Cross Lease Series (Vol.2)
My Cross Lease Neighbour Wants To Build Up
If a second storey is proposed, who owns the airspace and what can each owner do?
Cross lease ownership can feel much like owning an ordinary house until somebody wants to change the building. Legally, however, a cross lease is quite different from owning a separate fee simple lot. Each owner usually owns a share of the underlying land together with the other owners, while separately holding a long-term lease of their particular flat.
That distinction becomes important when one owner wants to add a second storey. The developing owner may think, "it is above my house, so I should be able to build there". The neighbouring owner may think, "we are on a cross lease, so I can simply say no". Neither proposition is a safe starting point.
The Court of Appeal decision in Liow v Martelli [2026] NZCA 101 gives useful guidance on the ownership of the airspace, the consent process and when consent can reasonably be withheld. The first step in every case is still to read the particular record of title, flats plan and memorandum of lease.
1. Why is a cross lease different from a freehold title?
With an ordinary fee simple title, the owner generally owns the defined parcel of land shown on the survey plan. A cross lease works differently. A typical owner has an undivided share in the underlying fee simple land as a tenant in common with the other owners, and a leasehold estate in the particular dwelling shown on the cross lease plan.
An exclusive or restricted use area may give one owner private use of a garden, courtyard or other part of the site, but it does not convert that area into a separately owned fee simple lot. Cross lease owners therefore need to look not only at where a fence or house physically sits, but also at what the lease actually demises and what rights remain shared.
2. The scenario: your neighbour wants to add a second storey
Assume there are two homes on a cross lease. Both were originally single storey. One owner now wants to add bedrooms and living space above the existing roofline. New windows or a balcony may overlook the neighbouring property, and the overall height and bulk of the building will change.
For the owner proposing the work, the question is whether the existing cross lease gives them the right to extend the flat upwards. For the neighbour, the questions are whether their consent is required, what concerns they are entitled to raise, and whether they can refuse the proposal.
3. Who owns the space above the roofline?
Liow v Martelli confirms a point that is not always obvious to owners: unless the particular cross lease says otherwise, the lease is ordinarily of the physical building that forms the flat. The land beneath the flat and the airspace above it remain part of the common property owned by the underlying owners together.
So neither owner usually has exclusive ownership of the airspace above the existing roofline. Building a new storey is not simply using empty space already contained within the existing lease. It extends the physical dimensions of the flat vertically into space outside the existing leasehold boundary.
That is also why a second storey can be different from a detached garage or other independent improvement on an exclusive use area. Liow recognises that not every improvement on cross lease land must form part of the leased flat. But where an alteration changes the dimensions of the flat itself, horizontally or vertically, the registered cross lease structure must be addressed.
4. What did Liow v Martelli decide?
Liow itself was not a second-storey case. It arose from a proposal for a substantial extension to one cross lease dwelling, together with a swimming pool and decking. The neighbouring owners refused consent and the dispute went to arbitration and then through the Courts. The Court of Appeal used the case to clarify the general law applying to alteration covenants in cross leases.
First, the Court held that under the lease before it the required consent was the consent of "the Lessors" - meaning the owners of the underlying estate acting jointly in their capacity as lessors. It was not simply a separate personal veto held by one objecting owner. If the owners could not agree, the decision-making procedure in that particular lease had to be used.
Secondly, the Court rejected the earlier approach associated with Smallfield v Brown, which had placed the focus on whether the developing owner received a substantial benefit while the detriment to the neighbour was only trifling. The broader question is whether a reasonable lessor, having regard to the interests of all the lessees and the context of the cross lease, could reasonably withhold consent.
5. If you are the owner who wants to build up
Start with the cross lease documents before committing to the design. Many leases prohibit structural alterations that change the external dimensions of a flat, or the construction of additional buildings or structures, without the prior written consent of the lessors. A new storey will usually fall within that type of provision, although the precise wording must be checked.
Provide enough information for the proposal to be assessed properly. That will usually mean plans and elevations showing existing and proposed heights, window and balcony positions, setbacks and the relationship with the neighbouring dwelling. Depending on the proposal, privacy, shading or other specialist information may also help. A willingness to make sensible changes that materially reduce unnecessary impact on a neighbour is relevant to the reasonableness assessment.
Council approval is a separate matter. A resource consent or building consent deals with public planning and building requirements; it does not rewrite the private rights under the cross lease. If the new storey extends beyond the existing leasehold dimensions, a new cross lease plan and updated cross lease documentation will ordinarily also be required so that the title correctly reflects the altered flat.
6. If you are the neighbour being asked to consent
You are entitled to understand the proposal and its actual effect on your property before deciding what position to take. Liow identifies matters that may legitimately be relevant, including privacy and overlooking, light and views, the physical effect on your use and enjoyment of the property, any material impact on market value, remaining site coverage and the effect on your own reasonable future development opportunities.
The wider context also matters. Current planning rules, what has become common or ordinary in the neighbourhood, changes in residential expectations and the reasonable expectations of the owner seeking to improve their home may all carry weight. By contrast, personal animosity or an unrelated dispute between neighbours is not a proper basis for withholding consent.
The practical point is that a cross lease neighbour has real rights, but not necessarily an absolute veto. The question is whether the concerns raised provide a reasonable basis for the lessors, acting jointly, to withhold consent in the particular circumstances.
7. Can consent be subject to conditions, and what if there is no agreement?
In many cases the better outcome is not simply "yes" or "no". Legitimate concerns may be capable of being addressed by agreed changes or conditions - for example, changes to windows or balconies, privacy screening, limits on construction access, reinstatement obligations, or requirements dealing with survey and title work. Any conditions should be properly recorded and should relate to the proposed development and the rights protected by the cross lease.
If the owners cannot agree, the dispute resolution or decision-making provisions in the particular lease need to be checked. In Liow, the lease contained machinery for the lessors to reach a joint position and, if necessary, for the issue to be determined by arbitration. Not every cross lease is drafted the same way.
An owner should be cautious about simply starting work where required consent has not been obtained. Depending on the lease and the circumstances, unauthorised alterations can lead to injunctions, damages or orders requiring work to be reversed or remedied. If the physical dimensions of the flat have changed without the necessary cross lease plan and lease being updated, a title defect can also result.
8. The takeaway
A second-storey proposal on a cross lease is not just a Council or building-design issue. It raises questions about common property, the scope of the existing lease, the consent regime and the registered title.
For the owner wanting to build, the key point is that being above your existing house does not automatically make the airspace exclusively yours. For the neighbouring owner, the key point is that having a shared interest in the land does not automatically give you an unrestricted right to veto development. The lease must be read and the proposal assessed against the reasonableness principles explained in Liow.
Before substantial design or construction costs are incurred, both sides should answer three questions: What does the cross lease actually permit? What consent process applies and what concerns are reasonably relevant? If the work proceeds, what survey and legal documentation is required to make the altered building match the title? Addressing those questions early is usually much easier than dealing with them after the scaffolding goes up.
Considering a cross lease development?
Kate Chivers and the Turner Hopkins property team can review the record of title, flats plan and memorandum of lease, advise on the consent requirements and help assess the legal implications of proposed alterations. We can also work with surveyors and other advisers on any amended cross lease plan and title documentation required if the development proceeds.
Key legal references
- Liow v Martelli [2026] NZCA 101, particularly [14], [80]-[93] and [107]-[112].
- Smallfield v Brown (1991) 2 NZ ConvC 191,110 (HC), the earlier approach considered and rejected in Liow.
- Turner v Goldsbury [2024] NZCA 292.
This article provides general information only and is not legal advice. Cross leases differ in their terms, and each property and proposed development should be considered by reference to its particular record of title, flats plan, memorandum of lease, building proposal and applicable Council requirements.