21 Mar Quay Law Tip of the Week: Types of property ownership
Type of property ownership by Ian Mellett
One of the questions frequently raised by the potential investors pertains to the type of property ownership involved, so I thought that it would be useful to set out the most common forms of ownership below:
Fee simple: This represents a form of freehold ownership and in essence represents absolute ownership of the property. When people say that they “own” or “own the freehold of” a certain parcel of land they almost invariably mean that they own an estate in fee simple in that land.
Leasehold: This is a form of property tenure where one party buys the right to occupy land or a building for a given length of time. A leasehold estate thus differs from a freehold where the ownership of a property is purchased outright and thereafter held for an indeterminate length of time, and also differs from a tenancy where a property is rented on a fixed term or periodic basis. Until the end of the lease period the leaseholder has the right to remain in occupation as an assured tenant paying an agreed rent to the owner.
Cross lease: This is a hybrid form of multi-unit tenure in which each owner has an undivided share of the underlying freehold as tenants in common, and is granted a registered leasehold estate of the particular unit or flat occupied. Effectively the property owners share ownership of the land and each owner leases their building from the other owners, which together form the cross lease title.
Stratum estate: Under the Unit Titles Act 1972 the deposit of a unit plan has the effect of creating in each unit a new kind of statutory estate called a stratum estate in freehold, or a stratum estate in leasehold, depending on whether the land which was subdivided into units was freehold or leasehold.
It is essential to determine, upfront, the exact nature of the form of property ownership when embarking upon a purchase of any property. My experience is that it is beneficial to have your lawyer cast his/her eye over a potential purchase agreement, before you sign the document, to ensure that you fully understand the nature and form of property ownership involved.
Find a Property Lawyer?
Please feel free to contact Auckland Lawyer,Ian Mellett at Quay Law for more information, or if you have any questions regarding your conveyancing or other legal needs visit our website www.quaylaw.co.nz or call Auckland based Law Firm, Quay Law on ph – (09) 523-2408 for more information.