Legal Structure for Group Property Investment in New Zealand

Group property investment involves two or more people pooling funds to purchase real estate together. In New Zealand, this approach is often used by investors or first-home buyers seeking to share deposit requirements, lending obligations, and ongoing costs.

The main legal structures for group property investment

The legal structure chosen affects ownership rights, personal liability, tax treatment, and how easily investors can enter or exit the arrangement. Understanding these structures upfront helps groups choose an option that aligns with their goals and risk tolerance, especially when considering the broader rules and practical realities outlined in shared property ownership in New Zealand.

The table below outlines the most common legal structures used for group property investment in New Zealand and highlights how they differ in practice.

Structure	Who owns the property	Liability	Tax treatment	Ease of exit	Common use case
Co-ownership (personal names)	Individuals are listed directly on the title	Joint and several liability. Each owner can be responsible for the full mortgage	Income and expenses taxed at each owner’s personal tax rate. Bright-line may apply on share transfers	Harder. Requires title changes and often refinancing	Small groups, friends or family buying one property
Look-through company (LTC)	The company owns the property. Investors hold company shares	Limited liability in theory, but banks usually require personal guarantees	Profits and losses flow through to shareholders at personal tax rates	Easier. Shares can be sold, subject to lender approval	Investor groups planning multiple properties or flexible ownership
Trust	Trustees own the property on behalf of beneficiaries	Liability sits with trustees. Guarantees are often required for lending	Income can be distributed to beneficiaries or taxed at trustee rate	Harder. Beneficiaries do not own transferable shares	Family groups, long-term holding, asset protection
Unit trust	Trust owns the property. Investors hold units representing a proportional interest	Varies by structure. Often requires guarantees for lending	Income distributed per unit holdings	Moderate. Units can be transferred under the trust rules	Larger or structured group investments

Co-ownership in personal names

The simplest structure for group property investment is co-ownership, where all investors are listed on the property title in their personal names. In New Zealand, this can be set up as either joint tenancy or tenants in common.

Joint tenancy

Under a joint tenancy, all owners collectively own the entire property. Individual shares are not recorded. A defining feature is the right of survivorship, meaning if one owner dies, their interest automatically passes to the remaining owners rather than through their estate. This structure is commonly used by couples but is less common for unrelated investors.

Tenants in common

Under a tenants in common arrangement, each owner holds a defined share of the property, which can be equal or unequal. If an owner dies, their share passes according to their will. This structure is widely used by friends, siblings, or investment partners because it allows ownership to reflect differing financial contributions.

Key considerations

All co-owners are named on the title and, if the property is mortgaged, on the loan. Most New Zealand lenders apply joint and several liability, meaning each borrower remains responsible for the full loan amount if other parties are unable to meet repayments.

Profits and expenses are taxed at each owner’s personal income tax rate in proportion to their ownership share. Any transfer of an ownership share is treated as a disposal for tax purposes and may trigger bright-line tax, depending on the acquisition date and circumstances.

Co-ownership agreements are commonly used to document contributions, decision-making processes, dispute resolution, and exit provisions when starting a property investment group in New Zealand.

Look-through companies (LTCs)

A look-through company is a commonly used structure for small group property investments. An LTC is a limited liability company for legal purposes, but for tax purposes its income and losses flow through directly to the shareholders.

How an LTC works

The company owns the property, and investors hold shares reflecting their economic interest. Rental income, expenses, and losses are attributed to shareholders in proportion to their shareholding and taxed at their personal rates.

Although the company provides limited liability in theory, lenders typically require personal guarantees from shareholders. As a result, personal exposure often remains similar to direct co-ownership for lending purposes.

Advantages of an LTC

An LTC allows ownership interests to be transferred by selling shares rather than transferring the property title. This can simplify investor exits or changes in ownership, subject to lender approval.

LTCs can be suitable for groups planning to hold multiple properties or adjust ownership proportions over time, provided compliance requirements are met.

Limitations of an LTC

LTCs involve higher setup and ongoing compliance costs, including annual filings and financial reporting. Ownership is generally limited to a small number of shareholders, which can restrict scalability.

Tax rules for LTCs are more complex and usually require professional advice to administer correctly.

Trust structures

Trusts are commonly used in New Zealand for asset protection and estate planning. In a trust structure, trustees hold property on behalf of beneficiaries rather than individuals owning defined shares directly.

Use in group investments

Trusts are typically used for family-sized groups rather than unrelated investors due to the concentration of control in the trustees. For unrelated parties, a standard trust may lack clarity around individual ownership rights.

Some larger investment arrangements use unit trusts, where investors hold units representing proportional interests. These structures are more complex and often subject to additional regulatory requirements.

Advantages of trusts

Trusts can provide asset protection and continuity of ownership over long periods. Income can be distributed among beneficiaries in line with the trust deed, which may offer tax planning flexibility in some circumstances.

Limitations of trusts

Trusts have higher establishment and maintenance costs and are governed by the Trusts Act 2019, which places ongoing duties on trustees. Exiting a trust structure can be difficult, as beneficiaries do not hold a direct, transferable ownership interest.

Transferring property into or out of a trust may trigger tax consequences, including potential bright-line implications.

Key considerations when choosing a structure

When deciding on a legal structure, groups should consider:

• Investment timeframes: Different expectations around holding or selling can affect suitability

• Financing: Lenders assess all individuals behind a structure, regardless of entity

• Costs and administration: More complex structures carry higher setup and compliance costs

• Exit mechanisms: Some structures allow ownership changes more easily than others

• Regulatory considerations: Larger groups or passive investor arrangements may fall under financial markets regulation

The most appropriate structure depends on the size of the group, the nature of the investment, and the level of flexibility required.

Summary

There is no single legal structure that suits every group property investment in New Zealand. Co-ownership offers simplicity, LTCs provide administrative flexibility for smaller investor groups, and trusts may suit longer-term or family-based arrangements.

What matters most is that all participants understand how their chosen structure affects liability, tax, and exit rights. Documenting expectations at the outset and choosing a structure aligned with group objectives helps reduce disputes and unintended consequences over time.

Legal disclaimer: This article provides general information only and does not replace personalised legal or financial advice.