Homeowner's Blog

Buy vs Rent in New Zealand

 

Since 20 June 2011 Body Corporate and Unit Titles Act have got for apartment owners a new meaning. Apartments are a good investment when you understand how the Body Corporate is managed and know how to manage your property or Property Manager.

Apartment Owners have to know

 

Being upfront apartment ownership is good when you own the right property, in the right area and under the right terms. Apartments are a good investment when you understand how the Body Corporate is managed and know how to manage your property or Property Manager.

 

When you already own an investment apartment you learned to look at it with the eyes of your tenants considering car parking, location, public transportation etc. Regarding apartment ownership related risks you can read more about

 

· buying apartments off the plan

· recommendations of experienced apartment investors

· common reasons for losing money on apartments

 

As apartment owner you know that apartment ownership in New Zealand is based on three title types. Related rules and legislation for using common property and for maintenance differ, too.

 

 

Three Types of Title:

 

1) Company share / flat owning company

 

A company share title gives you as individual owner an equity share in the company and a ‘license to occupy’ an unit. The land and buildings are owned by a company and the share title comes under the Companies Act.

 

2) Cross-lease

 

Cross-lease titles, mostly used in the 70ies, provide to owners an undivided share of the land and each title holder leases exclusively a part of the building from the other owners and rights for shared property like drive way, etc.

 

3) Unit title / Stratum Estate / or Strata Title

 

Unit titles are the most common form of apartment ownership and covered by the Unit Titles Act.

You, as apartment owner, own a share of the building (common areas such as exterior, corridors, lifts, central hot water system etc) and the apartment.  All unit title holders form the ‘Body Corporate’ represented by the Body Corporate Chairman and the Body Corporate Committee. The Body Corporate’s operation is based on rules and regulated by the Unit Titles Act.

 

 

Common mistakes when owning an apartment

 

The common mistakes are already illustrated in these three articles mentioned above and  making one of them can lead you down a long and brutal road in terms of costs for vacancies, frequent repairs and maintenance.

Be clear about, an apartment building needs to be managed like a commercial building. Make sure you check every Body Committee meeting minute and compare figures with the budget and ask questions. This affects your net income, and that directly impacts the Body Corporate levies, as well.

 

 

Unit Titles Act 2010

 

All changes to The Unit Titles Act affect the lives of apartment owners and the new Act has increased the Body Corporate levies. Be aware that the Act 2010 and Unit Titles Regulations 2011 came into force on 20 June 2011 and do get informed.

 

For instance under the old Act levies were calculated based on the relative capital value of an unit with no opportunity to have your levies reassessed. Under the new Act you can have your apartment reassessed for levies any time as long as three years have elapsed since the last assessment.

 

Also the new Act brought in new disclosure rules for sellers, buyers, developers and Body Corporate. For example a seller of an apartment would need to disclose the amount of the Body Corporate levies, proposed levies for the next 12 months, expenses for maintenance and more. A bad operation of the Body Corporate can become a costly obstacle. Read more at common reasons for losing money on apartments.

 

 

And by the way, when renting an apartment out, the landlord must make tenants aware of the Body Corporate rules. The landlord is responsible for carrying out any maintenance in his apartment and the Body Corporate for the common area and the building.

More information you will find on the Department of Building and Housing's website or Land Information New Zealand.

 

Hopefully you got everything to stay on the road—otherwise drop a line.

Klauster

 

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