REAA Continuing Education – 2013
TOPIC 1
THE LEGAL AND PHYSICAL DESCRIPTION
AND REPRESENTATION OF REAL ESTATE
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REAA Continuing Education 2013
Introduction
CONTENTS
Welcome and Overview
2
TOPIC 1: Property ownership
10
Section 1: Private property vs public property
14
Section 2: Land tenure
19
Section 3: Certificates of title
37
Section 4: Rights relating to real estate
44
Section 5: Interests in land
46
Section 6: Other issues relating to title
64
Section 7: Co-ownership of land
756
Section 8: Māori ownership of land
78
Section 9: Chattels and fixtures
83
Section 10: Risk Management
95
Summary
97
Additional resources
98
Note: Version 3, published 1 February 2013.
REAA Continuing Education 2013
Introduction
WELCOME AND OVERVIEW
Welcome to the REAA Verifiable Continuing Education
Programme for 2013.
This year we will review licensees’ obligations for
disclosure in respect of the legal and physical description
and representation of real estate.
In 2012 we covered the key elements of disclosure and
confidentiality in relation to property-related information
and personal information. Much of our focus was on Rule 6
and Rules 9.21 – 9.23 of the REAA Professional Conduct and Client Care Rules 2009
(the Code), as well as the Real Estate Agents Act 2008, the Fair Trading Act 1986,
and the Contractual Remedies Act 1979.
This year the emphasis remains on disclosure, however, we are also going to look
specifically at what we need to understand in respect of property; again applying
many of the same legal concepts. We will be using the REAA Professional Conduct
and Client Care Rules 2012 (the Code).
IMPORTANT NOTE:
This resource (including the printed learning material, trainer notes, and
PowerPoints) has been prepared for the purpose of assisting with the Real Estate
Agents Authority Compulsory Continuing Education requirement. In preparing this
work, every care has been taken to ensure accuracy, currency and completeness.
However, this content should not be construed as legal advice.
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REAA Continuing Education 2013
Introduction
The key learning objectives for the programme are to:
 identify and explain the main concepts relating to property in a real estate
context
 correctly interpret certificates of title containing a range of interests and
memorials
 explain certain issues that aren’t found on certificates of title, but are
significant to a property
 identify and describe common building issues, including claddings, building
components, and common problems relating to buildings
 apply the above knowledge in the preparation of agency agreements and
agreements for sale and purchase/lease of real estate.
As a real estate licensee, you are expected to have a reasonably high level of
knowledge of matters affecting property and property rights and interests; land,
buildings and other structures, as well as how particular property may be used.
You also need to be aware of the legal rights and interests that accompany the
property and any limitations that might affect its use. For example, are there any
issues such as covenants or easements? Are there any problems that you need to
disclose?
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REAA Continuing Education 2013
Introduction
IMPORTANT NOTE:
Decisions by the REAA Complaints Assessment Committees and the REAA
Disciplinary Tribunal have set a benchmark for a reasonably competent licensee as
one who knows the information contained within the relevant current education
qualification for that person’s licence.
For example, a reasonably competent salesperson would be expected to know and
understand the material that makes up the National Certificate in Real Estate
(Salesperson) (Level 4) qualification. A reasonably competent branch manager
would be a person who knows and understands the material that makes up the
National Certificate in Real Estate (Branch Manager) (Level 5) qualification. A
reasonably competent agent would be a person who is expected to know and
understand the material that makes up the National Diploma in Real Estate (Level
5).
In addition to covering the legal principles provided by legislation and the common
law, we will review a number of cases that provide insights into what is expected
of a professionally skilled real estate licensee.
IMPORTANT NOTE:
In law, words commonly used have specific meanings. For this reason, we have
used bold font in some parts of the text, to alert you to a key word or phrase. This
is also covered in the glossary at the back of the learning material, as a handy
reference tool.
This programme is divided into two key topics:
 Property ownership and
 Property structures.
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REAA Continuing Education 2013
Introduction
In Topic 1, Property ownership, we will discuss the different types of property
tenure, the physical features of land, and the rights and interests that may apply to
that land. We will also review common issues that apply to certificates of title.
In Topic 2, Property structures, we will consider a range of issues that may affect
buildings and other structures, such as structural components and special
situations applying to the built environment.
Finally, we will briefly discuss how to apply all this knowledge in standard agency
practice, including the preparation of agency agreements, sale and purchase
agreements and lease agreements.
Throughout the material, you will find a number of Review activities; these are for
self-testing purposes to help consolidate your learning. They are all relatively short,
and designed to be completed within a few minutes.
Also included are opportunities for Reflection. When you come across one of
these, we suggest you read the item and then pause for a few moments to
consider the issue from your own perspective. It would also be beneficial for you to
discuss these reflection points with others in your office or people within your
network. We have included a number of Weblinks that direct you to further
information about specific topics.
There are also a number of brief summaries of cases decided by Complaints
Assessment Committees (CACs), the Real Estate Agents Disciplinary Tribunal
(Tribunal) and the Courts. These are supplemented by a number of Important
notes and Extracts of information to help consolidate your understanding of the
material.
Whilst we expect that much of this material will already be familiar to you, we
hope you will enjoy the journey, and also gain valuable knowledge and insights
that will help you more effectively meet the needs of your clients and customers.
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REAA Continuing Education 2013
Introduction
Real estate best practice
The concept of best practice is about using methods and techniques that are
superior to all others available. Real estate best practice involves knowing,
understanding and valuing the legislation, regulations and rules that govern the
industry, and working consistently within this framework to provide the highest
quality service to clients and customers.
As you work through each of the topics, it is important that you consider the five
rules under the REAA (Professional Conduct and Client Care) Rules 2012 which are
of importance in this material:
6.2
A licensee must act in good faith and deal fairly with all parties engaged
in a transaction.
6.3
A licensee must not engage in any conduct likely to bring the industry
into disrepute.
6.4
A licensee must not mislead a customer or client, nor provide false
information, nor withhold information that should by law or in fairness
be provided to a customer or client.
10.7
A licensee is not required to discover hidden or underlying defects in
land but must disclose known defects to a customer. Where it would
appear likely to a reasonably competent licensee that land may be
subject to hidden or underlying defects, a licensee must either (a) obtain confirmation from the client, supported by evidence or
expert advice, that the land in question is not subject to
defect; or
(b) ensure that a customer is informed of any significant
potential risk so that the customer can seek expert advice if
the customer so chooses.
10.8
A licensee must not continue to act for a client who directs that
information of the type referred to in rule 10.7 be withheld.
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REAA Continuing Education 2013
Introduction
Decisions
In addition to the provisions of the Code, there have been a number of decisions
made by Complaints Assessment Committees (CACs), the REAA Disciplinary
Tribunal (Tribunal) and the Courts that provide excellent background and guidance
on both minimum acceptable standards and best practice.
Here is an example:
EXTRACT: [2011] READT 39
In [2011] READT 39 the Tribunal said:
We consider that a licensee, upon taking instructions for a sale of a
property should search the title, or have some competent person search it
for the licensee, and be familiar with the information gained from such a
search.
… Similarly, the licensee should ascertain such matters as zoning and
compliance with town planning regulations or Council requirements.
We do not accept that a licensee can simply regard such matters as within
the realm of a vendor or purchaser’s legal adviser.
And later:
… understanding the state of the title of the subject property is an essential
role for a licensee, and failure to undertake such a title check could well
amount to unsatisfactory conduct under s. 72 or even the more serious
offence of misconduct under s. 73.
It also says:
We observe that acting merely as a conduit from seller to purchaser may
not exonerate a licensee from blame. We do not think that a licensee
should place sole reliance and credence on advice or assurances from a
vendor, even though given in good faith.
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REAA Continuing Education 2013
Introduction
The REAA has published an Information Sheet: Checking of Titles, which is
available in the Publications and Forms tab of its website, www.reaa.govt.nz. Here
is an extract from that document:
EXTRACT: CHECKING OF TITLES
Your obligations:
In our view, in order to comply with the obligations identified in the decision, a
licensee needs to:





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2
obtain a copy of the certificate of title
review it to verify that the information on tenure, ownership, legal
description and property description in the listing document matches the
information on the title
establish whether or not there are interests registered on the title such as
covenants, caveats, easements etc. that should be brought to the attention
of interested parties
if necessary have a lawyer assist the licensee to interpret what those
restrictions mean, and
ascertain zoning and town planning regulations or Council requirements so
the licensee is in a position to point out what restrictions might apply to that
property e.g. they should be able to point out how a property is zoned and
what zoning restrictions apply.The licensee is then in a position to:
explain clearly and simply any restrictions which might affect the rights of a
purchaser; and
advise the parties to seek proper legal advice on such matters.
Copyright © REAA, 2012
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REAA Continuing Education 2013
Introduction
We can also learn from CAC decisions regarding:
 licensee’s failure to adequately identify the legal owners of a property,
 misrepresentation of the distinctions between different types of tenure, and
 issues regarding the boundaries of properties, and defects beyond the
boundaries among others.
When a licensee first represents a property to prospective purchasers, there is
likelihood that he or she will make a number of positive statements. However, the
licensee must take care to ensure that such positive statements are correct, and
that there are no underlying issues which might adversely affect the prospective
purchasers’ decision-making process. For example, pointing out a view but
neglecting to mention that there is a proposed development on the adjacent land
that will restrict much of that view.
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TOPIC 1: PROPERTY OWNERSHIP
REAA Continuing Education 2013
Topic 1: Property ownership
INTRODUCTION
When we first look at property, we are most likely to think of the
physical issues, such as where it is located, the contour of the land,
and the visual aspects of any buildings or other structures on the
land. Whilst this is a good place to start, it is only the tip of the
property iceberg.
When viewing a piece of land it’s difficult or impossible to tell whether there are
likely to be issues regarding:
 who the true owners of the property are
 what the land can be used for (under council zoning or other restrictions)
 whether it is subject to any encumbrances, such as easements, covenants or
other legal restrictions affecting the property’s use
 whether there are additional rights granted in respect of the land (such as
water rights or rights of way over an adjoining property)
 potential for flooding or subsidence
 the need for special foundations to support any proposed structures
 contamination by chemicals, asbestos or other harmful substances
 external “defects” that may apply beyond the boundary, such as encroachment
by a building on this property or an adjoining property
 whether an unregistered lease to occupy the property has been granted by the
owner and the duration of that lease
 existing use rights
 any other restriction imposed by the public (Crown) rights.
There may also be restrictions on the use of the land, or the outcomes of activities
that can be undertaken, for example noise and/or pollution.
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REAA Continuing Education 2013
Topic 1: Property ownership
Similarly, when we inspect a building, or a structure such as a retaining wall or
swimming pool, it may be difficult to identify:
 whether it complies with the Building Code, other regulations and buildingrelated legislation
 any possible “leaky building syndrome” issues.
One part of a licensee’s obligation is to have sufficient knowledge and experience to
be able to identify potential defects that may apply, including hidden or underlying
ones. As already noted, when viewing piece of land, it can be difficult or impossible
to tell – from that physical inspection alone – what these issues might be. They
always require further investigation.
Some rights grant additional benefits to the land, such as benefits that extend
beyond the boundaries, or benefits granted to the subject property over other land,
such as water rights, drainage easements or rights of way.
In this topic, we will discuss the different types of property tenure, the physical
features of land versus the rights and interests that may apply to that land, and
review common issues that apply to certificates of title.
This topic is divided into the following ten sections:
Section 1: Private property vs public property
In this section, we will discuss the distinctions between property which is subject to
public ownership by the government on behalf of the Crown, and that which is in
private ownership.
Section 2: Land tenure
We will review the different types of land tenure, such as the freehold and other
estates in land.
Section 3: Certificates of title
All licensees need to understand how to read and interpret certificates of title. The
purpose of this section is to help you consolidate your knowledge here.
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REAA Continuing Education 2013
Topic 1: Property ownership
Section 4: Rights relating to real estate
In this brief section, we discuss the various public and private rights applying to real
estate.
Section 5: Interests in land
There are a number of interests that may apply, including those which are registered
and those which are only equitable. This section will help you identify and
understand them.
Section 6: Other issues relating to title
In addition to legal and equitable interests, there may be other issues which can
affect a property’s title, and how that property may be used.
Section 7: Co-ownership of land
In this section, we will discuss the forms of co-ownership of land: joint tenancy and
tenancy in common.
Section 8: Māori ownership of land
Some land within New Zealand is separate from Crown ownership, while other land
is subject to Māori freehold title.
Section 9: Chattels and fixtures
Chattels and fixtures are commonly sources of frustration and dispute among
contracting parties. You need to be aware of how to distinguish between the two,
and provide appropriate advice to clients and customers.
Section 10: Risk management
In the final section of Topic 1, you will find some useful advice for minimising your
risk as a licensee.
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REAA Continuing Education 2013
Topic 1: Property ownership
SECTION 1: PRIVATE PROPERTY VS PUBLIC PROPERTY
Private property is separate from public property; that which is held by the
government on behalf of the Crown. One example of public property is the vast
tracts of land in the South Island which are held by the Crown.
The institution of private property whereby land is held by private
citizens, trusts, companies, etc. is an important part of the New
Zealand property landscape. It is within the democratic idea of
recognising the freedom of the individual to do what he or she
likes with his or her possessions. Private property in New Zealand
is a sacrosanct notion but it is balanced by public rights. For
example, the ‘bundle of rights’ accorded to private property
owners usually includes the following rights:
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to use and enjoy the property
to transfer ownership, through sale, will or by gift
to grant further rights over the property
to mortgage the property.
Private property is made up of personal property and real property, which are both
defined below.
Personal Property
Personal property falls within one of three classifications:
Chattels personal: goods that can be possessed, such as a car, clothing, or books
Enforceable rights: rights that can only be enforced through legal action, such as
an insurance policy, or shares in a registered company
Intellectual property: copyright, brand names and patents
Chattels are items of personal property (known in law as “personalty” – note, this
isn’t a misspelling of “personality”!)
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REAA Continuing Education 2013
Topic 1: Property ownership
Real Property
Real property, also known as real estate, consists of land, buildings and structures
attached or affixed to the land, things growing in or on the land, minerals, and rights
over the land, such as mortgages, covenants and easements.
It usually includes the surface of the land, and a shallow layer of underlying soil,
sufficient for foundations, landscaping and so on. Also included is some of the air
space above the land where this is necessary for the normal use and enjoyment of
the land. Note that most minerals found under the earth’s surface in New Zealand
belong to the Crown, under the Crown Minerals Act 1991.
Eminent Domain
While we say we “own” our own land, all land in New Zealand ultimately belongs to
the Crown, except Māori Customary and Māori Freehold Land. This comes under the
jurisdiction of the Māori Land Court under Te Ture Whenua Māori Act 1993 and
other legislation.
This means that while the term “ownership” of land is commonly used, in reality, the
best we can obtain is an estate in land. Under the doctrine of eminent domain, the
Crown is free to take over the land for public use, such as roading, power supply,
telecommunications, or for the construction of public schools, hospitals, prisons or
other essential facilities. However, to do so it must follow what is known as a
designation process outlined in the Resource Management Act 1991. The land is
taken under the Public Works Act 1981.
The Minister of Lands is empowered to do this by s. 4(a) of that Act. Similarly, local
authorities are empowered to do so for local works for which they have financial
responsibility (s. 16 of the Act). The Crown can also “resume” (acquire) land under
the Public Works Act if a Section 27 Māori Land Claim memorial is registered on the
title, and the land is included as part of a Māori deed of settlement with the Crown.
Tenure
The concept of tenure comes from the English feudal system. Under that system, all
land was owned by the Crown, which in turn granted estates to certain people in
exchange for the provision of specific services (for example, maintaining a troop of
trained soldiers, or growing crops).
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REAA Continuing Education 2013
Topic 1: Property ownership
These people were tenants of the King, who was their landlord. These tenants also
made grants of parts of their land to others, usually in exchange for other essential
services. It is from here that the word tenure arises, from the Latin tenere, which
means “to hold”.
In 1840, when New Zealand came under British sovereignty, the same land
ownership system was applied. As the Crown owns all land (except specified Māori
land as mentioned earlier), holders of certificates of title are only in charge of an
estate. They are not, in a legal sense, the owner of their property. Under the rule of
eminent domain, the Crown may acquire any land, provided it is taken for public
benefit. However, we will continue to use the term “owner” and similar words
throughout this material, because of their common usage.
The following diagram shows the general concept of estates in land. The closer a
property is to Crown ownership (the underlying basis for land in New Zealand,
except Māori customary land), the greater its bundle of rights.
Crosslease /
leasehold
Stratum /
leasehold
Company
share /
leasehold
Crosslease
Leasehold
Stratum
(Unit title)
Company
share
Freehold (usually fee simple)
Crown
Fig 1: Estates in land (theoretical framework – not to scale)
Copyright © Yvonne Box
Each form of estate, such as freehold or leasehold, gives us a bundle of rights,
comprising public and private rights. This bundle of rights varies according to the
type of estate held.
Māori
leasehold
Māori
freehold
Māori
REAA Continuing Education 2013
Topic 1: Property ownership
The fee simple estate is the highest form of ownership available in New Zealand, and
all other estates (such as leasehold, cross-lease and stratum estates) must be
created from a fee simple base.
The private bundle of rights associated with a freehold parcel of land usually includes
the following rights:
 to use the land (according to legislation and local body controls)
 to sell or otherwise dispose of the land (through gifting or a will)
 to grant further rights over the land (such as easements or covenants)
 to mortgage the property.
The private bundle of rights is balanced against the public rights (held by the Crown),
which include, among others, the right to:
 impose taxes and levies in order to provide essential services
 acquire land or create an easement over land for public works
 control land use.
Other, lesser estates may have fewer rights and more restrictions. A cross-lease on
leasehold land would be subject to the terms of the lease applying to the land, and
the separate lease applying to the ‘flats’, dwellings or other structures.
There is also a life estate, in which a person is granted possession of a property for
the duration of his or her lifetime. The holder of the life estate is unable to sell or
otherwise transfer ownership, as their tenure is limited to the extent of their life.
In some cases, people who wish to transfer property into a family trust retain the
right to continue to occupy their property by way of a lease for life.
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REAA Continuing Education 2013
Topic 1: Property ownership
Review – 1
For each of the following statements, indicate whether you think they are true or
false.
Statement
1
The definition of real property includes land, buildings, and
things growing in, or on, the land.
2
A car, caravan, boat or motorbike is classified as personal
property.
3
The Crown has the right to take land for any purpose.
4
Freehold titles carry the greatest bundle of rights because
they are closest to Crown ownership.
5
The holder of a life estate can sell the property during their
lifetime.
True / False
Summary
In this first section, we have introduced the following concepts:

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public and private ownership of land
personal and real property
eminent domain
tenure
In the next section, we will expand on this as we discuss the key issues affecting land
tenure.
REAA Continuing Education 2013
Topic 1: Property ownership
SECTION 2: LAND TENURE
In this section we will review the types of title applicable in New Zealand and discuss
their key points.
The Torrens system of land registration in New Zealand replaced the older system of
deeds. Under the deeds system, each property transaction was recorded on a
separate deed document, which built up over time to show the property’s history of
ownership. Any break in the chain of deeds, such as loss of one deed document, had
the effect of creating a defective title. Robert Torrens introduced the system that
New Zealand adopted in 1870 and is still in use today. Each property is given specific
registration information, which is updated on the original record each time there is a
new entry on the register.
First, it is important to understand the principle of indefeasibility. In simple terms, a
registered owner of property should receive an absolute good title even if there
were defects in the title held by previous owners.
Three main principles apply:
 The mirror principle (the public register)
 The curtain principle (indefeasibility)
 The insurance principle (state guarantee).
The registered owner’s title must be ‘good against the world’.
The mirror principle
The certificate of title reflects (mirrors) all things of relevance to ownership, such as
the name/s of the registered proprietor/s, the nature of the estate, and any
encumbrances on the land.
The curtain principle
Registration effectively makes a title to land absolute (indefeasible). In theory, a
‘curtain’ falls after each registration. Anything that has gone before is no longer
relevant. The registered proprietor, who has acted in good faith, holds the title free
of any unregistered claims.
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REAA Continuing Education 2013
Topic 1: Property ownership
The insurance principle
This is a guarantee by the Crown that if any person whose name is registered on the
title is affected by a loss through the fault of the land transfer system, they can seek
compensation through the provisions of the Land Transfer Act 1952.
FEE SIMPLE
The fee simple estate is one of the freehold estates (the others are composite
estates such as cross-lease, unit titles and estates for life.) A fee simple estate is the
highest form of land ownership, the most common estate in New Zealand, and has
the greatest bundle of rights.
The following is a summary of the key points and common problems associated with
fee simple estates.
Key points:
 Unlimited duration (it is not time-limited unlike a lease)
 If permitted by land and property law, or local or regional territorial authority,
the land holder may carry out work such as subdivide, develop, alter buildings,
authorise a lease, or impose positive or restrictive covenants on subsequent
owners
 Transfer of title is relatively simple, but may require approval from other
parties, such as a mortgagee or any caveator
 Sometimes, covenants require consent from a third party entity.
Common problems:
 Some owners are unaware of, or intentionally breach, their rights and
obligations under land and property law, regulations and local or regional
territorial authority rules. Breaches can become problematic for present and
future owners
 Some owners may also be unaware of the extent of additional beneficial land
rights available to them, such as additional water rights and rights of way.
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REAA Continuing Education 2013
Topic 1: Property ownership
Life estate
This is most commonly applied in the form where a parcel of land is registered to a
person for the term of that person’s life. In other words, their rights come to an end
at the time of their death. This gives the recipient the status of life tenant.
Life estates (or leases for life) are sometimes used by family trusts as a means of
ensuring that the settlors of the trust are able to continue living in their home. They
are also sometimes used as an alternative to the provisions of the Property
(Relationships) Act 1976, using Section 21 of the Act.
In such cases, a couple in which one is the owner of a property might issue a life
estate to his or her spouse, with the property then reverting to the beneficiaries of
the owner’s will following the owner’s death.
LEASEHOLD
A leasehold interest gives the lessee exclusive occupation rights to a property or part
of a property for a specified period of time. Because of the limited time period, it is a
lesser estate than freehold. Some leases are perpetually renewable (usually referred
to as Glasgow leases). Renewal dates are usually specified as 7, 14 or 21 years.
Terminating leases, which have a defined end date, may have provisions for removal
of the building and other structures by the lessee at the end of the term.
Some leases have provision for the lessee to purchase the freehold title.
These are contracts between the registered proprietor of the land (under a freehold
or leasehold estate) and the lessee, which set out the duration and terms of the
lease, and any rights of renewal.
The following is a summary of key points and common problems associated with
leasehold estates.
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REAA Continuing Education 2013
Topic 1: Property ownership
Key points:
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
A contract between the lessor (owner) and the lessee (occupier)
Exclusive possession by lessee for a specific period
The lease document sets out the rights and obligations of each of the parties
Ground rent is payable
May be renewable.
Common problems:
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Increases in land values can result in considerable increases in ground rents
at the time of renewal
If the lease is a terminating one, occupancy rights cease at expiry of the lease
The value to the lessee will likely be affected by the remaining lease duration
at the time of sale
Some prospective purchasers are reluctant to buy leasehold properties
They may be difficult to finance by way of mortgage.
Leasehold interests in land should are not to be confused with commercial leases of
land and buildings.
CROSS-LEASE
Cross-leases are composite estates, primarily concerned with the ownership of the
land. The composite estate usually consists of an estate in fee simple and an estate
in leasehold for the dwelling. However, sometimes the estate can consist of a mix of
estate in leasehold (ground lease) and an estate in leasehold for the dwelling. They
were originally used for small multiple-ownership developments.
Originally, all flats (the term used to describe individual dwellings) in a cross lease
had to be under the same roofline, but that was later revoked. Today, you might
come across cross-lease properties which have any of the following combinations:
 two (or more) completely separate dwellings
 two or more flats under the same roof
 two or more blocks each containing two or more flats.
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Topic 1: Property ownership
IMPORTANT NOTE:
It is important to remember that the lease is of the structure, not of the land. The
owner has an undivided proportionate share of the total land area.
The following is a summary of key points and common problems associated with
cross-lease estates.
Key points:
 Each owner has a defined and undivided share in the fee simple estate of the
whole land area
 The owners are tenants in common with other owners
 Leases are usually 999 years duration
 Consideration (usually $1, or even 10 cents per year), is payable by each owner
to each other owner as consideration for the lease, but doesn’t usually happen,
because the sums cancel each other out
 The flats plan on the certificate of title must reflect the buildings and other
structures on the property at the time of sale. If the buildings and structures
are not accurately reflected, this potentially becomes a defect in the title
because it represents a breach of the lease
 If one owner wishes to construct any additions or make alterations to the
footprint they must obtain the prior approval of all other owners, and have the
property re-surveyed so that the flats plan is correct at the time of transfer
 The fee simple title may be subject to restrictions or covenants that have
implications for prospective customers
 The lease may contain restrictions, for example, restricting or prohibiting the
keeping of pets or specifying how a dwelling may be used (e.g. for nonresidential purposes)
 Any exclusive use area recorded on the title reflects a covenant by the other
owners not to enter onto that exclusive use area; it is not a fee simple estate
for that area
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Topic 1: Property ownership
Common problems:
 Prospective purchasers (and licensees) may lack sufficient understanding of the
cross-lease system
 There may be no specified provision for upkeep of the common areas
 Owners (lessees) may not realise their obligation to obtain the other owners’
approval, have the property re-surveyed and alter the flats plan when carrying
out alterations to any of the structures or any other developments
 Unauthorised structures may be subject to requisition, with the possible
outcome that a sale will not proceed
 Restrictive covenants may limit the range of otherwise permitted activities
 Restrictions on cross-lease properties may affect the market value or amenity
value.
The following is an extract from a cross-lease deed of lease. This shows some of the
restrictions that may be imposed on cross-lease properties. In this case, you would
need to be aware of such matters when dealing with prospective purchasers.
EXTRACT:
The lessee shall not make any structural alterations to the building without the prior
consent of the lessors.
The lessee shall use the flat for residential purposes only … and shall not bring into,
or keep in the flat any cat, dog, bird or other pet which may be reasonably expected
to interfere with the quiet enjoyment …
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IMPORTANT NOTE:
Always obtain a copy of the certificate of title and the memorandum of lease before
starting a marketing programme, so that you can check the plan and familiarise
yourself with the cross-lease.
Failure to do so may make you accountable in respect of rules 6.2, 6.3, 6.4 or 10.7 of
the Code. (These rules are included in the Introduction section of this material.)
The following two pages give an example of a reasonably typical certificate of title
involving two dwellings, one of which is two storeys, on cross-lease titles. Familiarise
yourself with the contents, and then answer the questions in Review 2.
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Review – 2
For each of the following statements, indicate whether you think they are true or
false.
Statement
1
Judith McLaughlan and Dean Whyman are mentioned twice
on this certificate of title because they each have a share of
the freehold estate, and a share of the leasehold estate
under the cross-lease.
2
The purpose of the interest H800923 – Lease of Flat 1 and
Garage 1 – is to show the relationship between the lessee
of Flat 1 and the ownership of the fee simple estate.
3
The purpose of the three diagrams on the right hand side of
the flats plan is to show the footprint of the buildings on the
land.
True / False
Review – 3
Read the case summary below, and answer the questions that follow.
CASE SUMMARY:
Complaints Assessment Committee decision
1
A customer inspected a property with a licensee salesperson, who explained
that the title was cross-lease, but that was the same as, or similar to, freehold.
Continued on next page
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Topic 1: Property ownership
2
The customer asked the licensee if there were any caveats or conditions on the
property that might affect their use of the property. He gave the example of
whether he would require the neighbour’s consent to install a swimming pool.
3
The licensee assured the customer that there were no such conditions applying
to the property.
4
In his evidence to the CAC, the licensee is reported to have said that “the title
describes both leasehold and fee simple, fee simple meaning freehold.”
5
The licensee later stated that it is the customer’s responsibility to get their
solicitor to do due diligence on a title.
6
The licensee was found guilty of unsatisfactory conduct, and ordered to pay
the complainant’s legal costs involved in seeking information regarding the
nature of the title.
Reference Number: CA4097838
1 The customer was likely to be concerned mainly because:
a.
b.
c.
d.
2
The title was not a simple freehold estate
There might be restrictions on his use of the land because of the cross-lease
He didn’t fully understand the meaning of the term ‘caveat’
Installing a pool can be very expensive
In addition to obtaining the certificate of title, the licensee could have:
a. Obtained and read a copy of the memorandum of lease
b. Suggested that the customer take legal advice before proceeding
c. Sought the advice of his manager (or another senior person who is
knowledgeable in this area)
d. All of the above
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IMPORTANT NOTE:
In the above case, the licensee should have pointed out to the customer that, under
a cross-lease, any further development - such as a pool - would be subject to the
prior approval of the other lessors.
Review – 4
Consider the following case summary, and answer the statements that follow.
CASE SUMMARY:
Complaints Assessment Committee case study
1
A licensee was engaged by the vendor to market a property which was on a
cross lease title, subject to the provision that the purchaser accepted the
vendor’s title, so that any issues with the title would pass to the purchaser. This
is because the title of Property A was not an accurate reflection of the cross
lease with Property B.
2
The licensee advised the complainant (the purchaser) that “any title issues
would be dealt with between the vendor and the purchaser’s solicitor and were
matters beyond my expertise”. The licensee was aware, but did not disclose that
there were conflicts between the titles to the two properties.
3
The purchaser subsequently discovered that there were differences between the
titles for Property A and Property B. She lodged a complaint with the REAA, and
the matter was heard by a Complaints Assessment Committee.
Reference Number: CA4408968
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1
The licensee should have been aware that there were possible issues with the
title because the client had instructed that there must be a special clause in
any ______________________ that the customer accepted the title.
2
The two most likely Rules of the Code that have been breached are ________
and ________.
3
As well as a financial penalty, the CAC might have instructed the licensee to
______________________ in writing to the complainant.
4
To avoid a similar problem in the future, you would suggest that the
customer seek the advice of their ______________________.
STRATUM TITLE (UNIT TITLE)
The Unit Titles Act 1972 provided the legislation that made the stratum estate
possible in New Zealand. The 1972 Act has now been superseded by the Unit Titles
Act 2010. The stratum estate was created to help overcome difficulties with the
cross-lease and company share ownership systems. Unlike the cross-lease title, the
stratum title is focused on the structures (known as units), rather than the land
component.
In addition, there may be stratum estates relating to the granting of titles below the
surface of the land, for example, underground car parks connected to commercial or
apartment buildings.
Two or more individual principal units (PU) are created, which are the dwellings or
business units, and there may also be accessory units (AU) such as car parks or other
areas of land set aside for exclusive use. The body corporate owns the common
property and holds it in trust for the unit owners.
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Each PU and AU is allocated an ownership interest, which is a proportion of the
value of the entire property, set by a registered valuer, and recorded on the unit
plan.The following is a summary of key points and common problems associated
with stratum (unit title) estates.
Key points:
 Multiple ownership of a single piece of land
 Common in the development of apartments, home units, townhouses and
multi-unit commercial properties
 Fee simple title for the entire property is held by the body corporate
 Individual occupiers hold a specified proportionate share of the property, as
tenants in common with the other owners
 The body corporate must hold annual general meetings (as a minimum)
 The body corporate is responsible for the upkeep and maintenance of the
common areas, and insurance for the building structure. These costs, and the
body corporate fee, are passed on proportionately to the individual owners
 The body corporate must establish and maintain a long-term (10 years
minimum) maintenance plan
 The body corporate must establish a long-term (10 years minimum)
maintenance fund, unless authorised not to by special resolution
 Accessory units cannot be sold separately from principal units. They may be
transferred from one principal unit to another
 Certain sections of the Unit Titles Act 2010 do not apply to unit titles for
retirement villages that are registered under the Retirement Villages Act 2003
(See section 11, Unit Titles Act 2010)
 The Act imposes an obligation on owners selling their units to provide various
disclosure statements. Owners cannot contract out of this obligation
 Each PU and AU has an ‘ownership interest’. What was referred to as ‘Unit
Entitlement’ under the 1972 Act is now called ‘Ownership Interest’.
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Common problems:
 Alterations or extensions beyond the building envelope require approval of all
owners
 Restrictive covenants may limit the range of otherwise permitted activities
 Misunderstanding by the owners of the requirement to provide the necessary
prescribed disclosure statements, for example, Form 18, at the time of sale.
Review – 5
Read the case summary below, then answer the questions that follow.
CASE SUMMARY:
Complaints Assessment Committee case
study
1
A licensee marketed a property, the title of which stated “stratum on
freehold”, and included reference to “AU2” (Auxiliary Unit 2).
2
The vendor had told the licensee that there was no body corporate fee, and
had not been one for 20 years.
3
The CAC heard argument from the purchaser (the complainant) that the
licensee had assured her (on several occasions and in the presence of
witnesses), that there was no body corporate. The licensee stated in evidence
that he had informed the purchaser that there was “no body corporate fee”.
4
In her evidence to the CAC, the vendor stated that she had never fully
understood the amount she paid each year, but believed it was for insurance.
Reference Number: CA 3829575
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Statement
1
2
3
True / False
The references to “stratum in freehold” and “AU2” signify
that this is a unit title.
The licensee should have sought clarification from their
branch manager, or (with the client’s approval) from the
client’s solicitor.
The body corporate holds the fee simple title for unit title
properties.
COMPANY SHARE
Under a company share scheme the land and buildings are owned by a company,
usually in a fee simple estate, but it may be a cross-lease or unit title. Individual
owners are given an equity share in the company, which includes a licence to occupy
a specified dwelling or other unit. Usually, rules of occupancy, as well as fees and
levies, are applied, and may be subject to change by the property-owning company.
IMPORTANT NOTE:
While licence holders may obtain a certificate of title, the occupier’s licence is not
covered by the Crown guarantee that applies to other types of title.
The following is a summary of key points and common problems associated with
company share properties.
Key points:
 The real estate is owned by a company, rather than individual occupiers
 The occupier is granted a licence, rather than outright ownership
 Rules, fees and levies are applied to all occupiers.
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Common problems:
 There is no outright ownership of any part of the physical property by the –
occupier
 The fact that the occupier has nothing more than a licence rather than any
ownership of the land or buildings, means lower security with possible issues
relating to the securing of mortgage finance
 The rights and interests of the community, being the company and the total
number of occupiers as a whole, are generally superior to those of individual
occupiers
 As companies are governed by the Companies Act 1993 which has no provision
for issues relating to land and buildings, there are no specific requirements
imposed on the company for maintenance and upkeep, or any restrictions on
the levies that may be imposed on occupiers
 The continuation of occupation rights is dependent on the continued solvency
of the company
 Company share schemes may have rules such as prohibition of tenants,
restrictions on pets, or other issues that need to be addressed with prospective
purchasers so that they may make a fully informed decision about whether to
proceed with a purchase, or not
 Some companies reserve the right to pre-approve future licence-holders.
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Review - 6
For each of the following statements, indicate whether you think they are true or
false.
1
2
3
4
5
Statement
A cross-lease title is more or less the same as a fee simple
title.
Principal and accessory units apply to cross-lease titles.
True / False
Under a unit title, the body corporate must establish a longterm maintenance plan.
Under a company share title, the individual licence holders
are the owners of the property.
A fee simple title has the greatest bundle of rights.
Summary
It is essential to fully understand and be able to explain the tenure that applies in
respect of any property you are marketing. As we have discussed, there are certain
rights and obligations that apply to the different tenures. These may need to be fully
explained to prospective customers to help them in their decision-making.
In the next section, we will review certificates of title and discuss the information
they contain.
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SECTION 3: CERTIFICATES OF TITLE
Certificates of title are available from Land Information New Zealand (LINZ). This is
the Government body responsible for land titles, survey systems, other related
functions and a number of other resources. All certificates of title are now held in
electronic form.
IMPORTANT NOTE:
At times, a property owner or another source will offer you a copy of a certificate of
title. This is only acceptable for your purposes if it includes all the information
currently registered. Otherwise it is what is known as a ‘stale’ search. To rely on such
a document would potentially put you in breach of your obligations under sections
5.1, 6.2, 6.3 and 6.4 of the Code.
Search, Historical or Guaranteed Search Copy
A Search Copy shows what is currently registered on the title, such as the names of
the current owners, and any current interests, such as mortgages, easements, or
caveats. It also includes a copy of the diagram of the property from the Deposited
Plan.
An Historic Search Copy shows details dating back to the time when the title was
first issued, including the original and all subsequent owners, and all the interests
that have been registered, including those that have been extinguished later. It often
includes a scanned copy of the original (paper) certificate, which looks significantly
different from those on the Computer Register.
A Guaranteed Search Copy shows the same information as found on a standard
search copy, but also notes any interests which have been lodged for registration by
LINZ, but have not yet been added to the title. This is the form used by solicitors
when preparing settlement of a sale.
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Elements on a certificate of title
The following is a brief summary of the key elements found on certificates of title:
Heading:
This indicates the register in which the title is held, e.g. freehold, unit
title.
Subheading: This states “Search Copy”, “Historical Search Copy” or “Guaranteed
Search Copy” depending on what type of title has been ordered.
Identifier:
This is the title’s unique reference, which identifies a specific parcel of
land.
Land Registration District:
This shows which of the twelve land registration districts the property
is located in (North Auckland, South Auckland, Gisborne, Taranaki,
Hawkes Bay, Wellington, Nelson, Marlborough, Westland, Canterbury,
Otago, Southland).
Date issued:
This is the date on which the current title was issued.
Prior References:
This gives the Identifier/s of any earlier certificates of title from which
this was developed, i.e.by way of subdivision.
Supplementary Record sheet:
This only applies on unit titles, and alerts the reader to issues relating
to all of the unit titles registered on the property.
Estate:
This describes the type of estate, e.g. fee simple. In cases of a
composite computer register, there will be two sections showing the
different elements of the estate.
Area:
The land area, often expressed with “more or less”, meaning that
there is allocation for a fraction of a square metre.
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Legal description:
The Lot number and Deposited Plan number.
Proprietors:
The name/s of the owners at the time. Expressed as “Original
proprietors” in an Historical Search Copy, with subsequent proprietors
listed in the Interests section.
Interests:
The list of any interests and encumbrances registered on the title,
such as mortgages, easements and caveats. In an Historical Search
Copy, this will show all interests and encumbrances, including those
which have been subsequently extinguished. In a Search Copy, only
current interests will be shown.
At the bottom of each page is a Transaction identification number, client reference,
and the date on which the search copy was issued, including the number of pages of
the certificate of title.
IMPORTANT NOTE:
Some certificates of title include a site plan showing the location of buildings and
other structures. This usually only applies on cross-lease (composite) titles and unit
titles, because each of these relates to multiple ownership of the property. In each
case, if the footprint of buildings on the land was altered, it would be necessary to
have the land resurveyed, and the certificate of title diagram altered accordingly.
Such detailed diagrams are not usually part of a fee simple title. This is because if
there were alterations or additions (such as an addition to the dwelling, or the
removal of an old garage) this would involve the property owner in considerable cost
to resurvey the property and have the title changed accordingly.
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IMPORTANT NOTE:
Some entries on a title will include issues of complexity or uncertainty, which are
beyond the expertise of the licensee to interpret, for example, complex easements
or complex covenants. In these circumstances, the client or prospective customer
should be advised to seek independent legal advice as to what implications, if any,
the entries may have for them.
Review - 7
Examine the extract from the certificate of title on the following page, and then
answer the questions that follow.
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1 The tenure shown on this title is:
a. Unit title (stratum estate)
b. Cross-lease
c. Freehold
d. Company share
2 The current owners of this property are:
a. Kenny Rogers and Dolly Parton
b. Bernard Kenny and Robyn Kenny
c. Kenny Bernard and Robyn Kenny
d. Not specified
3 The land area is:
a. Approximately 410 square metres
b. 408 square metres more or less
c. Not accurately measured
d. Not specified
4 The property is currently subject to a registered mortgage:
a. With ASB
b. With Westpac
c. With BNZ
d. There is no registered mortgage
5 This is an historical search copy of the title.
a. Yes
b. No
c. It might be
d. You can’t tell from this document
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Documents registered on a certificate of title
The following is a list of common documents, known as memoranda, which are the
most common entries registered on a certificate of title:












Transfer or transmission
Mortgage
Variation of mortgage
Discharge of mortgage
Priority (relating to mortgages)
Easement
Covenant
Lease
Caveat
Withdrawal of caveat
Consent notices
Encumbrances issued by Councils.
If you obtain a certificate of title in respect of a property you are planning to market,
or are already marketing, and you see an interest that you are unfamiliar with, you
should seek advice. If you are a licensee salesperson, consult your manager or agent.
You may also need to seek the advice of the client’s solicitor, but only do so with the
client’s prior approval, as the solicitor may charge his or her client for this service.
Summary
Certificates of title are the principal sources of information regarding the legal
description and ownership of a property. Real estate licensees usually rely on a
Search copy of the title, which shows current ownership, interests and
encumbrances.
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SECTION 4: RIGHTS RELATING TO REAL ESTATE
In addition to the issues relating to the type of title, properties are also subject to a
number of rights.
Here is a summary of the main rights applying to properties, from both a public and
private perspective:
Public rights
Private rights
Rate
Own
Levy
Build
Tax
Occupy
Control land use
Mortgage
Control activities
Subdivide
Enter
Privacy
Invoke emergency powers
Quiet enjoyment
Acquire compulsorily
Impose covenants
Run public utilities
Grant easement
Dispose
Destroy or neglect
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Over time, a number of Acts of Parliament have entered into
the legal framework, and effectively altered many of the original
rights of property ownership. For example, the Resource
Management Act 1991 and the Building Act 2004 impose
limitations on development and construction respectively.
However, the Public Works Act 1981 restricted the rights of the
Crown to resume (take back) land.
Common law also applies in a way that is intended to minimise the risk that one
property owner uses their property in such a way that it causes a nuisance to other
adjoining owners. For example, under the law of tort, owners and occupiers are
entitled to the ‘quiet enjoyment’ of their property, without being unfairly disturbed
by the actions of their neighbours. There is also a common law duty of support that
an owner owes to an adjoining property. This basically means that one property
owner cannot excavate their property to the extent that it causes damage or risk to a
neighbouring property.
Individual rights to minerals naturally occurring on property have
been largely lost as a result of legislation. The Crown Minerals Act
1991 reserves the right to all gold, silver, petroleum and uranium.
Rights to other minerals are similarly affected by statute.
The right to the taking, damming and use of water (in all its forms) is now governed
by the Resource Management Act 1991.
If objects are found in or on the land, the rights to them are usually applied to the
holder of the fee simple, rather than the finder. However, the owner of the objects
would have the highest claim.
The individual right to the airspace above a property is largely limited to that which is
necessary for normal use. However, building height restrictions apply, and
navigational/communication requirements may impact on some properties such as
those which are within the flight path of airports.
View shafts prevent the erection of structures which may intersect the line of sight
to a protected view. An example of this is the view from the Wellington Botanical
Gardens to Wellington harbour.
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If the Crown or a requiring authority requires land under the Public Works Act 1981,
it must provide adequate compensation to the land owner. If this cannot be agreed
through negotiation, the matter will be decided by a Land Valuation Tribunal.
Summary
Licensees must be able to distinguish between public rights and private rights
relating to property. It is important to understand how legislation such as the
Resource Management Act 1991 and the Building Act 2004 (and their subsequent
amendments), as well as common law, impact on the obligations of property
owners. Licensees must also understand the rights of the Crown to take back
(resume) land for public works.
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SECTION 5: INTERESTS IN LAND
A single property may be subject to one or several interests, which may be effective
in the present or at some future time.
Interests are either legal or equitable. A legal interest is registered on the certificate
of title, so that anyone inspecting that title is made aware of its existence. This
means that a legal interest is enforceable against the whole world, because it is a
matter of public record.
Other common legal interests
The following are common legal interests:








Ownership estates (refer to Tenure in Section 2)
Mortgage
Lease
Easement
o A right of way easement
o A services easement
Covenant
o Land covenants that bind the successive owners
o Fencing covenants
Joint Family Home
Change of name
Caveat.
Mortgage
A mortgage is security for repayment of a debt. It is both a charge (obligation) on the
land, and a personal promise by the mortgagor (the borrower).
A registered mortgage is a legal interest in the land. Although the mortgagor has
ownership of the property, the mortgagee (the lender) has an interest secured over
the title. If the mortgagor fails to meet their commitments regarding repayment,
and other conditions of the mortgage, such as payment of rates, and maintaining the
property in a reasonable condition, the mortgagee can give notice and sell the
property (Property Law Act 2007).
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Lease
A lease is an interest in land expressed in time. A lease of premises or part of
premises greater than three years’ duration is capable of being registered on the
title. This gives certainty to the lessee that their rights to occupy the property will
not be undermined if it is sold during the period of the lease. However, there is no
actual obligation to register a lease.
The lease document will set out the rights and obligations of the parties, including
the right to exclusive possession of the leased area by the lessee, the distribution of
costs for such things as maintenance, rates, and other items associated with the
property, and any rights of renewal. If you are marketing a property which is subject
to a lease, you should obtain the lease document, and familiarise yourself with its
contents.
Easement
An easement is the granting or benefit of rights in land which do not include
possession. For example, rights of way, water rights. Most easements have a
dominant tenement, where the land enjoys the benefit of the easement, and a
servient tenement, where the land provides the “service”. The diagram below
showing the right of way easement makes the situation clear.
The exception is an easement in gross, which relates to public utilities, such as
power, water supply and drainage, which has no dominant tenement, but does have
a servient tenement.
It should be noted that some easements may not be registered on the title, for
example old drainage easements which may not be recorded on certificates of title,
even though they may appear on district plan maps.
IMPORTANT NOTE:
Some easements are general, such as an easement protecting against the
undermining of a neighbour’s property. These easements are not registered on
individual certificates of title, because they are universal concepts.
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Right of way easement
When the owner of a freehold estate grants an easement over some part of their
land, the owner is allowing another person to interfere with their “enjoyment” of the
land. In a right of way easement, one party is granting another access across a
portion of their land for the purpose of accessing a separate property.
IMPORTANT NOTE:
The easement on the title which is the dominant tenement will be identified as
“Appurtenant hereto …”.
Where the easement relates to the servient tenement, the interest may record it
with the statement “Subject to … ”. In other cases, it may just say “Easement as to
…” or similar.
In the diagram below, Property A has created a right of way easement in favour of
Property B.
Right of way
Road
Property A
Servient
tenement
Fig 2: Dominant and servient tenements
Property B
Dominant
tenement
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Services easement
It is common for properties to have one or more easements recorded on the title for
the provision of public services, such as electricity and gas, water, drainage, sewage,
telecommunications and so on. It is important to know the location of such
easements, especially if there are plans to develop or redevelop the property. Some
easements impose restrictions on building, because of the requirement to access the
public services for repairs and maintenance by the relevant authority.
Covenant
A covenant is a promise or agreement between two or more parties regarding the
use or non-use of land.
Land covenant
Most common are restrictive covenants, by which the owner of the servient
property agrees with the owner of the dominant property (who receives the benefit)
not to take some action that could otherwise have been done.
For example, in subdivisions, the developer often drafts covenants relating to the
nature, size and value of buildings to be erected, or imposes other limitations on the
use of the property. While in most cases, identical covenants are applied to each
property within the subdivision (as a blanket provision), some developers register
individual covenants on each parcel of land prior to sale.
This means that the developer retains their option to register or not register
covenants on the remaining land. If the land needs to be sold under urgency, then it
is possible that the subject properties will be sold without the covenants that were
applied to earlier property transactions in the same subdivision.
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Review – 8
Complete the statements below by filling in the blanks.
1 The ____________________ is the borrower of the mortgage.
2 An easement in ____________________ relates to public utilities, such as power
and water supply, and has no dominant tenement.
3 Certain easements are not recorded on the certificate of title, but may be found
on the ____________________ ___________.
4 Most commonly, land covenants are ____________________ by nature.
Now read the following important case summary, which is likely to be used as a
precedent when deciding future similar cases.
CASE SUMMARY:
[2011] NZREADT 39
1
The REAA considers this case a ‘guidance decision’ to help all licensees
understand their responsibilities.
2
It concerns a home and income property involving a main dwelling and a
separate one bedroom flat. However, there was a covenant on the title that
prevented the property being used for more than one dwelling, or for
commercial purposes.
3
Originally, the flat had been built as a ‘minor unit’ for a family member, which
was compliant with the local district plan. Note: It is not the Council’s role to
check certificates of title for covenants.
Continued on next page
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4
Had the licensee checked the interests on the certificate of title, they would
have likely realised that the flat was not compliant with the covenant, even
though it was compliant with Council.
5
In this case, the parties were able to agree to an out of court settlement.
There were no findings against the licensee, however the Tribunal issued a
clear warning and instruction to all licensees: always obtain and examine a
copy of the certificate of title. Also, always check the zoning of the property,
and any town planning regulations or council requirements. If there is
anything you don’t fully understand, seek the advice of the vendor’s solicitor
(with the vendor’s approval) for matters relating to title, or the local council
for zoning and related information before commencing any marketing.
Fencing covenant
Fencing covenants may place restrictions on fences, shrubbery or trees, in order to
maintain certain specified height limits. Commonly, these occur in conjunction with
the land, and bind subsequent owners.
A fencing covenant may have the effect of allowing a subdivider or developer to
avoid their contribution to a fence between their property and adjoining land, as
provided for in the Fencing Act 1978. Fencing covenants such as this are recorded on
the certificate of title, but expire at the time of sale of the adjoining land by the first
purchaser, or at the end of twelve years. However, the covenant may still remain on
the certificate of title.
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Fencing agreement
Section 2 of the Fencing Act 1978 defines a fencing agreement as:
EXTRACT:
… a covenant, agreement or proviso, not being a fencing covenant that relates in any
way whatever to work on a fence between adjoining lands; and includes an
agreement not to erect a fence.
Copyright © The Crown
For example, adjoining neighbours may reach an agreement to limit the height of a
fence between their two properties for aesthetic reasons.
Fencing agreements do not need to be registered on the certificate of title, but if
they are, they have the effect of binding future owners of the affected properties.
Joint Family Home
In the 1960s, it was still reasonably common for a family
home to be registered in only one name, usually the
husband’s. The Joint Family Homes Act 1964 provided a
means of registering the property in both names, giving them
equal rights as joint tenants. It also carried the right of
survivorship – if one died, the other inherited the property as of right. It also gave
limited protection of the family home against claims by creditors.
Change of name
The most common reason for a change of name of a registered proprietor on a
certificate of title is marriage, whereby one person adopts the other person’s name
as their legal surname. It is also possible to change one’s name by deed poll, and
have this change similarly recorded on the titles of any property owned.
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A less common change of name situation occurs when the name of a registered
proprietor has been incorrectly recorded, either through a fault of the conveyancer
or the land registry staff.
Caveat
A caveat (from the Latin, let the person beware) gives notice to
anyone searching the title that the caveator is protecting a claim of
an unregistered interest against the property. A caveat doesn’t
create any new rights, but serves to protect existing ones.
The majority of caveats prevent registration of dealings, which means that if the
property is sold, the Registrar at LINZ will be unable to register the new owner’s
name on the certificate of title until the caveator has either withdrawn the caveat, or
accepted such registration, or it is removed by court order.
If you are asked to market a property which is subject to a caveat, you should
immediately enquire of the client as to the situation, and if necessary, suggest they
seek legal advice, so that they are able to provide clear title at the time of settlement
of a sale.
Transfer and transmission
Every time a property changes ownership, this is recorded by either a transfer, or in
some cases, a transmission.
A memorandum of transfer is prepared by the purchaser’s solicitor and, after
settlement of the sale, this is forwarded to Land Information New Zealand, where
registration takes place.
If the property changes ownership by a mechanism other than sale, such as by will,
in which the administration of the property passes to an executor, the process is
known as transmission. The executor would later execute a transfer to the
beneficiary/ies under the terms of the will, once probate has been completed.
There are other ways in which property is automatically transferred by operation of
the law. For example, under the Insolvency Act 1967, when a person is adjudged
bankrupt, ownership of the land automatically passes to the Official Assignee by
transmission.
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The following case summary highlights the need to perform thorough checks when
listing and selling a property.
Review – 9
Read the case summary that follows, then answer the questions below.
CASE SUMMARY:
Complaints Assessment Committee case
study
1
The licensee prepared an agreement for sale of a property, in which two
people were named as the vendors. However, a third owner (deceased) held
a 60% share of the property. There was no reference to this person’s estate in
the agreement document.
2
When questioned, both the licensee and the agent stated that it was not
company policy to obtain a copy of a certificate of title unless the property
was to be sold by auction or tender.
3
The CAC, having reference to the decision in [2011] READT 39, decided to
further investigate the management policy within the office.
4
The salesperson was found guilty of unsatisfactory conduct, but no further
penalty was applied, apart from publication of the case. The agency was
found guilty of unsatisfactory conduct and fined $500, with an additional
$500 payable to the complainant.
Reference: CB 5488094 / CB 5789711
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1
The primary lesson to be learned from the Disciplinary Tribunal’s judgement in
[2011] READT 39 is:
a. Only obtain a copy of the certificate of title if the property is to be sold by
auction or tender
b. Only obtain a copy of the certificate of title if the property is cross-lease
c. Always obtain and familiarise yourself with a current copy of the title
before starting any marketing of a property
d. Ask the customer’s lawyer to obtain a copy of the certificate of title
2
The licensee could have correctly identified the names of the owners by:
a.
b.
c.
d.
Checking the current certificate of title
Asking the clients whose names are registered on the certificate of title
Asking the clients’ solicitor
All of the above
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Review - 10
Match the following terms with the correct definition by inserting the appropriate
letter (A – E) in the space provided.
Term
1
Caveat
2
Right of way easement
3
Transmission
4
View shaft
5
Mortgage
Letter
Definition
A
The means by which a property passes to the executor of a will.
B
A charge over a property and a promise to repay a debt.
C
A warning of an unregistered interest; it prevents the Registrar at LINZ from
transferring title.
D
Allows the dominant tenement access over the servient tenement’s land for
the purpose of accessing their property.
E
Provides protection of a view between two sight lines.
REAA Continuing Education 2013
Topic 1: Property ownership
Less common legal interests
In addition to the common issues registered on certificates of title, here are some of
the less common ones that you may come across.








Charging order
Notice of claim
Profit à prendre
Marginal strip provisions
Section 27a and 27b, State Owned Enterprises Act 1986
Building Act 2004
Riparian rights
Water rights.
Charging order
A charging order is a notice placed on a certificate of title by the Court, preventing
sale of the property until the owner has repaid a debt. The creditor must apply to the
Court for this.
Notice of claim
A notice of claim has a similar effect to a caveat, but is lodged in accordance with the
Property (Relationships) Act 1976. It provides protection to the person lodging it,
even though there may be no dispute about the disposal of the property and the
distribution of proceeds from such disposal.
Profit à prendre
Profit à prendre gives one party the right to take something from the land of
another, without giving any exclusive rights of possession or access to the land. For
example, a large farm may have an established pine plantation used primarily for
erosion control. The farm owner has no use for the trees at maturity, and agrees to
sell them to a timber merchant, granting not only the future cutting rights, but also
the right to access and maintain the growing trees.
The profit à prendre recorded on the title sets out the nature of the agreement and
the termination date, so that any prospective purchaser is made aware that the
subject matter is not to be included in the purchase price.
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Esplanade provisions
Properties that border the coast, a lake or river may have to provide land to give
access for members of the public for recreational use, to protect the natural
environment surrounding the waterway, and minimise natural hazards or pollution.
Under the Resource Management Act 1991, either esplanade reserves or esplanade
strips are taken wherever an allotment less than four hectares in size is subdivided.
This only applies to land adjacent to rivers wider than three metres and lakes greater
than eight hectares in size.
A similar provision exists under section 24 of the Conservation Act 1987, but this only
applies when the Crown sells or disposes of land. Under this Act, a 20 metre strip is
again taken, but it is called a marginal strip. Certificates of title affected by marginal
strips or esplanade strips will have a notation to that effect recorded in the Interests.
State Owned Enterprises Act 1986 (Section 27a and b)
Section 27a of the above Act relates to land that has been transferred to a stateowned enterprise. Section 27b covers the rights of the Waitangi Tribunal to take
back such land as part of the settlement of a Treaty of Waitangi claim.
These interests remain on the certificate of title even if they are sold to a third party,
and provide a warning that the property may be used for settling claims by
resumption (takeover of the land) by the Crown. In such an event, compensation is
provided under the terms of the Public Works Act 1981.
This is a complex area, and you should always refer any customers to specialist legal
advice before proceeding with a purchase or lease decision.
Building Act 2004 (Sections 71 – 74)
This relates to the construction or major alteration of buildings on hazard-prone
land. Notices under sections 71 to 74 of the Building Act prohibit consents being
issued for such buildings in some circumstances. However, consent may be issued,
but a notice on the title will provide a warning of the risk.
If you are asked to market a property that is subject to a Section 71 restriction, you
should make immediate enquiries with Council building officers.
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Riparian rights
Under the old common law principle of riparian rights, all landowners whose
property adjoins a body of water have the right to make reasonable use of it, as
related to the reasonable use rights of other adjoining owners. This includes the right
to access for recreational purposes (swimming, fishing, boating, etc.).
However the Resource Management Act, which exercises a number of controls over
the taking and use of water, imposes a number of limitations, especially relating to
the depositing of substances of any kind in the water, or causing pollution.
It is a ‘common property feature’ rather than a ‘land right’, because it doesn’t offer
the individual property owners any level of exclusive use. Riparian rights cannot be
sold or otherwise disposed of apart from with the adjoining land. They are not
recorded as instruments on a certificate of title.
Water consents
The Resource Management Act 1991 covers the use of water; whether surface
water, groundwater (such as springs, bores and wells) or geothermal water.
Consents are not required for water that is intended for domestic use, for livestock
use (unless there is a likelihood of contamination or pollution), or for fire fighting.
However, particularly in rural and some industrial situations, a high volume of water
is an essential requirement. In such circumstances, water permits must be sought
from the regional authority for the area.
Water consents don’t give actual ownership of the water resource, and unless
specified otherwise, are granted for five years. The maximum possible duration is 35
years.
They may contain a number of requirements and restrictions, such as controls on the
volume of water that may be taken in a given period, metering requirements, and so
on.
Such permits are personal to the consent holder, and don’t run with the land. This
means that they don’t necessarily transfer to the purchaser at the time of sale.
For this reason, if selling land that has one or more water rights, it is essential to
check with the vendor as to their intentions. They may be planning to transfer the
water right to another property they own, within the same catchment area.
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In the case of Altimarloch v Moorehouse which is briefly summarised below, there
was a major issue regarding water rights.
CASE SUMMARY:
Altimarloch JV v Moorhouse & Others
1
Supreme Court, 2012
In this case, the licensee
failed to identify the true situation regarding water
l
rights at a property that was being purchased for development as a vineyard.
Although the LIM report had not been updated to reflect the water rights
situation after part of the property had been subdivided, the agent was held
liable for representations made to the purchasers, and required to pay more
than half the value of damages awarded.
2
If the licensee had made sufficient enquiries of the vendors at the time of
listing the property for sale, he would have been in a position to inform all
prospective purchasers of the situation.
3
In this case, the purchasers were unaware of the water rights issue until after
settlement.
4
The Supreme Court ruled that the agency, the council and the solicitors were
each liable, and awarded damages of approximately $1.1 million, of which
more than $600,000 was against the agency.
Equitable interests
Equitable interests are not formally recorded on the certificate of title, although they
are capable of being registered. Equitable interests are always subordinate to a
registered interest which has been acquired in good faith and without fraud.
An example of an equitable interest is that of the purchaser of a property under a
fully signed, unconditional agreement for sale and purchase. Although there is no
record of the purchase until the title transfer is complete, the purchaser has the
ability to lodge a caveat on the title.
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Other common examples of equitable interests include:
 An agreement granting a neighbour access over a property (for a temporary or
occasional purpose)
 A short-term lease
 An unregistered mortgage
 A licence (such as the right to graze livestock on a neighbour’s land).
IMPORTANT NOTE:
Certain legal interests must be dealt with before transfer of title can take place.
These include mortgages, caveats and notices of claim.
It is also very important to check with property owners about whether there are any
equitable interests that may affect a future sale or lease of the property. If there is
any uncertainty, ask them to consult their legal adviser before putting the property
on the market.
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Review – 11
Read the statements that follow and decide if they are true or false. Record your
answers in the space alongside the statement.
Statement
1
Profit à prendre is the right to take something from the land
of another.
2
The Property Law Act governs the use of water.
3
The Building Act can prohibit building on hazard-prone land.
4
A notice of claim is lodged under the Property
(Relationships) Act.
5
Riparian rights do not actually give owners exclusive use.
True / False
Summary
In this section, we have discussed the most common rights and interests that can
affect a specific property. It is important to remember that some interests are ‘legal’,
meaning that they are registered on the certificate of title. Others are ‘equitable’,
which means they are capable of being registered.
You need to be fully aware of, and familiar with, any interests affecting properties
you are marketing, so that you can give adequate advice to prospective customers.
However, because this is potentially a complex area of law, you should always
recommend that people seek specialist legal advice.
REAA Continuing Education 2013
Topic 1: Property ownership
SECTION 6: OTHER ISSUES RELATING TO LAND
In addition to the matters discussed in the previous section, some properties are
subject to other issues that are not recorded on the certificate of title.
Designation
A designation implies a commitment from a requiring authority (either the Crown,
or a Crown agency, for example a territorial authority or network utility operator)
that they intend to purchase or lease some or all of the land concerned for a specific
public use. Designations are recorded on the local District Plan, which identifies who
the requiring authority is, and the purpose of the designation. An example of this is
provided in Auckland where over 200 properties are designated as being in the path
of the Motorway Waterview extension. Also, around 280 properties may be
designated as required for the proposed Auckland City inner rail link.
The owner of a property that is subject to a designation is prevented from
undertaking any development on the property without first obtaining the approval
of the requiring authority. This is separate from any resource consent that may be
required.
A designation lapses after five years if the requiring authority has not
proceeded to acquire the land. If this happens, a new requirement has
to be issued by the requiring authority.
If land has been taken for the purpose of a designation, but not used by the requiring
authority and is no longer needed for the purpose, it must be offered back to the
previous owner at current market value, as determined by a registered valuer.
A property which has an existing designation may be more difficult to sell, because
of the level of potential uncertainty. Also, properties adjoining or close to the
designated site may also be more difficult to sell, because prospective buyers are
likely to prefer certainty as to the future of their immediate surroundings.
The next case summary discusses an issue that was a matter of local public
knowledge, but not recorded on the certificate of title.
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CASE SUMMARY:
Complaints Assessment Committee decision
1
In this instance, there was no actual designation on the title, but there had
been a well-publicised proposal by Transit New Zealand regarding a major
road project that would run either through or adjacent to the property.
2
The licensee, who was also the vendor, failed to mention this to his
prospective purchasers, who entered into a conditional contract. The
contract was later cancelled.
3
In this case, the licensee was found guilty of unsatisfactory conduct, and
censured by the CAC.
Reference: CA 2627859
Heritage protection orders
The New Zealand Historic Places Trust (NZHPT) classifies sites, buildings and
structures such as monuments, bridges, gardens, etc. according to their historic
merit. Heritage protection orders are not necessarily granted to the most attractive
or significant property, but can also apply to buildings, sites and structures typical of
their era.
The NZHPT holds a register of properties, divided into categories according to their
historical value. A heritage order can impact greatly on a property owner’s rights,
such as demolishing or altering buildings, prescribed colour schemes, and even a
requirement to retain and preserve items such as chattels and furniture.
If a heritage protection authority refuses to grant an owner consent to use or alter
the property as they wish, the owner may appeal to the Environment Court, for
either compulsory purchase by the authority, or to modify or remove the order.
Many heritage buildings or sites are not registered with the NZHPT but are listed in
the district plan.
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This means that just because a property is not registered with the Trust, it doesn’t
necessarily mean a protection order does not exist. You will find details about local
heritage orders in your district plan.
You should seek your branch manager’s or solicitor’s advice whenever you appraise
or list a property that is subject to a designation or heritage protection order.
We will now look at some potential problems with that can affect titles.
POTENTIAL PROBLEMS WITH TITLES
For the majority of properties, the certificate of title correctly reflects the rights and
interests of the proprietor, and is free of any issues that may affect the vendor or
purchaser at the time of sale or other disposal, such as by lease. As part of the
process of completing a sale and subsequent transfer of title, the vendor may have
to settle any mortgage requirements or have certain other encumbrances on the
title removed, for example a caveat or a charge.
Recorded rights and interests on the title document serve as important reminders to
the person managing the conveyancing process.
However, some properties are affected by one or more potential
defects or encumbrances to the title. Some of these defects go to the
very root of the title, and can call into question ownership rights and
the ability to pass title on to another individual. While you may not
come across these often, you need to be aware of them.
Limited as to parcels
A certificate of title with ‘Limited as to parcels’ stamped across the top indicates that
one or more boundaries of the property are unable to be guaranteed by the Crown,
because there has not been a survey conducted to acceptable land transfer
standards. (It was only in the 1960s that current survey requirements for
subdivisions became compulsory). This means there is possible uncertainty over the
position of the land, and/or the actual land area.
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Check the memorials on the title to see whether this limitation has been removed.
The current registered proprietor is not required by law to remove such a limitation.
This means, the purchaser cannot force the vendor to have the property surveyed.
However, some councils will not consider resource consent applications for
properties that are limited as to parcels. This is particularly the case with commercial
and industrial developments, where there is often a requirement to build on or very
close to the legal boundary of the property.
A surveyor will be able to determine the exact boundaries, and can deposit a survey
plan that will enable removal of this notation on the title.
If a purchaser arranged for a survey which showed that there were substantial
discrepancies, the purchaser would have a claim for compensation against the
vendor. If the purchaser found that there was a very significant difference between
what the vendor claimed to own and the actual land area and location, the
purchaser may exercise a right to cancel the contract.
A prospective purchaser would need to be fully informed of the situation, and should
be strongly encouraged to take legal advice before proceeding.
Encroachment
Encroachment can occur in one of two ways – where the subject land invades onto a
neighbouring property, or where the neighbouring property invades onto the subject
land.
For example, a fence may have been erected along a line that is not the legal
boundary. In this case, the matter would be dealt with under the terms of the
Fencing Act 1978.
Occasionally, a building or other structure will have been constructed beyond the
legal boundary of the property to which it applies. Provisions of sections 321 to 325
of the Property Law Act 2007, give the Court powers to grant an easement to cover
the affected area, order the removal of the offending structure or part of a structure,
or require a boundary realignment to resolve the problem.
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If the encroachment is such that it prevents the owner of the affected property from
giving vacant possession to a purchaser, this would be considered under the
Contractual Remedies Act 1979.
There may be grounds for cancellation. If not, the purchaser would have the right to
claim compensation for the defect in title, or damages for the failure to give vacant
possession.
This is a matter that extends beyond the required skill of a real estate licensee and
therefore should be referred to a solicitor or other specialist adviser as soon as the
licensee becomes aware of the problem.
Defects beyond the boundary
At times, a property will be subject to defects that go beyond the legal boundary.
Whilst in normal circumstances it is not the licensee’s responsibility to point out the
boundaries, you should inform prospective customers and recommend they arrange
for a survey of any areas that remain uncertain. Making positive representations
where there may be doubt may lead to a claim of unsatisfactory conduct or
misconduct.
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The following case highlights issues with one particular property’s boundaries.
CASE SUMMARY:
[2012] NZREADT 13
1
While marketing a lifestyle property which was being offered for sale by
auction, a licensee pointed out boundaries to prospective purchasers, saying
that one area of land was an ‘access way’, but not clarifying the matter,
beyond suggesting that they do due diligence on the property.
2
In fact, the access way was part of the neighbouring property, and the legal
boundary was eight metres inside a fence which, to a casual observer, would
have had the appearance of being on the boundary.
3
The prospective purchasers had made it clear to the licensee that one of their
key criteria was the ability to erect a large workshop on the property for
commercial use.
4
The same prospective purchasers bought the property at auction, and after
they had started excavation work for the workshop, were made aware that
the area they thought they owned, and were conducting earthworks on, was
actually part of a neighbouring property.
5
The purchasers took the matter to the REAA, where a CAC decision found the
licensee guilty of unsatisfactory conduct, and imposed a fine of $7,000 and
issued an order to rectify of $25,000 plus GST.
6
The licensee subsequently appealed to the Tribunal, which confirmed the
unsatisfactory conduct decision, upheld the fine, but increased the
compensation to $40,000 inclusive of GST.
7
The Tribunal’s decision is currently under appeal to the High Court.
(September 2012).
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It is relatively easy, as an additional tool, to check boundaries using one of the
property websites, by superimposing the boundary on the aerial or satellite map.
This is simply a precaution to help alert you, and should not be relied on as certainty
of the location of the boundary.
Limited as to title
This is a far more serious problem than ‘limited as to parcels’ because it is a defect in
the title itself. It means that when the land was transferred into the current
registration system (under the Land Transfer Act 1952), the registrar was not
completely satisfied that the proprietor in possession at that time had full legal
ownership rights to the property.
There are a number of possible reasons for this. For example, the original proprietor
may have abandoned the land or died as in the case of a number of properties in
Cardrona in Central Otago. These properties were originally purchased by gold
miners in the late 19th century, but abandoned when the goldfields became less
profitable.
Anyone who has used land for a continuous period of at least 20 years, without the
registered proprietor’s consent, such as a squatter, or someone with an unregistered
lease, may claim ownership by ‘adverse possession’. The current proprietor would
need to provide adequate evidence of their continuous occupation of the property
to the Registrar, in order to have the title recorded in their name. Otherwise the
property will remain ‘limited as to title’, and not be subject to the rule of
indefeasibility, meaning the Crown will not provide compensation for loss resulting
from the defect.
If a property which is sold is limited as to title, the purchaser has the right to object
to the title, and the seller will be obliged to take all necessary steps to have a
guaranteed title (the principle of indefeasibility) issued before settlement takes
place.
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Other defects going to the root of title
In rare situations, an apparent vendor will have no actual right to transfer title. Here
are some examples:
 Trustees or beneficiaries who do not have the power of sale
 One spouse in a Joint Family Home, or partner under the Property
(Relationships) Act, where the other spouse or partner has not given approval
 An on-sale situation, where the sale and purchase agreement for the on-sale is
due to settle on a date which is before the date of the original sale
 Where the right to transfer title is subject to mortgagee approval.
Fortunately, each of these situations is reasonably easy to identify at an early stage
through adequate enquiry by the licensee involved in proposed transactions.
Review - 12
Answer the following questions in the spaces provided.
1
If you receive a certificate of title with a reference to s. 71 of the Building Act in
the interests, you should:
Make enquiries of the local _______________ to identify the nature of the
hazard, and recommend that any prospective _______________ make
enquiries, either to the Council or to their _______________.
2
If not actioned by the requiring authority, a designation lapses after what period
of time? ______________
3
If the owner of a property which is subject to a heritage order is refused
permission to alter the property, who may they appeal to?
_______________________________________________________________
Continued on next page
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4 If the title to a property is stamped ‘Limited as to parcels’ this means that one
or more _______________ of the property are unable to be guaranteed by
the_______________, because there has not been a survey conducted to
acceptable ______________ _______________ standards.
5 If a building encroaches over the boundary of an adjoining property, the court
may, under the provisions of the Property Law Act 2007, take the following
actions:
Grant an _______________ to cover the affected area; order the
_______________of the offending structure or part of a structure, or require a
boundary _______________ to resolve the problem.
RIGHTS, INTERESTS AND ENCUMBRANCES NOT RECORDED
ON TITLES
Existing use rights
Over time, district plan rules change to meet the changing needs of society and the
environment. This sometimes means that a formerly permitted property use is no
longer permissible.
Land can continue to be used in a manner that now contravenes a rule in a district
plan, under the doctrine of existing use rights if it meets all of the following criteria:
 the activity was lawfully established at the outset
 the activity has not been discontinued for a continuous period of more than 12
months (however the council can grant an exception to this timeframe in
exceptional circumstances)
 the effects of the use are the same or similar in character, intensity and scale
 any reconstruction, alteration or extension to any building does not increase
the level to which it fails to comply with any rule in a district plan.
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If you are asked to market a property that seems to be out of character with the
surrounding ones, such as a factory in a semi-residential area, you should check with
the owner and the local territorial authority to see if existing use rights apply.
Property access and vehicle parking
District plans usually provide rules for access to properties, and on-site or off-site
parking. In residential areas, it is preferable that all residents’ vehicles are parked off
street, with allowances for accessory vehicles for boats, caravans, etc. Parking
requirements may be calculated on the basis of a ratio of car parks to the number of
habitable rooms or bedrooms per dwelling, or floor space. The district plan outlines
the parking requirements. In some areas, geography and contour may create
difficulties in respect of parking, and in such cases, councils usually have a waiver
provision.
IMPORTANT NOTE:
Many residential subdivisions include covenants restricting the on-site parking of
accessory vehicles, such as boats and caravans. Licensees should discuss such issues
with clients and prospective customers. Remember, councils aren’t usually involved
in covenants – they only administer the district plan requirements. However, under
certain circumstances councils may register covenants on land, e.g. a fencing
covenant.
Overseas Investment Act provisions
The Overseas Investment Act 2005 classifies certain land within
New Zealand as a sensitive asset. This means that such land cannot
be sold into overseas ownership without the prior consent of the
Overseas Investment Office, which is part of LINZ.
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The definition of an overseas person is:
 an individual who is neither a New Zealand citizen nor ordinarily resident in
New Zealand
 a company or body corporate incorporated outside New Zealand
 a company, body corporate or partnership incorporated in New Zealand where
25% or more of any class of shares is owned or controlled by an overseas
person.
Sensitive assets are defined as:




non-land business assets valued at more than $100 million
non-urban land exceeding 5 hectares in area
land on most offshore islands
certain land over 4,000 square metres, such as that on certain islands, land
including or adjoining reserves, Conservation Act land, historic or heritage land
and certain lakes
 land exceeding 2,000 square metres including or adjoining the foreshore.
Such land must be advertised and offered for sale on the open market to New
Zealand citizens and residents for at least 20 days before consent can be granted for
sale to overseas interest. Any agreement for sale of such a property would need to
be conditional upon Overseas Investment Office consent being granted, a process
which is likely to take a minimum of three or more months.
The following weblinks will give you more details regarding the processes involved in
a purchase of property that is subject to the Overseas Investment Act.
Weblink: Overseas Investment Act 2005
http://www.legislation.govt.nz/act/public/2005/0082/latest/DLM358552.html
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Weblink: Overseas Investment Office
http://www.linz.govt.nz/overseas-investment
Summary
In this section, we have discussed issues that may affect a limited number of
properties. However, it is essential to recognise them when they arise, and take the
necessary action to ensure that clients and customers, as well as prospective clients
and customers, are made fully aware of their rights and obligations in respect of
these properties. If there is any doubt about what might be involved, specialist
advice should be sought.
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SECTION 7: CO-OWNERSHIP OF LAND
There are two forms of co-ownership of land:
 Joint tenancy
 Tenancy in common
We will now explore these forms of co-ownership of land in more detail.
Joint tenancy
A joint tenancy exists when two or more people jointly own a property. Their names
are recorded on the certificate of title with no mention of separate shares.
For example, you might receive a certificate of title which records the proprietors as:
Brian William Green and Patricia Mary White
The effect of section 61 of the Land Transfer Act 1952 is that if two people are
named in a transfer, they will be deemed to be joint tenants. The main features of
joint tenancy are:
 Each tenant has equal rights to possession of the land. Each tenant shares
equally their joint interest in the land (there is no defined area of the shares of
the land)
 Each joint interest has come from the same source (whether by purchase, will
or gift).
An important feature of joint tenancy is the right of survivorship.
If one tenant dies, the surviving tenant/s own the whole estate. A
joint tenant can only dispose of his or her interest during their
lifetime. There is no facility for them to leave it to a third party in
their will.
Joint tenancy ownership may have been the intention at time of purchase, but
during the ownership period, circumstances may change. If the joint tenants don’t
take the necessary action to reflect those changes in ownership, this may create
problems in terms of the parties’ rights and interests at the time of sale.
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Trusts
One common type of joint tenancy is the trust. Trusts are a means of protecting and
managing assets by transferring property from individual ownership into that of the
trust. The trust is managed by trustees on behalf of beneficiaries.
Family trusts are often used as a means of protecting assets from risk, such as the
failure of a business or breakdown of a personal relationship. They also have effect
in limiting tax liability.
IMPORTANT NOTE:
Trusts are not legal persons in their own right, unlike limited liability companies.
Unless the deed of trust specifies otherwise, you should obtain the signatures of all
trustees on agency agreement forms (listings), sale and purchase/lease agreements,
and any other legally binding documents. If you are unable to do this, you should
obtain some evidence in writing that the other trustee is aware of and has approved
the transaction and that her/his fellow trustees may sign the document on her/his
behalf.
Tenancy in common
The second form of co-ownership is tenancy in common. While joint tenancy had
been earlier accepted as a default co-ownership for domestic partners, it is now
more common for domestic partners to purchase property as tenants in common as
a way of avoiding potential future problems.
Also, consider situations such as a block of flats, or an
apartment complex, which has multiple owners. In this
situation it is obvious that a joint tenancy arrangement would
not be workable.
Under a tenancy in common, each person has a distinct share in the rights of
ownership, but the land itself is not physically divided. Each tenant has a defined but
undivided share.
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It may be proportioned equally, such as each tenant in common having a one-half or
one-third share, or disproportionately, such as one person having a three-fifths
share, and another having two-fifths.
A tenant in common may also hold separate title for his or her share. This is the
situation in cross-lease and unit titles.
Under the terms of a tenancy in common, there is no right of survivorship. Each
tenant is free to dispose of his or her interest as they see fit, whether through sale
(transfer), provision of their will, or by gifting.
Reflection
Imagine you are talking with your son and his friend who are planning to buy their
first property, a residential investment, together. They ask you to comment on
whether they should purchase as tenants in common or as joint tenants. What issues
would you take into account?
Summary
The distinctions between joint tenancy and tenancy in common are very important,
and must not be confused. Do not overlook the right of survivorship in a joint
tenancy. Trusts are automatically joint tenancies.
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SECTION 8: MĀORI OWNERSHIP OF LAND
Māori land is defined by sections 129 and 130 of Te Ture Whenua Māori Act 1993.
The status of Māori land is defined as:
 Māori customary land, which has never been transferred into freehold title by
the Māori Land Court, nor ceded to the Crown
 Māori freehold land, where ownership has been determined by the Māori Land
Court.
 General land owned by Māori in multiple ownership. This is mainly for the
purposes of domains, Marae and Papakainga (group housing).
Māori freehold and general land is mostly owned by incorporations set up under the
Te Ture Whenua Māori Act, with ownership in the form of shares, which suits the
Māori ideology of kinship (family groups).
Before the Act, it was not compulsory for orders made by the Māori Land Court to be
registered with LINZ. For this reason, the record may be incomplete. If you are
working in an area where there is known Māori land, or have reason to believe there
may be an issue affecting ownership of the land, consult the Māori Land Information
Base on the Te Puni Kōkiri (Ministry of Māori Development) website. Alternatively
make enquiries at the Māori Land Court.
Even when you know that you are working with Māori freehold land, searching the
title at LINZ may not be enough. A legal practitioner with experience in such matters
should be engaged to check the records at the Māori Land Court. This is because it is
not always evident on the front page of a title that the land is Māori freehold.
Ownership lists of all legal and beneficial owners of Māori freehold land are
maintained by the Māori Land Court. This Court determines the interest of owners in
common. An owner of an undivided interest in Māori freehold land can separately
alienate (dispose of) their interest, but only to direct family members.
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Māori reserved land
There are two distinct concepts, one arising under the Māori Reserved Land Act 1955
and the other under the Māori Affairs Act 1953.
A Māori reserve is a parcel of land which had been set aside for the benefit of Māori
following the land confiscations of the 18th century. The legal estate in the land was
vested in the Māori Trustee and held in trust for former owners in accordance with
their respective interests in the land. A variety of leases and licences were granted
over time. The leases were usually perpetually renewable 21 year terms with ground
rents fixed at 4-5%.
Approximately 26,000 hectares of reserved land was leased for residential,
commercial (some CBD) and rural use in many regions, towns and cities across New
Zealand, e.g. Taranaki, Palmerston North, Wellington and the West Coast. By the
end of last century, serious inequities had arisen as a result of the terms of the lease,
and the effects of inflation.
Rents were regarded as “peppercorn” and the Māori owners were constrained in
changing the terms due to the lessee’s registered interests.
In 1997/98 the Māori Reserve Land Act was amended to allow for the rents to more
accurately reflect the market, and granting the lessees (Māori owners) first right of
refusal to purchase the leases when they came up for sale. Where the Māori owners
wished to dispose of the lessor’s interest, the lessee was to be given the same right
of first refusal. Compensation was to be paid to any party who could show loss of
registered rights as a result of the changes.
A Māori reservation arises from the 1953 Act and is much closer to the universally
recognised concept of a reserve. Land may have been set aside as a reserve for a
meeting place, recreation, church site, urupa or a place of historical or scenic
interest.
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The following weblinks will help you access further information about Māori land
records.
Weblink: LINZ – Te Puni Kōkiri – Māori Land Online
http://www.maorilandonline.govt.nz/gis/home.htm
Weblink: LINZ – Searching for Māori land records
http://www.linz.govt.nz/survey-titles/maori-records/search-maori-land-records
Summary
Māori have a long-standing cultural and spiritual relationship with the land. The
marketing of Māori general or Māori freehold land is a specialist area, which requires
further research and investigation than a standard title search can offer.
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Review – 13
Read the statements that follow and decide if they are true or false.
Statement
1
Under a Joint Tenancy, if one joint tenant dies, the
remaining tenants inherit the property automatically.
2
All trustees must sign legal documents relating to the trust’s
property, unless there is provision in the Trust Deed for
other arrangements, or any non-signing trustee has
formally authorised the transaction.
3
The Te Puni Kōkiri website is a good reference for Māori
land information.
4
It is possible for a Tenancy in Common to have unequal
share provisions (i.e. one may have 2/3, one may have 1/3).
5
Joint tenants must agree if the property is to be sold.
True / False
REAA Continuing Education 2013
Topic 1: Property ownership
SECTION 9: CHATTELS AND FIXTURES
Chattels are items of personal property that are not included in a sale unless they are
specified.
Chattels can be easily removed from a property without causing any
damage to the chattel itself or the property. They are not sold with
the property unless specifically included – that is why the
REINZ/ADLS Agreement for Sale and Purchase of Real Estate form has
a section exclusively for chattels.
Fixtures are considered to be part of the land or buildings. There are three tests to
determine whether something is a fixture:
1
The annexation test
Can the object be easily removed without damaging it or damaging the
property itself? For example, a fitted carpet would be hard to remove
without causing some damage at least to the edges. However, a set of
ornate drapes is likely to be easily removed from the property. Debates
about whether an item is a fixture or chattel can be resolved by
determining the extent of the annexation.
2
The purpose test
Is the item intended to be a permanent and possibly substantial
improvement to the premises? If a villa has an ornate Victorian fireplace
surround, it is likely that the purpose was for it to be a permanent
attachment to the property.
3
The intention test
If something that may be considered a chattel is ‘attached’ to the
premises in some way, is it the intention of the parties that it remain so?
A garden sculpture may look permanent, but if the owners intend to take
it with them when they move, this cannot be considered a fixture.
(However, it is important to advise any prospective purchasers/lessees of
this fact, and include a clear statement in the agreement for sale and
purchase/lease so that there is no confusion.)
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In a number of cases licensees have found out after an agreement has been reached
that certain items that they believed to be fixtures are, in fact, chattels.
One common example is garden sheds which are freestanding, and therefore
removable. If these are not itemised as being either included or excluded on the
agency agreement and subsequent agreement for sale and purchase/lease, there is
room for a possible claim against the vendor and/or the licensee from the purchaser.
Best practice suggests asking the vendor about their intentions in relation to any
item that may be in doubt.
At the date of settlement, any chattels must be in the same (working) order as they
were at the time of agreement, with the exclusion of fair wear and tear.
For example, if a dishwasher that was not in working order at the time of agreement
was being left as a chattel, the purchasers must be made aware of its non-working
condition. If the purchasers were allowed to believe that the dishwasher was in
working order, they have the right to expect it to be so at the time of settlement.
Summary
Disputes regarding chattels and fixtures are among the most common faced by real
estate licensees. These disputes usually arise from a lack of understanding about
what is, and what is not, included in the sale. Your attention to detail and careful
checking and confirmation with clients and customers will help you avoid such
problems.
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Review – 14
Identify whether the following items are most likely to be considered chattels or
fixtures.
Item
A
A 2-metre square floor rug (not attached)
B
A wired burglar alarm
C
An in-ground spa pool, with a surrounding deck
D
A remote garage door opener
E
An electric stove
F
A billiard table
G
A set of built-in bookshelves
H
A large mirror, glued to the wall
I
An in-ground fishpond with 10 goldfish
J
A bedspread in fabric matching the bedroom drapes
Chattel/Fixture
Review – 15
Review your understanding of this topic, by completing the following activities:
PART A
Study the extract from the certificate of title below (NA15D/894), and answer the
questions that follow.
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1 What type of title is this?
a. Freehold
b. Cross-lease
c. Unit
d. Company share
2 How many dwellings are on this property?
a. 1
b. 2
c. 12
d. 14
3 The final entry on the Interests means:
a. An internal (LINZ) entry, correcting an error in the legal description of Flat
1 and Garage 1
b. The title is incorrect
c. The boundaries have not been properly surveyed
d. No pets are permitted on the premises
PART B
4 The two forms of co-ownership are:
a. Joint family home and cross-lease
b. Cross-lease and unit title
c. Joint tenancy and tenancy in common
d. Tenants and landlords
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Review – 16
This is an opportunity for you to review your understanding of certificates of title
and the common elements you may find.
PART A
Study this certificate of title (SA50B/542) and then answer the questions that follow.
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1
2
Judith McLaughlan’s share of the total fee simple estate is:
a. 100%
b.
75%
c.
50%
d.
25%
The number on the certificate of title that identifies the lease document for this
property is:
a. LB075371.1
b.
SA50B/542
c.
62608
d.
SA12B/732
PART B
Study the certificate of title that follows (280536), and then answer the next set of
questions.
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3
The words “_____________________ ______________” indicate that the
stormwater easement (6963502.11) is a benefit to the land.
4
The date of this search copy of the title is ____________________________.
5
What information indicates that the ownership of the land is
freehold?
a.
The heading “Computer Freehold Register”
6
b.
The estate: “Fee simple”
c.
The fact that there are no occupation licences registered on the title
d.
All of the above
The prior reference/s for the title are:
7
a.
NA51D/983
b.
DP 368968
c.
280536
d.
8907936.4
In order to search the land covenant you would obtain a copy of which
document?
a. CT 280536
b. NA51D/983
c.
6963502.13
d. 6963502.6
8
If the owner of the above property gave you a certificate of title for which the
search date was 17 February 2003, what would you do?
a. Explain that you need to work with a current certificate of title, as there
may have been changes made since that time.
b. Be concerned that relying on an “old” (stale search) certificate of title
may be a breach of Rules 5, 6 and 9 of the Code.
c.
Obtain a current search copy anyway
d.
All of the above
PART C
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Study the extract from the certificate of title below (NA137B/659), and answer the
questions that follow.
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9
Do the proprietors hold their interests as joint tenants or tenants in common?
_________________________________________________________
10
There are two easements relating to a right of way, and also gas, electricity,
telecommunication and water rights. The term which identifies the land as
being the dominant tenement for one of those easements is:
_____________________________________
11
The term which identifies the land as being the servient tenement for one of
the easements is: _______________________
12
If you were ever in any doubt about your understanding of a certificate of title,
would you:
a. Ask the client to explain it to you
b. Ask your branch manager, agent, another member of your team with
suitable experience, or the client’s solicitor to help you
c. Do nothing; it’s up to the customer to sort it out
d. Pretend you understand and tell prospective customers and other
interested parties what you “think” is probably correct?
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SECTION 10: RISK MANAGEMENT
Here is a summary of steps you should take to protect your client, customer and
yourself from risk:
Information and advice
 Make sure you are knowledgeable about the law, the property you are
marketing and agency best practice
 Give verifiable and accurate information to customers when it is available.
 Do not pass on information that you are not sure about – always check the
facts first.
 If you don’t know the answers to a client’s or prospective customer’s
questions, say so.
 Advise customers to seek independent advice themselves, for example,
through a lawyer, building inspector, surveyor, registered valuer, engineer, or
by consulting the appropriate council.
 Remember Rule 5.1 of the Real Estate Agents Act (Professional Conduct and
Client Care) Rules 2009, which reads:
A licensee must exercise skill, care, competence, and diligence at all times
when carrying out real estate agency work.
Documents and advertising
 When preparing to market a property, always search the certificate of title.
This will help you identify the correct legal owners, the correct legal
description, and any interests or encumbrances that may need to be brought
to the attention of prospective customers. This is supported by the decision of
the Real Estate Agents Disciplinary Tribunal in [2011] READT 39.
 Make sure that all contractual documents, including agency agreement forms,
Agreements for Sale and Purchase of Real Estate, and lease agreements
comply with legal requirements, and that you carefully explain them to clients
and customers before they sign the documents.
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 Carefully proofread all advertising and marketing materials to make sure they
are accurate and up to date. When making a positive representation about a
property (including its rights, interests and encumbrances, structural elements,
features, or potential for future use or development), you must proactively
check the information first. The decision in [2012] READT 44 also imposes
considerable obligations on licensees to take particular care to avoid possible
claims of misrepresentation.
 If you are in possession of documents supplied by a third party, such as a LIM
report given to you by a client, with approval to distribute this to prospective
customers, you must follow your company’s compliance management
procedure before doing so.
 Do not exceed the limits of your skill when discussing documents with clients
or prospective customers. If you don’t know something, say so, and
recommend that they seek independent specialist advice.
 Keep diary notes, especially in relation to situations where you have given
advice, made recommendations, or distributed material to a third party.
Risk management
 You and your agency must be aware of your obligations and must implement
appropriate systems and procedures to ensure you comply with all relevant
legislation, to avoid breach and liability.
 You must recognise and respond promptly to ‘alarm bells’ where a situation
has the potential to expose you to liability. Approach contracts from a
‘protection of self’ point of view – this means you should exercise particular
caution when processing contractual agreements with clients or customers
where you think they could expose you to ‘dangerous territory’. Check with
your manager or supervising agent.
 Make sure you understand and comply with your company’s risk management
plan in respect of liability.
 Check that your agency has adequate professional indemnity insurance to
cover claims and associated costs.
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SUMMARY
This topic is the most important in the current programme. At times, property law
issues can be extremely complex. Fortunately, the role of a licensee is to have a good
general knowledge of the concepts, such as how to read and interpret the features
of a straightforward certificate of title, and identify property zoning and relevant
issues.
In some situations you will be dealing with a title which has issues that are beyond
your required level of expertise. These may include complex convents, easements or
other issues for which you must recommend clients and prospective customers seek
legal advice. You must exercise considerable caution when representing a property
to ensure that you do not risk creating an impression that could potentially be
misleading or deceptive.
You must have sufficient knowledge and skill to avoid a possible claim of
misrepresentation that may arise if you give incorrect information or advice, or omit
to inform a client or customer of something they should know in respect of the
rights, interests and restrictions attached to a specific property.
Previous decisions made by CACs and the Tribunal have demonstrated that a
competent licensee must understand the overall principles of property law, but also
know when to recommend that the parties seek further advice from a specialist
adviser.
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ADDITIONAL RESOURCES
The following recommended resources provide you with additional information
about property ownership issues.
McMorland, D.W. (2011)
Sale of Land (3rd ed). Auckland, New Zealand: Cathcart
Trust.
In particular:
Chapter 8 – Description and quality of property
Chapter 9 – Title.
Websites
ConsumerBuild
http://www.consumerbuild.org.nz
Land Information New Zealand
www.linz.govt.nz
Ministry of Business, Innovation and
Employment
(includes Department of Building and
Housing)
www.dbh.govt.nz
Real Estate Agents Authority
http://www.reaa.govt.nz
Real Estate Institute of New Zealand
https://www.reinz.co.nz
REAA Continuing Education 2013
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