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There are many types of land ownership in New Zealand, and each one can impact what you can and cannot do with your property. It is essential to understand the different types of property ownership to understand your rights regarding commercial property. This article will outline the four main types of ownership, which are:

  • freehold;
  • leasehold;
  • unit title; and
  • cross lease.

Freehold Ownership

Freehold Ownership (also known as fee simple) is the most common type of ownership and is usually the most simple. If you have a freehold commercial property, you have sole ownership of the land and anything built on the land unless there are other interests. You have a right to mortgage the property, sell it or include it in your will or inheritance. Moreover, with a freehold property, you will not need to pay rent and can do whatever you like with the property as there is no landlord to worry about. 

Interests in your property may create restrictions on your ability to use it. These restrictions may include:

  • easements that give neighbouring property owners rights to use parts of your land to pass over;
  • covenants that limit what type of commercial property you can build on the land; or
  • restrictions under the Resource Management Act.

With freehold ownership of commercial property, you can remain in one place as long as your company wishes. This provides stability for your company and allows you to establish your business in the market.  

Leasehold Ownership

Your landlord will own the land you use with a leasehold property ownership. Additionally, you will need to pay rent to them during your tenancy. When you pay rent, you purchase an exclusive right to possess and use the land and commercial property for a certain period. Furthermore, you may use the leasehold land and property for as long as the lease outlines. Other terms that you may find in the lease include:

  • parties to the lease;
  • amount of rent to pay;
  • rent reviews;
  • fit-out terms;
  • your obligations to property maintenance;
  • description of premises; and
  • landlord’s responsibility for repairs.

With leasehold ownership, your business has the flexibility to change locations at the end of the lease term if you wish. Unlike a freehold, you are not bound to an expensive property because you decide to purchase it outright. A leasehold property is excellent if you intend to move locations or are testing out the market to see where your business will thrive best. 

Unit Title Ownership

You may use a unit title ownership when the commercial property has multiple owners. For example, as a unit owner, you will own:

  • your specific unit and any accessory units such as parking spaces, storage areas, and courtyards outlined in the record of title; and
  • an undivided share of ownership of the common property such as lifts, stairs, lobbies, and gardens.

Once you enter into a unit title ownership, you will automatically become a part of the body corporate. In this case, all unit owners will act as a group. The Unit Titles Act governs the body corporate and outlines the powers and duties of the body. Before you make any decisions, a certain percentage of the body corporate will need to approve them. Generally, this number is 50% or 75% of the unit owners. You should note that you will need to pay a fee to the body corporate.

Before buying into a unit title ownership, you can ask to read the corporate body rules. This will tell you how you and others can use the areas and what areas you have ownership over. In addition, the rules will give you an idea of what fees you need to pay and what the body expects of you as a member. As a result, you can understand the body’s services, such as rubbish collection and cleaning communal areas.

Before purchasing, the seller of the property must provide you with the following information:

  • pre-contract disclosure statement, which they will provide before you enter into the sale and purchase agreement;
  • pre-settlement disclosure statement, which they will provide after you enter into the sale and purchase agreement; and
  • any additional information you request regarding the body corporate.

Cross Lease Ownership

If you own a cross lease property, you will have the following two interests in the property:

  • a share of the freehold title in common with other cross leaseholders; and
  • a leasehold interest in the specific area and building you occupy.

The cross lease title will show the building plan you intend to occupy. You should check the title to ensure that you are entering into a lease for the property you want and whether your neighbours have any interests or easements in your land. In addition to this, you can check if there are areas that your neighbours have an exclusive right to use and what the common areas are for all cross leaseholders. 

With a cross lease ownership, most cross-leaseholders will need to approve any changes you wish to make to your building. Depending on the lease terms, you may need to get permission from other owners to make structural changes to your building, such as putting up a fence. Ultimately, the lease may restrict what you can and cannot do with the property.

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Key Takeaways

Before buying your commercial property, you should consider which types of property ownership you wish to enter into. The main types of property ownership include: 

  • freehold; 
  • leasehold; 
  • unit title; or 
  • cross lease ownership. 

Each of these options affects what rights you have to your property and what obligations you may need to fulfil. If you need help choosing the right type of ownership for your business, you can contact our property lawyers, who can help you as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

What does freehold ownership mean?

Freehold ownership provides full ownership of the land and any buildings attached. Therefore, you can do whatever you want with your property and do not have to pay rent to anyone. However, some people, such as your neighbours, may have interests or easements in your land so they can access their property. 

What are my obligations under a cross lease ownership?

Under a cross lease, you will need the approval of other cross leaseholders before you make changes to your buildings. The majority of the owners will need to agree to your proposed changes. There may be additional obligations you need to fulfil if your lease agreement outlines them.

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