Buying a residential lot in New Zealand requires navigating a landscape of sections, subdivisions, and varied zoning regulations. Understanding the distinctions between different lot types, their associated costs, and potential restrictions is crucial for making an informed investment. This article provides a detailed overview of residential lot types in New Zealand, focusing on practical tips and considerations specifically relevant to the buying process.
Understanding the Basics: Section vs. Subdivision
In New Zealand property parlance, the terms “section” and “subdivision” are fundamentally linked but represent different points in the land development process. A section typically refers to an individual, surveyed and legally defined piece of land intended for residential (or other approved) development. This section is the final product you, as a buyer, are likely considering. The term subdivision, on the other hand, describes the process of dividing a larger land parcel into multiple smaller sections. This process involves obtaining resource consent from the local council, meeting infrastructure requirements (roads, water, sewage), and registering the new sections with Land Information New Zealand (LINZ). Think of subdivision as the verb (the act of dividing) and section as the noun (the resulting piece of land).
Essentially then, when you’re looking to buy land, you’re likely buying a section within a subdivision. Understanding this relationship helps you appreciate the factors that influence the desirability and value of a particular section, such as the quality of the subdivision’s infrastructure and the overarching design standards imposed by the developer or council.
Types of Residential Lots in New Zealand
Residential lots in New Zealand come in various forms, each with its own set of characteristics, advantages, and disadvantages. Understanding these differences is essential for aligning your land purchase with your specific needs and long-term goals.
Standard Residential Sections
These are the “traditional” sections, usually rectangular or similarly shaped, offering a generous space for building a detached house, garden, and outdoor living areas. Section sizes vary widely depending on location. For example, in Auckland, a standard residential section might range from 400m2 to 800m2 or more, while in more rural areas, sections can easily exceed 1000m2. A key consideration is the site coverage ratio, often specified by the local council. This ratio dictates the percentage of the section that can be covered by buildings, driveways, and other impermeable surfaces. A low site coverage ratio can limit the size of your potential house, while a high ratio might reduce green space.
Tip: Always check the council’s district plan for the specific site coverage rules applying to the section you’re considering. Resource consents may be required if your proposed build exceeds these limits. You can typically find this information on the council’s website or by contacting their planning department.
Lifestyle Blocks
Lifestyle blocks offer a larger land area, typically ranging from 1 hectare (2.47 acres) up to 10 hectares (25 acres) or more. These are popular among those seeking a rural lifestyle with space for animals, orchards, or hobby farms. While offering ample space and privacy, lifestyle blocks come with added responsibilities. Maintenance, including fencing, weed control, and possibly animal care, can be time-consuming and costly. Council rates are also likely to be higher than for standard residential sections. A well located lifestyle block, however, may offer the possibility of sub-division in the future, significantly increasing its value. However, you will need a detailed understanding of council zoning and subdivision regulations before factoring that in.
Tip: Before buying a lifestyle block, thoroughly assess its suitability for your intended use. Consider factors like soil quality, water access, and proximity to amenities. Check the zoning rules carefully, as they may restrict certain activities or further subdivision. An expert lifestyle block consultant can assist with this assessment.
Terraced Housing and Apartment Building (THAB) Zones
Reflecting New Zealand’s drive for higher density housing in urban areas, THAB zones are becoming increasingly commonplace. These zones allow for the construction of multi-unit dwellings, such as townhouses and apartments, often with minimal or no individual land ownership. In such developments, you might buy a unit (a house or apartment) that sits on a ‘unit title’. Unit title ownership means you own your unit and share ownership of common areas, like driveways, gardens and sometimes recreational facilities, with other unit owners. A body corporate manages these shared areas and their maintenance, funded by levies paid by each owner. An important factor to also note when purchasing THAB properties, is the potential for additional building development in the vicinity. While most councils have building height restrictions, if the THAB zoning permits, there can be potential for considerable development and disruption in the area.
Tip: If you’re considering buying into a unit title development within a THAB zone, carefully review the body corporate rules and financial statements. Look for any planned special levies (one-off payments for major repairs) and thoroughly understand your responsibilities as an owner. Consider also the construction quality of the building as a whole—leaking roofs, poor insulation, or sub-standard cladding could lead to significant future costs.
Cross-Lease Sections
A cross-lease is a unique form of land ownership where multiple owners each lease their dwelling from a company, of which they are all shareholders. This arrangement differs from freehold ownership, where you own the land outright. Cross-leases were once a common way to subdivide land, but are now less popular due to their complexities. A significant drawback of a cross-lease is the need to obtain consent from other cross-lease holders for any alterations or additions to your property. This can lead to delays, disputes, and potentially costly legal battles. Furthermore, some lenders are reluctant to provide mortgages on cross-lease properties, particularly if the lease documentation is outdated or unclear. You must ensure you have a valid ‘flat plan’ that matches the actual building on the land.
Tip: Exercise extreme caution when considering a cross-lease section. Thoroughly review the lease documentation with a lawyer specializing in property law. Assess the willingness of other cross-lease holders to cooperate with future renovations or developments. Consider the potential difficulty in obtaining financing.
Fee Simple (Freehold) Sections
Fee simple, also known as freehold, is the most common and straightforward form of land ownership in New Zealand. As the owner of a fee simple section, you have the most extensive rights and control over the land, subject only to council regulations and legal restrictions. You can build, renovate, and sell the property without requiring consent from other parties (other than council for building consents). This ownership provides security and flexibility, making it a desirable option for most buyers.
Tip: While freehold ownership offers maximum freedom, it’s still crucial to check for any encumbrances on the title, such as easements or covenants, that could restrict your use of the land. A Land Information Memorandum (LIM) report, obtained from the local council, provides details of any such restrictions, as well as information on drainage, zoning, and other relevant issues.
Sections Subject to Covenants
Covenants are legally binding agreements registered on the title of a property that restrict what you can do with the land. They might dictate the style of house you can build, the types of materials you can use, or even the landscaping requirements. Covenants are often used in new subdivisions to maintain a consistent aesthetic and protect property values. Breaching a covenant can result in legal action and financial penalties. While covenants can seem restrictive, they can also provide benefits, such as ensuring a high standard of development in the area. An example is a covenant that restricts subdividing a property further than its current boundary, or to dictate that all houses must be built of brick.
Tip: Carefully review any covenants listed on the property title before making an offer. Understand the implications of these restrictions on your building plans and lifestyle. If you’re unsure about the meaning or enforceability of a covenant, seek legal advice.
Sections with Easements
An easement grants another party the right to use a portion of your land for a specific purpose. Common easements include rights of way (allowing neighbors to access their property), drainage easements (allowing the council to run drainage pipes across your land), and utility easements (allowing utility companies to install and maintain power lines or water pipes). An easement can impact your ability to build on a specific part of your section or restrict certain activities. However, it does not grant ownership of the easement area to the other party.
Tip: Identify any easements affecting the section you’re considering. Assess how these easements might impact your building plans and future enjoyment of the property. A LIM report will typically disclose any registered easements.
Navigating the Subdivision Process as a Buyer
Even though you’re buying a completed section within a subdivision, understanding the subdivision process can provide valuable insight into the quality and potential issues associated with your land.
Resource Consent and Compliance
A subdivision requires resource consent from the local council, ensuring compliance with the Resource Management Act 1991 (RMA). This consent covers various aspects, including environmental impact, infrastructure provision, and zoning requirements. As a buyer, you should ensure that the subdivision has obtained the necessary resource consent and has complied with all conditions imposed by the council. Failure to comply with these conditions can lead to delays in obtaining building consents or even legal disputes.
Tip: Ask the vendor (seller) or their agent to provide you with copies of the resource consent and any compliance certificates related to the subdivision. Review these documents carefully to ensure that all conditions have been met.
Infrastructure and Services
A well-planned subdivision provides essential infrastructure, including roads, water supply, sewage disposal, stormwater drainage, and power and telecommunications connections. The quality and reliability of these services can significantly impact your living experience and property value. Consider the long-term capacity of the infrastructure to accommodate future growth in the area. Also, with increasing incidence of natural disasters, consider if the subdivision has an adequate emergency water source in times of drought.
Tip: Inspect the infrastructure provided in the subdivision. Ensure that roads are well-constructed, drainage is adequate, and utility connections are readily available. If possible, talk to other residents in the area to gather feedback on the reliability of these services.
Design Standards and Amenities
Many subdivisions incorporate design standards and amenities to enhance the overall appeal and liveability of the area. These might include landscaping guidelines, building material restrictions, community parks, and walking trails. Such amenities can add value to your property and create a more desirable living environment. However, they may also come with ongoing costs, such as contributions to a residents’ association or body corporate. It’s always great to engage with residents when looking at buying in a subdivision, to understand some of the unwritten rules and the atmosphere of the environment.
Tip: Assess the design standards and amenities offered in the subdivision. Determine whether they align with your lifestyle and preferences. Understand any associated costs or obligations, such as membership fees or compliance requirements. These factors can sway your view about entering into the purchase of a section of land.
Specific Costs to Consider When Buying a Section
Beyond the purchase price of the section itself, numerous additional costs can significantly impact your overall investment. Budgeting for these expenses is crucial for avoiding financial surprises. The following includes tips and advice that pertain specifically to the purchasing of land, rather than general advice relating to purchasing property.
Due Diligence Costs
Before committing to purchase a section, it’s essential to conduct thorough due diligence. This involves various investigations and assessments to identify any potential issues or risks associated with the property. Key due diligence costs include:
- LIM Report: As mentioned earlier, a LIM report provides detailed information about the property from the local council, including zoning, drainage, building consents, and potential hazards. The cost of a LIM report typically ranges from $300 to $500, depending on the council. Delays in the provision of these reports can potentially extend the settlement period, so that is something to consider when structuring offers.
- Geotechnical Report: A geotechnical report assesses the soil conditions and stability of the land. This is particularly important if you’re planning to build a house, as it can identify potential foundation issues or the need for expensive site preparation. The cost of a geotechnical report can range from $1,000 to $3,000, depending on the complexity of the site.
- Survey: A survey confirms the boundaries of the section and identifies any encroachments or discrepancies. This is especially important if the section is irregularly shaped or has unclear boundary markers. The cost of a survey can range from $800 to $2,000, depending on the size and complexity of the section.
- Legal Fees: A property lawyer will review the sale and purchase agreement, conduct title searches, and handle the settlement process. Legal fees for buying a section typically range from $1,500 to $3,000, excluding GST.
Tip: Engage qualified professionals to conduct these investigations. Don’t cut corners on due diligence, as it can save you significant costs and headaches in the long run. Factor in the costs of these reports when calculating your overall budget.
Development Contributions
Local councils often charge development contributions to fund the infrastructure needed to support new subdivisions. These contributions can cover costs related to roads, water supply, sewage disposal, and community facilities. The amount of development contributions varies depending on the location, the type of development, and the council’s policies. In Auckland, for example, development contributions can range from $10,000 to $50,000 or more per section. These costs are typically passed on to the buyer, either directly or indirectly through the purchase price of the section. The development contributions are often specified within the LIM report and usually paid at the time of building consent application. However, be aware that in some instances these figures may increase depending on the build-type, (e.g larger than average dwelling) and will need to be re-calculated.
Tip: Clarify whether development contributions are included in the purchase price of the section. If not, factor them into your budget. Contact the local council to obtain an estimate of the development contributions payable for your proposed development.
Site Preparation Costs
Preparing a section for building can involve significant costs, particularly if the site is uneven, unstable, or has existing structures that need to be removed. Site preparation costs can include:
- Earthworks: This involves leveling the site, removing topsoil, and compacting the ground. Earthworks costs can vary widely depending on the amount of excavation and fill required.
- Retaining Walls: If the site has significant slopes, retaining walls may be necessary to prevent erosion and create level building platforms. Retaining wall costs can be substantial, depending on the height and length of the walls.
- Demolition: If there are existing structures on the site, such as old sheds or fences, they will need to be demolished and removed. Demolition costs can range from a few hundred dollars to several thousand, depending on the size and complexity of the structures.
- Service Connections: Connecting the section to essential services, such as water, sewage, and power, can involve significant costs, especially if the connections are located far from the building site.
Tip: Obtain quotes from experienced contractors for site preparation works. Consider the potential for unexpected costs, such as encountering underground utilities or contaminated soil. Factor these costs into your overall budget.
Building Consent Fees
Before starting construction, you’ll need to obtain a building consent from the local council. Building consent fees vary depending on the size and complexity of the project, but can typically range from $2,000 to $10,000 or more. These fees cover the cost of processing your application and carrying out inspections during construction. Failure to obtain a building consent can result in fines and legal action. Bear in mind that delays in the processing of consents is a common occurrence, so factor that into your plans.
Tip: Familiarize yourself with the building consent process and requirements in your area. Consult with a building consent consultant or architect to ensure that your plans comply with the building code. Factor building consent fees into your budget.
Case Studies: Real-World Examples
To illustrate the practical implications of different lot types and buying considerations, let’s examine a couple of case studies.
Case Study 1: First-Time Buyer in Auckland
Sarah, a first-time home buyer in Auckland, was looking for an affordable section to build her dream home. She initially focused on sections in new subdivisions on the city’s outskirts. While these sections were relatively affordable, she discovered that they were subject to strict building covenants and significant development contributions. After careful consideration, Sarah decided to purchase a slightly smaller, freehold section in an established suburb. Although the section was more expensive, it offered greater flexibility in terms of building design and avoided the significant development contribution costs. Also, existing infrastructure decreased the challenges in connecting to the utility grid.
Takeaway: Don’t be solely driven by the initial purchase price. Consider the long-term costs and restrictions associated with different lot types before making a decision.
Case Study 2: Lifestyle Block Purchase in Waikato
John and Mary, retirees seeking a rural lifestyle, purchased a 5-hectare lifestyle block in the Waikato region. They were attracted by the space, privacy, and potential for gardening and animal husbandry. However, they soon discovered that maintaining the property was more demanding and costly than they had anticipated. Fencing repairs, weed control, and pasture management proved to be time-consuming and physically challenging. They also underestimated the cost of establishing and maintaining a vegetable garden and keeping livestock. Council rates were also much higher than they were used to.
Takeaway: Thoroughly assess your capabilities and resources before committing to a lifestyle block. Consider the ongoing costs and responsibilities associated with rural property ownership.
FAQ Section
What is the difference between a section and a lot?
In New Zealand, the terms “section” and “lot” are often used interchangeably to refer to an individual piece of land within a subdivision. While there may be subtle differences in usage depending on the context, they generally mean the same thing.
What is a Land Information Memorandum (LIM) report and why is it important?
A Land Information Memorandum (LIM) report is a comprehensive document provided by the local council that contains information about a specific property. It includes details on zoning, drainage, building consents, potential hazards, and any other relevant issues. Obtaining a LIM report is crucial for identifying potential problems or restrictions that could affect your use or development of the land. This is arguably one of the most important due diligence steps when buying.
What are development contributions and how much do they cost?
Development contributions are fees charged by local councils to fund the infrastructure needed to support new subdivisions. The amount of development contributions varies depending on the location, the type of development, and the council’s policies. In Auckland, development contributions can range from $10,000 to $50,000 or more per section. These contributions are typically paid by the developer and passed on to the buyer through the purchase price of the section.
What is a covenant and how can it affect my building plans?
A covenant is a legally binding agreement registered on the title of a property that restricts what you can do with the land. Covenants can dictate the style of house you can build, the types of materials you can use, or even the landscaping requirements. Carefully review any covenants listed on the property title before making an offer and understand the restrictions they impose on your building plans.
What is an easement and how can it affect my property?
An easement grants another party the right to use a portion of your land for a specific purpose, such as a right of way for a neighbor or a drainage easement for the council. An easement can impact your ability to build on a specific part of your section or restrict certain activities. However, it does not grant ownership of the easement area to the other party. A LIM report will typically disclose any registered easements.
Is it better to buy a section in a new subdivision or an established area?
Both new subdivisions and established areas have their pros and cons. New subdivisions often offer modern infrastructure, design standards, and community amenities, but may also be subject to strict building covenants and development contributions. Established areas may offer greater flexibility in terms of building design and avoid development contribution costs, but the infrastructure may be older and the sections may be smaller or irregularly shaped. The best option depends on your individual needs, preferences, and budget. Often, the established areas have better access to community ammenities like parks and schools, as well as being closer to existing businesses.
References
- Resource Management Act 1991
- Land Information New Zealand (LINZ)
- Auckland Council District Plan
- Local Government Act 2002
Ready to take the next step in your land buying journey? Finding the perfect section in New Zealand requires careful research and planning. Don’t face the complexities alone. Contact a local real estate expert today for personalized guidance and expert advice tailored to your specific needs. By gathering expert input, you’ll reduce the risk, and avoid making a costly mistake. Seize your land opportunity confidently!
