In New Zealand, real estate can change hands in many ways. These situations range from simple sales to more complex transfers due to relationships, death, or legal actions. This guide explores the different scenarios where property ownership can be altered.
Voluntary Transfers of Ownership
Voluntary transfers happen when the property owner decides to initiate the change.
Sale and Purchase
A sale and purchase is the most common way to transfer property. First, a willing seller and a willing buyer enter into a legally binding Agreement for Sale and Purchase. Then, real estate agents and lawyers typically help with the process. Finally, the ownership title transfers to the new owner when the deal settles.
Gifting
An owner can also gift their property to another person or entity. While no money changes hands, this is still a formal legal process. Important things to consider when gifting property include:
- Deed of Gift: You’ll need a legal document to formalise the transfer.
- No Gift Duty: Fortunately, New Zealand abolished gift duty in 2011.
- Residential Care Subsidy Implications: Gifting can affect your future eligibility for a Residential Care Subsidy.
- Tax Implications: The bright-line property rule might still apply. As a result, the giver could face tax liabilities, even without a sale.
Inheritance (Transfer upon Death)
When a property owner dies, their property transfers to their beneficiaries. However, the type of ownership and the existence of a will determine how this happens.
- Joint Tenancy: If people own a property as joint tenants, the deceased owner’s share automatically goes to the surviving owner(s). This process, known as the right of survivorship, bypasses the will.
- Tenancy in Common: On the other hand, if they own it as tenants in common, each owner has a separate share. When one owner dies, their share is distributed according to their will or, if there’s no will, the rules of intestacy. This usually requires probate of the will.
- Life Interest: A will can also grant someone (a life tenant) the right to live in a property for their lifetime. After the life tenant’s death, the ownership then passes to other specified beneficiaries (remaindermen).
Transfer to a Trust
Property owners can transfer their real estate into a trust for various reasons, such as asset protection or estate planning. This involves legally moving the title from the individual’s name to the trustees’ names. Although the trustees become the legal owners, they hold the property for the benefit of the trust’s beneficiaries.
Changes Due to Relationships
The beginning or end of a relationship, civil union, or marriage can also change property ownership.
- Adding a Partner to the Title: A sole owner might add their partner to the property title, making them a co-owner. People often do this to reflect their shared life and contributions.
- Property Division upon Separation or Divorce: The Property (Relationships) Act 1976 outlines how to divide relationship property when a relationship ends. Generally, the family home is considered relationship property and is split equally, no matter whose name is on the title. A “contracting out” agreement (prenup) can change these standard rules.
Involuntary Transfers of Ownership
Involuntary transfers happen without the owner’s consent, often because of legal or financial issues.
Mortgagee Sale
If a property owner defaults on their mortgage, the lender (mortgagee) can sell the property to recover the debt. Consequently, the original owner loses their rights to the property.
Adverse Possession (“Squatter’s Rights”)
In rare cases, someone who is not the legal owner can gain ownership of land. To do this, they must occupy it continuously for at least 20 years without the owner’s permission. The claimant must prove to the High Court that their possession was open, obvious, exclusive, and hostile to the true owner’s rights.
Government Acquisition
The government or a local authority can also compulsorily buy private land for public works, like building new roads or schools. This is done under the Public Works Act 1981, and the owner must receive fair compensation.
Court-Ordered Sale
In some legal disputes, a court may order the sale of a property. This can happen in situations such as:
- Partition of Co-owned Property: If co-owners can’t agree on the property’s future, one or more can ask the court to order a sale and divide the proceeds.
- Enforcement of a Judgment Debt: If a creditor has a court judgment against a property owner, they may be able to force the sale of the property to settle the debt.
Other Scenarios Leading to Ownership Changes
Company or Trust Restructuring
If a company or trust owns a property, changes in the company’s shareholding or the trust’s trustees can effectively change who controls the property. This can happen even if the legal owner on the title doesn’t change.
Boundary Adjustments and Subdivisions
While not a complete change of ownership, subdividing a property creates new titles. This can involve selling off parts of the original land, thus changing the ownership landscape. Similarly, a boundary adjustment with a neighbour alters how much land each party owns.
Understanding the different ways real estate ownership can change is vital for property owners, buyers, and anyone in the property market. Each scenario has unique legal requirements and potential consequences. Therefore, getting professional legal advice is essential to navigate these complex transitions smoothly.
