At over 65 years old, the Land Transfer Act 1952 has retired. It’s recently been replaced by the new Land Transfer Act 2017.
This Land Transfer Act provides the framework for New Zealand’s whole land register and transfer system.
The adoption of the new Act is a significant. You’ll see a number of practical changes when buying or selling property (as well as some behind the scenes, which we won’t go into in this article).
Firstly, you’ll notice some changes in terminology:
Certificates of title
The print outs from the register that we all refer to as “certificates of title” were officially called “computer registers”. No one used this awkward term, but the old term “certificate of title” wasn’t technically appropriate either (they’re not a physical certificate, just a computer printout). The new term is the simpler “record of title”. You’ll see this term used in the updated ADLS/REINZ agreements.
“Registered Proprietor” has changed to the much easier to say and spell “Registered Owner”.
Easements and Covenants
The way land is described in easements and covenants has changed. The lot which benefits from an easement or covenant used to be the “dominant tenement”; it is now the “benefitted land”.
On the other side, the lot that provides the benefit has changed from the “servient tenement” to be the “burdened land”. This will obviously make it much clearer which lot profits from an easement or covenant!
There are more significant changes when it comes to easements, covenants and encumbrances.
Easements usually benefit a neighbouring property, such as giving access through a right of way. They can also be “in gross” – given to a third party, such as a right for the council to have sewage pipes under the land.
Covenants are a promise to do something—or more commonly, not to do something (for example, a rule saying you cannot paint your house orange). Covenants had to be between lots of land, and couldn’t be “in gross” (or to a third party like easements can).
Due to covenants not being “in gross”, property developers would use an “encumbrance” to enforce rules, such as not painting a house orange. An encumbrance is a type of mortgage, so at times can cause difficulties for buyers getting finance.
The new Land Transfer Act allows covenants in gross. This means that the developers can apply a covenant across a development, rather than having to rely on encumbrances.
This should see a decrease in the use of encumbrances, and the use of covenants in gross instead.
Ongoing covenants in gross will need a third party to continue to exist to enforce them. It will be interesting to see whether these will be granted to development companies, or whether we’ll see an increase in the creation of residents’ associations or management companies to fill this role.
If you’re dealing with a property with an easement, covenant or encumbrance please feel free to get in touch with us to explain the implications.