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Unit Title Subdivisions

Unit Title Subdivisions

Published in September 2018

This article provides a summary as to the various types of unit title developments that can take place.

Traditional unit title subdivision
The traditional option is generally what would come to mind when you think of a unit title subdivision. The registered owner of a freehold or leasehold piece of land (both known as the “base” land) is entitled, assuming various criteria are satisfied, to subdivide that land into a unit title development.

The steps are essentially:
1. Ensure with Council that the unit title development is a possibility with your land (i.e. does it fit within the unitary plan or will special permission, in the shape of a land use/resource consent, be required?).
2. Obtain the necessary consents to undertake the construction works; the consents may be subject to a number of conditions which will need to be complied with.
3. Carry out the construction works; work with Council throughout.
4. Engage a surveyor to prepare the unit plan depicting the principal units, the accessory units, the common property, and that the relevant boundaries are clearly stated on the plan.
5. Assess the utilities and prepare the budget; engagement of a skilled body corporate management company is recommended.
6. Engage a valuer to assess the relative values of each of the principal and accessory units. Consider whether those values are sufficient, or whether alternative utility interests might be appropriate.
7. Utilising your legal team, your surveyor, your valuer, and Council, obtain the necessary “sign-offs”, and deposit the unit plan with Landonline (there will only be one unit plan with a “traditional” unit title subdivision). Once complete, the “base” title will cancel and new titles will issue for each principal unit. Separate titles will not issue for the accessory units as these must be attached to a principal unit.

Staged development (FDUs)
A staged development is similar to a traditional unit title development except, as the name suggests, it will be completed in stages i.e. not as part of one unit plan.

The key distinctions are as follows:
1. When consent is obtained from Council, it will be consent to compete the development in stages; but it is important to note that the building plans that accompany the consent will be for all units in the completed development.
2. When stage 1 is complete a unit plan will be deposited which will create unit titles for the principal units forming part of stage 1, and the balance of the land (to be completed in subsequent stages) will show on the unit plan as future development units, or “FDUs”.
3. When construction of the stage 2 units is completed a subsequent stage plan will be deposited showing the completed stage 1 and stage 2 units, and the balance of the land (if any) as FDUs. When the final stage plan is deposited it must be accompanied by a “complete unit plan”.
4. If the units forming part of the stages following stage 1 are completed in accordance with the original building consent (and associated plans) then no subsequent body corporate approval is needed. If this is not the case, then further Council and body corporate consent will be required before any additional building work is carried out. In either case it is always preferable to have a written agreement between the body corporate and the FDU owner to outline the obligations and requirements of each party throughout the development process.

Subdivision of principal unit
This is similar to a traditional unit title development except of course when entering into this process the body corporate already exists, and therefore the approval of the body corporate, by special (and designated) resolution, is required. If approval is obtained and the subdivision is completed, the principal unit (and any associated accessory unit) will be cancelled and replaced with new titles for the newly created units, and these will form a subsidiary unit title development.

Layered development
Perhaps the most misunderstood of the unit title developments, a layered development is a grouping of unit title developments in which there is one “head” unit title development (developed from the base land – effectively the “traditional” unit title development), and at least one “subsidiary” unit title development (which is the result of a subdivision of a principal unit in the “head” unit title development). Where things get confusing is by the inclusion of the word “parent” unit title development, but this is simply the result of one of the units from one of the subsidiary unit title developments being further subdivided to create a further subsidiary unit title development; where this happens, the initial subsidiary development is known as both a “parent” and a “subsidiary” unit title development. There can only be one “head” development, but there can be any number of “parent” and “subsidiary” developments.

Layered unit title developments can be appealing for larger mixed-use developments where it may be advantageous to separate the management of the various activity-specific uses from each other. Caution and proper advice is needed because:

1. While it is possible to have separate operational rules for each subsidiary body corporate, in the event of conflict each subsidiary will be subject to the parent operational rules, and each parent will be subject to the head operational rules.
2. Layered developments are complex to set up, and the complexities, along with the increased costs, need to be fully considered and weighed against any perceived advantages.

Redevelopments

There are two types of re-development:
1. The alteration of boundaries between units; or
2. The enlargement or reduction of existing units, or the creation of new units.
A relatively straight-forward and typically cost-efficient process is to be followed to complete option one above, and critically the consent of the body corporate is not required. The trouble is you can only implement option one where the boundary alteration is confined to the affected units and does not affect the common property, or materially affect any other unit, or change the total number of units. If you fall outside option one (i.e. you cannot use it) then you default to option two.

Option two is more complex and requires the approval of the body corporate by way of a special (and designated) resolution. In addition, a new unit plan must be created, and the ownership interests will need to be updated. The costs associated with option two are generally significantly more than those associated with option one.

If you wish to discuss any of the matters raised in this article in more detail, please contact us.

This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.
 



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