake ratings, or other concerns. Check with your bank or broker before committing to a unit title purchase.
Insurance for unit titles is typically arranged by the body corporate for the building itself, with owners responsible for contents and sometimes internal fixtures. Check what the body corporate policy covers and what gaps you need to fill.
Financing Differences
Banks approach these title types differently. Freehold properties generally attract the best lending terms with no title-related restrictions on LVR or loan type.
Cross-lease properties may require additional due diligence. Banks often want a solicitor's certificate confirming no encroachments. Properties with known encroachment issues might face LVR restrictions or be declined altogether. Some banks are more cautious about cross-lease than others.
Unit titles face the most variability. Standard apartments with good body corporate records typically finance without issue. But buildings on bank "no-lend" lists, properties with weather-tightness claims or low earthquake ratings, and high-density inner-city apartments may face restrictions or higher rates.
As an investor, check financing options before committing to any cross-lease or unit title purchase. A property that looks attractive might be difficult to finance - or to sell later.
Insurance Considerations
Freehold properties have straightforward insurance. You insure the building and contents through a policy you control entirely.
Cross-lease properties can be complicated. If buildings are connected or share party walls, you need to coordinate coverage with neighbours. Some insurers require all dwellings on a cross-lease to be on the same policy. Separate policies can create disputes about shared damage or repairs.
Unit title buildings are insured by the body corporate for the common property and building structure. You are typically responsible for contents and any owner-installed fixtures or improvements. Check exactly what the body corporate policy covers and arrange your own policy for the gaps.
Recent years have seen insurance costs rise dramatically, particularly for some types of properties in certain locations. Apartments in high-risk zones (coastal Wellington, for example) have faced significant premium increases. Factor current insurance costs into your investment analysis, and consider how they might change.
Practical Implications for Investors
If you have a choice, freehold is generally the safest option for investment property. It offers the most flexibility, simplest financing, and typically the easiest resale.
Cross-lease properties can make good investments, but do your due diligence. Get a lawyer experienced in cross-lease to check the flat plan against the actual building. Understand your relationship with other owners and any consent requirements for work you might want to do.
Unit titles require careful assessment of the body corporate. Request financial statements, minutes of recent meetings, and the long-term maintenance plan. Consider whether the body corporate rules are compatible with your investment plans. Factor body corporate levies into your yield calculations.
Whatever title type you buy, ensure your lawyer explains exactly what you are purchasing and any restrictions or complications that apply. Title type is just one factor in investment property selection, but it is an important one to understand before you commit.
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