Tim Jones - Lawyer, of Glaister Ennor

An earlier column by Glenda Whitehead explained various forms of property title. This column amplifies the unique features of two: crosslease or unit. Unlike freehold or leasehold properties, cross lease and unit titles include a plan outlining the footprint and in many cases an elevation (a side view) of the flat (cross leases) or unit (unit titles).

This uniqueness is both a bonus and a drawback for owners/buyers. On one hand buyers can inspect a property and compare it with the flat/unit plan and know that what they see is what they are getting on the title. However a drawback is that the flat/unit dimensions are fixed by the plan. This means that owners cannot simply add on or build up to the building without altering the title and flat or unit plan.

When a change is made owners need to have a new plan drawn showing the new outline of the flat/unit, and have the title altered. Any alterations which do not have an altered title open the owner up to challenge by a prospective buyer that the title is defective.

Why is this a problem?

Technically, a flat is a building which is leased for a term of 999 years. If the flat is altered then that new alteration will not form part of the title until a new plan is drawn depicting the new building. The land in a cross lease is owned in shares by all the flats in the block. An owner needs to know that their title and cross lease title includes all of the building in their flat, not just the part excluding any alterations. In general the same sort of issues will apply to a unit on a unit title plan.

So what to do if you have altered your flat?

Have a new plan drawn by a surveyor, submit this for approval by the council, deposit it at Land Information NZ (LINZ) and apply for a new title to be created.

Your lawyer will create these new title documents and help you gain the written consent of all the other flat or unit owners in the block. Woe betide anyone in this predicament who has fallen out with their neighbours.

Luckily the standard agreement known as the ADLS/REINZ Seventh Edition 1999/2 includes rules as to what is and is not a defective title. Some alterations such as a freestanding structure not attached to the existing flat but within the flat owner's exclusive area or the unit's accessory area may not create a defective title. Examples are free-standing garages, carports, decks or pergolas.

But enclosed and attached alterations such as a built-on conservatory, bedroom, dining room or a garage may well create a defective title.

Flats and units with defective titles will have problems with both value and with lenders. Valuers may value them lower than full value. Lenders may require the owners to rectify the defective title or may not advance the full amount.

Owners also need to check whether the alteration to the flat has offended against the terms of the cross lease or the unit title rules, which usually require the consent of the other owners in the block. If consent is granted it is usually tagged with a request to rectify the title to coincide with the new building outline.

If you plan to alter or add on to a flat or unit, consult your neighbours and get them to agree. Consider whether it may create a defective title and seek legal advice if you are in any doubt. If you are creating a defective title and not prepared to go through the task of altering the title be prepared to face the consequences perhaps from a purchaser, down the track. And check whether you need a building consent under the Building Act 2004.

Purchasers of flats or units need to check that the actual physical flat/unit matches the plan. All solicitors should automatically provide a copy of the flat plan or unit title, check this, and maybe investigate further.

If you own a flat or a unit, think twice before doing your alterations and certainly consult before you start the building works. It might save some cost and heartache later.

tim.jones@glaisterennor.co.nz.