Land Transfer Act 2017

Wednesday 28 November, 2018

The Land Transfer Act 2017 came into force on 12 November 2018.  It is a significant rewrite of important Property Law legislation – but what impact does it have on local authorities?

There is a lot of new terminology.  The Act introduces the concept of a Record of Title which replaces what was previously referred to as a Certificate of Title or, since the introduction of Landonline, a Computer Register.

In keeping with a desirable trend towards modern plain English in legislation drafting, the previous concept of Registered Proprietor has been replaced with Registered Owner.

Dominant and Servient Tenements are gone and replaced with Benefited Land and Burdened Land respectively.

These changes in terminology will need to be borne in mind by Council officers, particularly in the planning arena – many district plans have references to Certificates of Title, and while the definitions under the 1952 Land Transfer Act will remain available to support these references, consideration will need to be given in the context of changes to and reviews of district plans as to what terminology should be used, and what it will mean.

The most helpful change for territorial authorities brought by the Land Transfer Act 2017 is the introduction, of the concept of covenants in gross. There are many situations where Councils wish to have a restriction noted on the title to a property to protect an arrangement made by a landowner with the Council.

If these arrangements were not able to neatly fit within the provisions of a consent notice, bond or covenant under the Resource Management Act, a Memorandum of Encumbrance (or more recently an Encumbrance Instrument) was registered against the land to give notice of the arrangement in a way that was legally binding and enforceable on both current and future owners of the land.

Encumbrance Instruments are correctly categorised being similar to mortgages, and as a result, have often proved troublesome to property lawyers when dealing with competing priorities for bank finance. Councils have properly required Encumbrance Instruments to be registered as a first charge, and therefore they would rank ahead in priority to the bank security.

Under the 2017 Act, a covenant in gross may be registered against the title to any land in favour of any person – including a Council.

Such a covenant does not contain a power of sale or any of the other usual characteristics of a mortgage, but the terms of the covenant are enforceable against the current and future registered owners of the land.

We anticipate that covenants in gross will largely replace encumbrances in the armoury of legal tools available to territorial authorities, although there will be some circumstances when encumbrances will remain relevant – particularly where a financial consequence payable to Council is desirable.

For assistance with questions relating to the new Land Transfer Act 2017 please contact Peter Duncan.