Published: Wed, Mar 13th, 2019 by Amy Christie
Cross leases were originally developed in the 1960s as a way of getting around restrictive subdivision requirements and saved developers in cost and time. They have however been labelled New Zealand’s “greatest conveyancing issue”. A majority of the remaining cross leases are located in Auckland.
If you have a property with a cross lease title, together with the other owners of the cross lease title, you own undivided shares as tenants in common in the underlying land. You then ‘lease’ your separate dwelling or flat on the land from all owners (usually for 999 years in perpetuity).
Because of this dual nature of land ownership, you will have limited rights as the owner of a cross lease property. You will most likely need to get the consent of the other owners if you want to make any improvements to your property (e.g .build an extension to your house or add a garage). Often we find that this can lead to significant and expensive disputes between owners.
A fee simple title (this is where you own the whole of the property), on the other hand, gives you absolute ownership over both your land and dwelling so you can alter or make additions without having to get your neighbour’s consent (subject to local bylaws and legal requirements).
So, What Can I Do?
It is possible to convert your cross lease title to fee simple, although this does involve time and expense and will require Resource Consent. However, a recent ruling in the Environment Court, directed that local councils are to “approach an application mindful of the possibility that there may be few, if any, material environmental implications warranting a full-scale assessment of the property as if it were a new development”. In other words, Councils were directed not to overcomplicate such applications.
All owners of the cross lease title will have to agree to the conversion, however this means that you will all benefit from the results, including being able to share the costs of the conversion.
Why Would I Convert my Property to Freehold?
Simply put, if two identical properties were being marketed, one on a cross lease and the other a fee simple title, the fee simple title would most likely always look more attractive to buyers and therefore reach higher sale figures than the cross lease.
In addition, the Auckland Unitary Plan may allow for further development potential. Depending on the size of your share of that land, you may be able to construct two or more townhouses in place of that one dwelling.
Other benefits include:
- You will not be a co-owner of the land with other people who can then make it difficult if you wish to undertake additions or alterations; and
- When selling you will not get drawn into any argument as to whether your title may be defective or not. This can happen if the plan which accompanies the title of your property does not show the correct outline of your dwelling or is missing another building (e.g. a garage) which was constructed later than the dwelling;
Ultimately, as owner of your own land you have the highest degree of freedom of use and ownership.
Ok, What Do I Do Now?
First, talk to your neighbours to find out whether they would also be interested in gaining the benefits from the title conversion. It is always easier working together as a team.
The next step is to engage a Surveyor who will visit the site and gather information on access, drainage, position of existing dwellings and any other features that are necessary to effect the change.
An Engineer will review and report on the existing infrastructure to see whether any separation of services are required (this includes sewage, water supply and stormwater drainage).
Your Surveyor will then prepare a Resource Consent application for approval by your local Council.
The Council may set conditions on the consent that requires improvements to be undertaken to the existing infrastructure.
Once these works are completed the Surveyor will complete the Survey Plan and apply for the final certification required.
Your trusted solicitor will then take over from here to work with the Surveyor and lodge the documents with Land Information New Zealand to obtain the new fee simple titles.
We can help
We regularly advise clients in relation to cross leased properties and the possibility of converting titles to fee simple. Please contact our resident expert, Amy Christie if you require assistance.