There has been a significant increase in the number of unit titles throughout New Zealand. They are a form of ownership that is widely accepted by owners and by bankers alike. But they have their own idiosyncrasies so it’s worth taking time to understand how they operate if you’re buying one for the first time.
Unit title owners own their particular unit or apartment. It is often within a building where there are other units. They also own an undivided share of the common property with all of the other owners. Together all of the owners comprise the body corporate. Such ownership, therefore, involves different obligations to other forms of ownership and requires different considerations by a buyer.
If you are considering buying a unit title for the first time, we recommend the following key checks:
Ensure you consider the rules of the body corporate. You’ll have to live by these rules so make sure they don’t have any practical impact that you don’t like. An example might be restrictions on pets or on using the property as an Airbnb. Also, think about how such rules can change in the future.
Rights of facilities
Check whether you have the right to use any expected shared facilities for example pools or laundry services. Also, enquire into how such facilities are maintained and who pays for what.
Issues that the complex might face
Ask the building manager and other occupants about any issues that the complex may face, for example, issues regarding noise, parties, parking, pets, rubbish and maintenance deficiencies. You’ll get an idea of this by looking at recent minutes, but asking people directly might reveal more.
Who the body corporate manager is
Not every unit title development will have a body corporate manager but if it’s sizable, it ought to. Their efficiency and management style has a big impact on what it will be like to live in the development. Consider who the body corporate manager is, their experience, expertise and reputation.
Whether the building manager is on or off-site
Find out whether there is a building manager and if there is whether they are on or off-site. Also consider if an on-site residence, and their salary, is included within the budget.
Read the minutes from the annual and extraordinary general meetings from at least the last three years and understand any earlier decision of the body corporate that may be binding on you. See if there are committee minutes available too.
Interests registered on SRS
When you look at the title to your prospective home, you’ll need to look at two titles; one for the unit and one for the common property. Consider any land covenants, consent notices, easements or encumbrances that may limit your use of the property or impose obligations on you or the body corporate.
Long term maintenance plan
There is a legislative requirement for a body corporate to have a 10-year long term maintenance plan. You should check the adequacy of this plan and ensure that it has been regularly reviewed, and followed. Think too about how that maintenance is to be funded. There may be a long term maintenance fund. Consider its adequacy. There is no requirement for a body corporate to have such a fund.
- Before purchasing a unit title, you will receive a pre-contract disclosure statement setting out general information about unit title ownership and the body corporate. Later, before you settle the purchase, you will also receive a pre-settlement disclosure statement giving you more information about the particular development you are buying into. However, these two statements alone may not provide you with sufficient information to make an informed decision about purchasing. In fact, the second statement is provided too late to affect your decision.
- You can also request an additional disclosure statement that provides more information on the body corporate. Such information can be very valuable.
- A building report specific to the individual unit can also be helpful. It also may not identify issues within the whole of the building and common property that will impact on you. You will need to decide the extent of the report.
- The other enquiries that are appropriate for any purchase remain relevant to a unit title e.g. LIM, title report, finance.