I'm a typical, struggling first home buyer in Christchurch and have been offered a tempting parcel of gifted land at no cost at the back of my parents 721 sq meter section. It would be walkway access only, yet there is shared parking on the front section.

I would like to build a 2 bedroom, full kitchen and bathroom house as a "Minor Residential Unit" as according to the Chch City Council regulations which allows a single story 5.5m height dwelling of up to 80 sq meters and create separate access as a walkway easement. I am looking at Versatile to build it.

My questions are, as the land is legally not in my name would I be able to get a mortgage and use my Kiwisaver to build this or would the land need to be subdivided and changed into my name first? Can a property lawyer draw up a contract which states the section of land I will own and the property to be built on it will be legally mine to appease the bank without first subdividing?

The council states that second dwelling "minor residential units" can be subdivided post build. I'm aware that technically my build would belong to my parents as it is on their title of land unless some legal contract can state otherwise. I'm just really unsure as to how this would work as a first home buyer / builder mortgage / Kiwisaver wise.

Any advice greatly appreciated.

mags_may - 2021-05-08 15:25:00

You could start by talking to your Kiwisaver provider. Might help, might not but worth a try.

artemis - 2021-05-08 16:22:00

No bank will give you a mortgage on a building where they do not have a lien over the title to the land under it.

A "property lawyer draw up a contract which states the section of land I will own", yes, it is called sub-dividing to give you/the bank title.

Edited by tony9 at 5:30 pm, Sat 8 May

tony9 - 2021-05-08 17:29:00

Waits for Jeff to join the chat.

ttaotua1 - 2021-05-08 17:48:00

tony9 wrote:

No bank will give you a mortgage on a building where they do not have a lien over the title to the land under it.

A "property lawyer draw up a contract which states the section of land I will own", yes, it is called sub-dividing to give you/the bank title.

a security not a lien

gabbysnana - 2021-05-08 19:15:00

The member deleted this message.

ash4561 - 2021-05-08 19:34:00

Is it an option for parents to build the new unit and rent it to you? Renting to family is exempted from the Residential Tenancies Act (makes life way simpler), and something around market rent needs to be paid. May be eligible for Accommodation Supplement. A plan would then be for some of the rent to be saved to subdivide later, followed by sale to the first home buyer! Sort of rent to buy.

Can work well, just need all to agree and do the right sums.

artemis - 2021-05-08 19:35:00

Jeff will be able to contribute no doubt but you will probably need to subdivide first unless you are going in with a tiny loan-to-value ratio.

The bank needs an asset they can foreclose on and sell if they need to and they can't do that to your house if it's on land they don't have legal right to. If not subdivided the bank will need security on the entire property including your parents house so they can sell the lot to recover costs if your loan goes bad.

Edited by esprit at 8:01 pm, Sat 8 May

esprit - 2021-05-08 20:00:00

Without proper access to the rear section, subdivision may not even be permitted. OP would need to confirm with the council before going any further.

sparkychap - 2021-05-08 20:08:00

tony9 wrote:

No bank will give you a mortgage on a building where they do not have a lien over the title to the land under it.

A "property lawyer draw up a contract which states the section of land I will own", yes, it is called sub-dividing to give you/the bank title.

A mortgage is a security document over land (not the house but it is valued) and only the land owners can do that.

Edited by amasser at 8:13 am, Sun 9 May

amasser - 2021-05-09 08:11:00

Hi mags_may,

As others have said you can't get a mortgage on a piece of land you don't own so the only way of doing this is to become co-borrower with your parents and the whole Title changes. This can have a major impact on them and any other family member so a visit to the lawyer is highly recommended. Then there is the issue of access, the Council would be my port of call there and get advice from them directly. Kiwisaver is a grey area here as it would be your first home yet the Title would be in shared names, again I'd be speaking with your KS provider once the first two items are in place. Hope that helps and good luck!

jeffqv - 2021-05-10 18:09:00

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kittycatkin - 2021-05-10 18:25:00

kittycatkin wrote:

Could the land be put in your name ?

This could save trouble in the future, Even if you paid a purely token amount like $1, it would mean that the land the house was on was legally yours and you could sell the house and land if you ever needed to.

The cost to have a lawyer do this can be as little as $250. It could be worth it.

Hmmmm not sure what her parents would say when she sells their house....

sparkychap - 2021-05-10 18:36:00

The other big issue is that even if you are allowed to subdivide, you may no longer be allowed to build a "minor residential dwelling" as you can only build those on land which already has a major dwelling on.

sparkychap - 2021-05-10 18:55:00

kittycatkin wrote:

Could the land be put in your name ?

This could save trouble in the future, Even if you paid a purely token amount like $1, it would mean that the land the house was on was legally yours and you could sell the house and land if you ever needed to.

The cost to have a lawyer do this can be as little as $250. It could be worth it.

no lawyer would do that because the lawyer for the parents would not allow it.

gabbysnana - 2021-05-10 19:06:00

You can't subdivide land that has no access. Foot access via an easement is not access. Access means vehicle access. Subdividing is many tens of thousands of dollars... putting in services (power, water, sewer, phone) is massive, contributions for connecting to services (to contribute to infrastructure) water alone can be $15k, contribution for "community assets" like parks and toilets and land care etc etc, I paid like $38k in Rolleston. Then you have surveyor fees, ground engineering fees, fencing, lawyers, Land registration, valuations so council can work out their cut and it just goes on forever. Cost me between $70k -$90k per section just to subdivide. Subdividing is profitable but it's done with cash or bridging type loans etc as you can't mortgage yourself for Subdividing. Title takes up to a year. And sparky is right, a minor dwelling can't be built on a section without a major dwelling. If this could be done with only walk on access, parents everywhere would be offering their backyards to their children.

Edit: Jeff I'm sure you can show there are other types of loans developers use, I was just stating one basic type.

Edited by oakcottage at 7:42 pm, Mon 10 May

oakcottage - 2021-05-10 19:40:00

sparkychap wrote:

Without proper access to the rear section, subdivision may not even be permitted. OP would need to confirm with the council before going any further.

Even the build would be a nightmare with no vehicle access, every delivery would be crane or large hiab.

mrcat1 - 2021-05-10 20:07:00

kittycatkin wrote:

Could the land be put in your name ?

This could save trouble in the future, Even if you paid a purely token amount like $1, it would mean that the land the house was on was legally yours and you could sell the house and land if you ever needed to.

The cost to have a lawyer do this can be as little as $250. It could be worth it.

Even if it was a good idea, why sell for $1.00? Why not gift?

Btw, Inland Revenue will treat the transfer at market value.

johnston - 2021-05-11 06:45:00

oakcottage wrote:

You can't subdivide land that has no access. Foot access via an easement is not access. Access means vehicle access. Subdividing is many tens of thousands of dollars... putting in services (power, water, sewer, phone) is massive, contributions for connecting to services (to contribute to infrastructure) water alone can be $15k, contribution for "community assets" like parks and toilets and land care etc etc, I paid like $38k in Rolleston. Then you have surveyor fees, ground engineering fees, fencing, lawyers, Land registration, valuations so council can work out their cut and it just goes on forever. Cost me between $70k -$90k per section just to subdivide. Subdividing is profitable but it's done with cash or bridging type loans etc as you can't mortgage yourself for Subdividing. Title takes up to a year. And sparky is right, a minor dwelling can't be built on a section without a major dwelling. If this could be done with only walk on access, parents everywhere would be offering their backyards to their children.

Edit: Jeff I'm sure you can show there are other types of loans developers use, I was just stating one basic type.

But in this case subdividing may be unnecessary if another house can be built without it.

committed - 2021-05-11 07:14:00

committed wrote:

But in this case subdividing may be unnecessary if another house can be built without it.

But in this case the OP wants to “get a mortgage and use my Kiwisaver to build this” which would be impossible without clear title to the house and land.

Edited by sparkychap at 7:34 am, Tue 11 May

sparkychap - 2021-05-11 07:34:00

sparkychap wrote:

But in this case the OP wants to “get a mortgage and use my Kiwisaver to build this” which would be impossible without clear title to the house and land.

The OP asked about options. Getting a mortgage may not be the best option, especially if it is unnecessary.

committed - 2021-05-11 13:32:00

sparkychap wrote:

But in this case the OP wants to “get a mortgage and use my Kiwisaver to build this” which would be impossible without clear title to the house and land.

And you quoted out of context. The OP asked if they could get a mortgage, not that they wanted to get one. They want a house!

committed - 2021-05-11 13:34:00

committed wrote:

And you quoted out of context. The OP asked if they could get a mortgage, not that they wanted to get one. They want a house!

No one wants a mortgage, but it's pretty clear to me that the OP knows they will need one, hence the questions around ownership of land. Argue semantics if you want with someone else.

Edited by sparkychap at 2:45 pm, Tue 11 May

sparkychap - 2021-05-11 14:45:00

committed wrote:

But in this case subdividing may be unnecessary if another house can be built without it.

Yes but op was asking about mortgaging the house to be built. Parents could build a minor dwelling and THEY get a mortgage, but op can't mortgage against the house if they don't subdivide, which they can't anyway as there's no vehicle access to the back section.

oakcottage - 2021-05-11 15:09:00

sparkychap wrote:

No one wants a mortgage, but it's pretty clear to me that the OP knows they will need one, hence the questions around ownership of land. Argue semantics if you want with someone else.

It’s not semantics if they don’t qualify for a mortgage, and even Jeff suggested they probably wouldn’t be able to get one. But if the parents come to the party, a mortgage could be redundant.

Edited by committed at 5:59 pm, Tue 11 May

committed - 2021-05-11 17:58:00

oakcottage wrote:

Yes but op was asking about mortgaging the house to be built. Parents could build a minor dwelling and THEY get a mortgage, but op can't mortgage against the house if they don't subdivide, which they can't anyway as there's no vehicle access to the back section.

But you are missing the point- a mortgage isn’t the only option. I think the OP wants options as to what they can do, not what they can’t do.

committed - 2021-05-11 18:01:00

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kittycatkin - 2021-05-11 18:08:00

The member deleted this message.

kittycatkin - 2021-05-11 18:11:00

committed wrote:

But you are missing the point- a mortgage isn’t the only option. I think the OP wants options as to what they can do, not what they can’t do.

I didn't miss the point...OP clearly asks, paragraph 3 of #1 can they get a mortgage and do they have to subdivide. Seems almost everyone has been giving their views on this. Including me. They also stated "any advice".

Edited by oakcottage at 7:13 pm, Tue 11 May

oakcottage - 2021-05-11 19:12:00

kittycatkin wrote:

If it's been sold, it can avoid legal difficulties in the future. It means that the person is the legal owner. The parents might not always want to live there for some reason. There's a reason for the sale at a token price.

If one party or the other wanted to sell and move, it might turn messy if the legal things aren't sorted. It might be difficult to sell a house if the ownership of the land is in doubt.

If the house was gifted there would still be a new legal owner. Selling for $1 offers no more protection than gifting. Inland Revenue will view the transfer at market value.

johnston - 2021-05-11 19:30:00

johnston wrote:

If the house was gifted there would still be a new legal owner. Selling for $1 offers no more protection than gifting. Inland Revenue will view the transfer at market value.

But how can they sell or gift the minor dwelling if it's not on it's own title?

oakcottage - 2021-05-11 19:34:00

oakcottage wrote:

But how can they sell or gift the minor dwelling if it's not on it's own title?

It cannot be. I was responding to a post claiming the land should be sold for $1.00.

Edited by johnston at 8:20 pm, Tue 11 May

johnston - 2021-05-11 20:18:00

committed wrote:

It’s not semantics if they don’t qualify for a mortgage, and even Jeff suggested they probably wouldn’t be able to get one. But if the parents come to the party, a mortgage could be redundant.

Yes and a number of people have given some options. I haven't seen yours though.

sparkychap - 2021-05-12 06:56:00

kittycatkin wrote:

I know some people who did just that. The mother subdivided the section. In fact, I know two people who've done it. You don't know the people in this case, so you can't possibly know what they would do. Subdivision is legal. Why do you think that a lawyer wouldn't do something so common?

But you originally didn't say anything about subdividing, just putting the land in the OPs name. Its unlikely that any sane lawyer would recommend that as it likely isn't in the parents interests.

sparkychap - 2021-05-12 06:59:00

oakcottage wrote:

I didn't miss the point...OP clearly asks, paragraph 3 of #1 can they get a mortgage and do they have to subdivide. Seems almost everyone has been giving their views on this. Including me. They also stated "any advice".

And the answers are: they may not need to get a mortgage or subdivide.

committed - 2021-05-12 10:37:00

sparkychap wrote:

But you originally didn't say anything about subdividing, just putting the land in the OPs name. Its unlikely that any sane lawyer would recommend that as it likely isn't in the parents interests.

Only the parents would know what is in their interests, and I’m sure a lawyer would act on the parents’ instructions as long as they weren’t trying to contract out of the law.

committed - 2021-05-12 10:40:00

committed wrote:

Only the parents would know what is in their interests

Not necessarily, that's what the lawyer is for, otherwise we'd never need professional advice.

sparkychap - 2021-05-12 10:48:00

committed wrote:

Only the parents would know what is in their interests, and I’m sure a lawyer would act on the parents’ instructions as long as they weren’t trying to contract out of the law.

The parents are highly unlikely to be aware of all the implications of transferring title. Just a couple for example, a PRA claim, the transfer treated as market value and thus avoidance.

johnston - 2021-05-12 11:34:00

johnston wrote:

The parents are highly unlikely to be aware of all the implications of transferring title. Just a couple for example, a PRA claim, the transfer treated as market value and thus avoidance.

That’s true but transferring title may be irrelevant in this case. But it’s worth discussing with a lawyer the various pros and cons of whatever the OP and parents want to do or the options available to them.

committed - 2021-05-12 12:25:00

oakcottage wrote:

You can't subdivide land that has no access. Foot access via an easement is not access. Access means vehicle access.

Are you sure? There are heaps of back sections in Wellington with walk-on access only. Wouldn't it depend on the city and their district plan requirements?

luteba - 2021-05-12 12:32:00

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kittycatkin - 2021-05-12 12:33:00

This message was deleted.

kittycatkin - 2021-05-12 12:35:00

kittycatkin wrote:

I know some people who did just that. The mother subdivided the section. In fact, I know two people who've done it. You don't know the people in this case, so you can't possibly know what they would do. Subdivision is legal. Why do you think that a lawyer wouldn't do something so common?

and your nose is as long as Pinocchio,s.

gabbysnana - 2021-05-12 12:38:00

kittycatkin wrote:

It should be obvious that the land was the land the OP's house would be on, the 721 sm or whatever it was, I didn't think of spelling it out. It shouldn't be necessary.

Yes the 721m2 also has the parents house on it, so put that in her name and she can sell the parents. And their house.

sparkychap - 2021-05-12 12:54:00

kittycatkin wrote:

It should be obvious that the land was the land the OP's house would be on, the 721 sm or whatever it was, I didn't think of spelling it out. It shouldn't be necessary.

Right, so the parents would be homeless and broke. Sounds like a great plan.

johnston - 2021-05-12 12:57:00

committed wrote:

That’s true but transferring title may be irrelevant in this case. But it’s worth discussing with a lawyer the various pros and cons of whatever the OP and parents want to do or the options available to them.

But why discuss it with a lawyer, surely the lawyer would just act on the parents’ instructions as long as they weren’t trying to contract out of the law.

sparkychap - 2021-05-12 13:05:00

Wasn't Tamatea (HB) on 100yr lease from the port of Napier?
Houses were built there with loans and the home owner didn't own the land?

smallwoods - 2021-05-12 13:50:00

smallwoods wrote:

Wasn't Tamatea (HB) on 100yr lease from the port of Napier?
Houses were built there with loans and the home owner didn't own the land?

The leaseholder owns the leasehold estate. I don't think creating a leasehold interest here would be in anyone's best interests.

johnston - 2021-05-12 14:01:00

Land transferred to child (op). Op has a creditor and a relationship claim and loses the land. Meanwhile parents are homeless, broke and ineligible for rest home subsidies because the transfer is treated as being at market value.

Brilliant scheme.

johnston - 2021-05-12 14:04:00

johnston wrote:

Land transferred to child (op). Op has a creditor and a relationship claim and loses the land. Meanwhile parents are homeless, broke and ineligible for rest home subsidies because the transfer is treated as being at market value.

Brilliant scheme.

Agreed, some people just don't listen.

jeffqv - 2021-05-12 17:41:00