The Unit Titles Act: What Apartment Buyers Need to Understand

Apartment ownership in New Zealand operates under a different legal framework from standard freehold property. When you buy an apartment, you are typically buying a unit within a unit title scheme, which gives you ownership of your individual unit alongside shared ownership of common areas with other owners. This arrangement is governed by the Unit Titles Act 2010, and understanding its key provisions is essential before you make an offer on any apartment or multi-unit property. At Chaperone, we want buyers to go into this type of purchase with their eyes open to both the opportunities and the obligations involved.

What Is a Unit Title Scheme?

A unit title scheme is a form of property ownership in which a building or development is divided into individual units that can be owned separately. Common areas - such as lobbies, driveways, lifts, and shared gardens - are owned collectively by all unit owners. The scheme is governed by a body corporate, which is the collective entity formed by all unit owners to manage and maintain the common property and make decisions affecting the development as a whole. Every unit owner is automatically a member of the body corporate and has both rights and obligations that flow from that membership.

The Role of the Body Corporate

The body corporate is responsible for maintaining the common areas, managing shared services, holding insurance on the building, and making collective decisions about the development. It operates through an annual general meeting of all owners and is often managed day-to-day by a professional body corporate manager engaged on behalf of the owners. Each unit owner pays a body corporate levy to fund these collective responsibilities. The levy amount varies significantly between buildings depending on size, age, condition, and the scope of services provided. Understanding the body corporate levy and what it covers is one of the most important due diligence steps before purchasing an apartment.

Pre-Contract Disclosure

The Unit Titles Act requires that certain information be disclosed to a buyer before a sale and purchase agreement is signed. This pre-contract disclosure must include the amount of the current body corporate levy, any known major expenses on the horizon, information about the building's insurance, and details of any current proceedings involving the body corporate. Reviewing this disclosure carefully is essential - it reveals the financial health of the body corporate and any significant costs that may be coming. Your solicitor should review this disclosure as part of their due diligence on your behalf.

Pre-Settlement Disclosure

In addition to pre-contract disclosure, the seller is required to provide updated disclosure information shortly before settlement. This pre-settlement disclosure includes the most recent financial statements of the body corporate, details of any outstanding levies on the unit, information about any special levies that have been approved but not yet collected, and details of any litigation involving the body corporate. This information is critical because it can reveal changes to the financial picture between when you signed the agreement and when you are about to settle. If the pre-settlement disclosure reveals significant new concerns, your solicitor can advise on your options.

Long-Term Maintenance Plans

Under the Unit Titles Act, body corporates for larger schemes are required to have a long-term maintenance plan (LTMP) covering the major maintenance and renewal needs of the building over a 10-year horizon. This plan is important because it signals whether the body corporate is proactively setting aside funds for significant future expenditure - such as roof replacement, lift upgrades, or exterior remediation - or whether those costs are likely to arrive as a surprise special levy. A well-funded maintenance plan and a healthy operating fund are positive signals about how the scheme is being managed. A body corporate with minimal reserves and large looming maintenance items is a meaningful risk for any buyer.

How Apartment Lending Differs

Lenders treat apartment purchases differently from freehold property in some important ways. Some lenders have restrictions on apartments below a certain floor area, buildings with a high proportion of investor-owned units, or apartments in certain geographic locations. The presence of body corporate levies also affects your serviceability calculation, as lenders will factor these as an ongoing expense. If the building has a history of leaky building issues or unresolved defects, some lenders may decline to lend on it entirely. It is worth discussing the specific apartment you are considering with your mortgage adviser before proceeding, to confirm there are no lending restrictions that could affect your finance.

Getting the Due Diligence Right

Buying an apartment under a unit title scheme involves a distinct layer of due diligence that goes beyond a standard freehold property purchase. Reviewing the body corporate disclosure documents, the long-term maintenance plan, the operating fund balance, meeting minutes, and any current or threatened litigation gives you a complete picture of what you are buying into. At Chaperone, we encourage apartment buyers to engage a solicitor who is experienced with unit title transactions and to speak with their mortgage adviser early about any property-specific lending considerations. Getting this right at the outset is far easier than managing problems that emerge after settlement.