Apartment ownership in NZ is based on three title types with rules and legislations to use the common property and share the costs for repair and maintenance of the building; flat owning company, Cross-lease, Stratum Estate or Strata Title
Know about 3 different Ownership Types
Especially now in times with a shortage of housing and escalating house prices the demand for apartments is very strong. That is why we see a lot of new high-rise blocks filling inner city locations where apartments are being sold off-the-plan (Just as an aside, check this out)
In general, apartments in smaller buildings have a better likelihood of achieving capital growth for two reasons; firstly it is the apportionment of land that appreciates and secondly an owner-occupier driven Body Corporate makes them a better proposition for city dwellers. What that means I illustrated in several blog posts about apartment living.
When you purchased something you would expect it is yours. This is not exactly what happens when you buy an apartment. And think about in a bigger apartment building you have less control, and what is an asset worth if you don’t have control?
Apartments are good investments, too—if you understand the specific with the Body Corporate and how to manage your Property Manager. Here are few tips:
Apartment owner— know the ownership title types
Apartment ownership in New Zealand is based on three title types with rules and legislations to use the common property and share the costs of repair and maintenance for the building.
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.
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 using the shared property like drive way, common space for drying washings, parking, playgrounds, etc.
Unit title / Stratum Estate / or Strata Title
Unit titles are the most common form of apartment ownership and covered by the Unit Titles Act (UTA 2010). 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’ (BC) represented by the Body Corporate Chairman and the Body Corporate Committee. The BC’s operation is based on BC rules and regulated by the Unit Titles Act.
Risks when owning an apartment
As the blog posts mentioned above illustrate, problems with the body corporate and building management regarding bad decisions, lack of maintenance and repairs can be a costly risk for the apartment owner. The larger building and body corporate are the less control unit owners have to lower their risk.
Not understanding the operational structure of the Body Corporate, not attending the Body Corp AGM and not reading the Committee meeting minutes will affect the budget and the amount of annual levies.
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 compliance costs and may impose contributions to LTMP, etc. Note that the Act 2010 and Unit Titles Regulations 2011 came into force on 20 June 2011.
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 for instance if you feel your contribution is unfair.
Also the new Act brought in new disclosure rules for sellers, buyers, developers and Body Corporate. E.g. 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. An ill functional Body Corporate can become a costly obstacle.
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Lifestyle with future?
Apartments are a well liked alternative to stand-alone homes in suburban settlements because of lower price and location close to work and amenities. I really enjoyed living in central located apartments for many years and experienced first hand the good and the bad apartment buildings.
Another consideration for future generations living in apartments are demographic changes like single-person households (single parents, retirees) and people with focus on careers (professional couples, people with a second residence), etc.
Klauster Blogs lead to a real person, IT professional, investor, landlord and business owner with interests in technologies, residential properties and healthy lifestyles.
The passion of making experiences available comes from renting in different countries and working with people who are interested in home ownership. Helping people to avoid pitfalls has been most rewarding, when forming relationships.
Our philosophy to treat life, partnerships and hobbies as an investment has helped people in our circle. Life is a dream with a deadline, happiness comes from making the right choices by having realistic expectations.
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