Flats Plan Update
What is a Flats Plan?
Cross lease titles or unit titles rely on a flats plan to identify the lease areas for each property title. In a normal freehold parcel, the site is defined on a title plan. On a cross lease or unit title, there are multiple owners of the land parcel, and the flats plan identifies which area each title has rights over.
How to Read Your Flats Plan
Flat 1
This indicates the extent of the building or lease area. The owner of Flat 1 has exclusive use of this area. They can make changes to the interior of the house but cannot alter the footprint or elevation without the neighbors’ approval.
Common Area
This is the area on the site shared between all owners. All owners have equal rights to use any area identified as a common area.
Covenant Area
This relates to a covenant recorded as part of the title. The covenant will detail restrictions on the area within the covenant boundary.
Updating Your Flats Plan
If there are changes to any of the lease or covenant areas, it’s recommended to update your flats plan. For example, if you renovate the house, changing the building footprint or elevation, the lease area (Flat Area) on the flats plan becomes incorrect. Technically, you don’t have a legal right to occupy the portion of the house outside the lease area, resulting in a defective title.
Defective Title
A defective title occurs when the buildings on the site do not match the boundaries of the flats plan.
Implications of a Defective Title:
When purchasing a property, the bank will often review the title to ensure they are comfortable lending against it. If the title is defective (the physical buildings don’t match the flats plan), they may view the security of the title as impacted and may require correction before lending. A defective title might also deter prospective buyers and consequently lessen the sale price.
How to Correct a Defective Title
Convert to Fee Simple (Cross Lease Conversion)
This process changes the ownership structure of the cross lease property, converting it to freehold, which is the most secure form of land ownership.
Update the Flats Plan
This process updates the flats plan to reflect the current physical buildings on the site.
The Process to Update the Flats Plan
KWC will handle the entire process for you, routinely updating flats plans and correcting defective titles. This process involves the council, LINZ (Land Information New Zealand), your lawyer, and your bank, and can take up to 4 months to complete. Updating your flats plan can be a condition of sale and written into the sale and purchase agreement, but it’s always best to initiate it as early as possible to relieve pressure from the property sale.
The Process Includes:
1. Conducting a site or topographic survey of the true building footprint and preparing a correct flats plan.
2. Gathering the necessary documents and lodging a resource consent with the council to update the flats plan.
3. Once the consent is approved, lodging the flats plan with LINZ.
4. Notifying your lawyer to prepare the necessary documents to update your title.
If you have any questions about cross leases, flats plan updates, or conversion to fee simple, please reach out to the friendly team at KWC for advice or a free quote.