Layered and staged unit title developments

Each week, national law firm Simpson Grierson answers commercial property questions which can be emailed and headed "property problems." This week's question is answered by senior associate Fiona Burton and who can be contacted at fiona.burton@simpsongrierson.com

Q. I am a property developer and I have been following the progress of the new Unit Titles Act with interest. I have heard that there is a new type of unit title development provided for in the new act that allows layering of unit title developments. I would be interested to know more about this, as well as how it differs from staged developments and redevelopments under the existing Unit Titles Act.

A. The Unit Titles Act 2010 has been passed by Parliament but will not come into effect until the regulations required by it have been finalised, which is likely to be later in the year. The new act does introduce a new concept of layered unit title developments but it will not be possible to create such a development until the relevant provisions of the new act are in force.

Under the new layered development regime, principal units in a unit title development can be further subdivided into what is called a "subsidiary unit title development". In addition, any principal unit in a subsidiary unit title development can be subdivided into a further subsidiary unit title development. A unit title development containing a principal unit that has been subdivided into a subsidiary unit title development is known as the "parent unit title development". If it is the top layer of the development, it is also simultaneously known as the "head unit title development".

The subdivision of a principal unit into a subsidiary unit title development is only permitted if the body corporate of the unit development, of which the principal unit is part, has by special resolution, agreed to allow the subdivision. There must also have been no objections from parties who are entitled to object, such as other unit owners, or any objections must have been dealt with under the process set out in the new act. Also, all the usual local authority consents that are required for unit title subdivisions must be obtained. The subdivision of a principal unit to create a subsidiary unit title development is effected by the deposit of plans with Land Information New Zealand (LINZ) and the issue of new titles for the subsidiary units.

Every subsidiary unit title development will have its own units, common property, and body corporate. Having a separate body corporate for each subsidiary unit title development may create some management benefits and the more flexible layered structure may be useful in mixed-use developments.

The new act states that, where a principal unit has been subdivided into a subsidiary unit title development, it still remains a principal unit in the parent unit title development. A subsidiary body corporate is required to send a representative to parent body corporate meetings.

You have asked: How do staged unit title developments and redevelopments differ from layered unit title developments? You will be aware that staged developments and redevelopments are provided for in the existing unit titles legislation. They are also provided for, in largely similar terms, in the new act.

A staged unit title development, as the name suggests, allows a developer to complete a unit title development in stages. A number of successive plans are lodged with LINZ as the development progresses. However, the stages are simply parts of the one unit title development. At the end there is one set of units, with common property, and one body corporate with responsibility for the development as a whole.

A redevelopment occurs when alterations are made to the boundaries of one or more units and/or the common property in an existing unit title development. The alterations are recorded on a redevelopment plan, which is lodged at LINZ. When a redevelopment is complete, various aspects of the affected unit title development will have been altered but, again, there will be only one set of units, with common property, and one body corporate with responsibility for the development as a whole.

We recommend that you talk to your lawyer about the best way to structure any unit title developments you plan to carry out in the future.

The information contained in Commercial Property is intended to provide general information in summary form current at the time of printing. The contents do not constitute legal advice and should not be relied on as such. Specialist advice should be sought in particular matters.