Not in My Backyard

For cross-lease owners, the question has never been whether you can build, but whether your neighbour will let you.

A recent Court of Appeal decision in Liow v Martelli has reshaped how cross-lease property owners should approach neighbours when seeking approval to renovations.

The ruling provides clearer guidance on what it means to “unreasonably withhold” consent when it comes to alterations and signals a more balanced approach between neighbours.

Cross-lease ownership

Cross-lease titles remain common across New Zealand, particularly in urban areas. Under this structure, multiple owners jointly own the underlying land and lease exclusive areas (their homes) to each other, often for terms of up to 999 years.

Because of this shared ownership, most cross-lease agreements include a restriction that owners of a cross lease must obtain consent from the other owners before making alterations to their home. Importantly, that consent must not be “unreasonably” withheld.

The issue: what does “unreasonable” actually mean?

Until now, the courts have relied on a long-standing test where a refusal would only be considered unreasonable where the impact on the neighbour was only minor or “trifling”.

In practice, this gave neighbouring owners significant control. Even relatively modest concerns could justify refusing consent, making it difficult for owners to carry out improvements.

In April 2026 however the Court of Appeal has rejected the above approach, finding it imposed an overly restrictive test that did not reflect the wording or purpose of cross-lease agreements.

Instead, the Court of Appeal confirmed that “reasonableness” should be assessed in a more flexible and fact-specific way, and that the impact of any renovations should be assessed by all of the cross lease owners.

That assessment involves a balancing exercise. The focus is on the position of the cross lease owners as a collective, including the party seeking consent, recognising that those individuals may have competing or conflicting interests.

This represents a shift away from rigid legal thresholds toward a more practical, common-sense assessment.

What factors are relevant?

The Court did not prescribe a fixed checklist, but it provided guidance on the types of considerations that may be relevant when assessing reasonableness. These include:

• Effects on privacy, outlook, and enjoyment of the neighbouring property
• The extent of physical intrusion or proximity to boundaries
• Potential impact on property value
• Whether the proposal limits future development opportunities
• Applicable planning rules and what is typical in the area
• Broader changes in how residential properties are used and developed.

Ultimately, the assessment will depend on the specific facts of each case.

Neighbouring owners will now no longer have an effective veto over proposed works, and while consent is still required, it cannot be withheld for arbitrary or purely subjective reasons. This reflects a more balanced approach between competing property rights.

Given that many cross-leases run for centuries, it is unrealistic to expect properties to remain unchanged over time. Homes will need to be altered, extended, or rebuilt to meet modern living standards.

The decision reflects this reality by allowing greater flexibility for development, while still protecting legitimate neighbour concerns.

Practical implications for Cross Lease property owners

For owners seeking to carry out works:

• Consent is still required under the terms of the cross lease;
• Proposals should be well-documented and clearly explained; and
• Consideration should be given to minimising impacts on neighbours.

For owners asked to provide consent:

• Refusals must be based on reasonable, evidence-based concerns;
• Personal preferences or general objections are unlikely to be sufficient; and
• Decisions should take into account both parties’ interests.

Looking ahead

The Court of Appeals decision brings long-awaited clarity to an area of law that has often caused frustration for property owners.

By replacing a rigid legal test with a more flexible and practical standard, the Court of Appeal has shifted the focus toward fairness and context.

While disputes may still arise, the new approach encourages a more constructive and balanced dialogue between neighbours, something that is essential in the shared environment of cross-lease living.