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Entitled to a Title Without Subdivision Consent?

We are aware of a number of instances where interests in camping grounds and other areas have been sold with a “title” based on a licence to occupy a specified portion of land as shown on a plan secured by an encumbrance and a share in the land as a tenant in common with other owners, or similar arrangements.

In the recent decision of Re Spark New Zealand Trading Ltd (“Spark”) involving the sale of land under an agreement for sale and purchase (“the agreement”) where covenants were attached to the agreement, two judges of the Environment Court had to decide whether the agreement, together with the proposed transfer of a share in the land as tenant in common, constituted a sub-division of the land.

The Court made the following declarations:

  • The Property Arrangements constitute a subdivision within the meaning of section 218 of the Resource Management Act 1991 (“the Act”).
  • Subdivision of the land does not come within the exceptions to the prohibitions on subdivision in section 11(1)(a) of the Act.
  • Subdivision of the land is not effected by any of the triggers in section 11(b) to (d) of the Act.

The Court further stated that it was “clear from the documentation that there is a division of the allotment".

The "arrangements" in Spark and in our view similar arrangements for the division of land, fall under the term "subdivision" in section 218(1)(ii) of the Act"…by way of sale or offer for sale of the fee simple to part of the allotment”, as that is defined in the Act.

Section 11 of the Act concludes that unless the subdivision is expressly allowed by rules, in both the operative and proposed district plans, resource consent is necessary.  Whether a subdivision is “expressly allowed” is a matter of construction of the plans in question.  The consent must be clear and explicit in permitting the activity, which would otherwise infringe on the relevant rule or rules in the district plan or proposed district plan.

A key factor in Spark is that the arrangement clearly shows an intention to have a subdivision.

The Court referred to the following factors in reaching that conclusion:

  • An agreement for sale and purchase indicating an intent to create a separate allotment.
  • That is to be supported by a consequent survey and deposition of plan.
  • That the transfer as to tenants in common is to be in shares to which that area bears to the total area of the land.
  • That the covenants [attached to the agreement for sale and purchase] divide the operational responsibility for the areas as a matter of fact. 

The Court established that:

Critically, all of these arrangements require division of the allotment into the parts shown on the Plan. They require that to be surveyed and deposited with LINZ, creating a new allotment under s 218(2) of the RMA. Without that, the balance of the Arrangement could not occur. In short, division is at the heart of the disposition by agreement for sale signed by the parties”.

and held the arrangements

…involve the partitioning of the land, the creation of a new allotment being part of the existing Allotment, and different rights attracting to each part. It is founded, essentially, upon the plan agreed and the subsequent survey and deposited plan. It intends that these be registered with LINZ and that certificates of title be issued”.

The decision in Spark does not, of itself, upset arrangements similar to those discussed in theSpark decision.  However, Councils of their own initiative, or at the urging of affected parties, could now review such arrangements where they do not comply with their district plan and Council could take enforcement action to dismantle the "titles" and/or require that subdivision consent be applied for.

Disclaimer
This information is intended to be general in nature.  You are strongly recommended to seek your legal advice in relation to the matters dealt with here.

@ Brookfields Lawyers 2016.  All rights reserved

 

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