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Buying a Cross Lease? Beware the Limitations of a Cross Lease Title

Cross lease titles are fairly common in New Zealand. They evolved in the 1970’s as a means of bypassing onerous Council requirements on subdivisions of land. If you own a cross lease title or you are considering the purchase of a cross lease property, there are some important features of cross leases you need to be aware of.

How does a cross lease title work?

The owner of a cross lease title owns an undivided share in the fee simple, together with a lease (often for a term of 999 years) of a defined area of the fee simple estate.

For example, a cross lease section may comprise of a quarter acre section with two flats on it. The owners of each flat will own an undivided one-half share in the whole quarter acre section as tenants in common. In addition to this, each owner will hold a lease for a specified part of the land over which they have exclusive use. Separate certificates of title will be issued to each owner, which will include the share in the fee simple estate, together with the lease.

The key documents to be aware of on a cross lease title are the lease itself, and the “flats plan”, which marks out each flat, its exclusive use area, and any common areas.

Understanding the terms of a cross lease

Before you purchase a cross lease title, is important that you have read and understood the terms of the lease.

The owners of the adjoining cross lease flats will have rights under the lease to enforce the provisions. This may include the right to force a sale of your property if breaches are not remedied.

The terms of the cross lease generally include:

  • Maintenance obligations in respect of the buildings and common areas;
  • Obligations for payment of property outgoings (generally a proportion);
  • Restrictions on making alterations to the buildings (covered in more detail below);
  • Confirmation of exclusive use areas;
  • Restrictions on use of the property can also be included, including prohibition on keeping pets and leaving rubbish or obstructions on the property.

The “Flats Plan” and alterations to buildings

The lease is based on the “flats plan”, which marks out the buildings and areas over which the lease applies. Because of this, any external additions or alterations to the buildings can only be done with the consent of the other owners of the fee simple title.

In addition, a new flats plan outlining the alterations (or additional buildings) must be submitted to the council and registered on the title. This can be costly and needs to be taken into consideration where alterations to the buildings on the land are proposed.

In some cases it can be more cost effective to surrender the cross lease title and convert it to a freehold title by subdivision.

Duty to maintain the common areas on a cross lease title

It is common for a cross lease title to include some common property. This can often be the driveway or parking areas. Generally the lease will include provisions requiring that the combined owners of the fee simple share (in proportion to their share of ownership of the land) the responsibilities of maintaining the common areas and the services leading from the street to the individual units. Care needs to be taken when purchasing to ascertain what maintenance is proposed on such common property (for example, upgrading the driveway).

Take care and seek advice before purchasing a cross lease property

Given the complexities of cross lease titles, it is important to take legal advice before signing up to purchase a cross lease property. This will allow your solicitor to ensure that appropriate conditions are included, to allow you to carefully consider the terms of the cross lease and for the buildings to be checked against the flats plans.

If you are the owner of a cross lease title and you are considering undertaking alterations to the buildings on the property, then you need to be aware of the cross lease restrictions and ensure you adhere to the terms of the lease when undertaking the alterations. This may include the deposit of a new “flats plan”.

Jamie Bourke is a Director at Henderson Reeves Lawyers.  You can contact Jamie at jamiebourke@hendersonreeves.co.nz

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