The Cross-Lease Conundrum
History of the Cross-Lease
A Cross-Lease was a form of subdivision popular in the 1970’s and 1980’s. It was popular as it avoided subdivision rules prior to the Resource Management Act 1991 (RMA). This made it much cheaper than subdividing into fee-simple titles.
What is a Cross-Lease?
A Cross-Lease is where several people own an undivided share in a single piece of land and have leases with the other owners that allows them to build and occupy certain portions of the land. These leases refer to a flat plan which shows building and areas of land with restricted use. The resulting title is referred to as leasehold and usually have term of 999 years.
What are the issues?
The Flat Plan is snap shot of the day the title was issued. If the exterior of the building is altered after this date i.e. by extension of the building or addition of a deck or garage, and the Flat Plan is not updated then the title is considered defective. Over recent years banks generally do not lend on a defective title unless provisions are put in place to have the title updated. Furthermore, as you are leasing the land your home occupies you also require permission from the other owners of the piece of land in order to complete any such alteration to your home. This can often lead to neighbour disputes. As a result, the value of a Cross-Lease title is often less than if that Cross-Lease was to be converted into a fee simple title.
What are the advantages of a fee simple title?
When it comes time to sell a fee simple title in most cases will increase both the marketability and the sale price. There is no need to gain your neighbours approval for extensions or alterations provided you meet planning requirements. These additions will also no longer trigger the need to update the Flat Plan.
What can I do?
Undertake a Cross-Lease rectification survey to update the Flat Plan to reflect what’s been built on site. A subdivision consent application needs to be made to Council and the Flat Plan needs to be updated with Land Information New Zealand. However, any further building additions will still require the Flat Plan to be updated. Cost involved are Council Fees, Surveyors Fees & Legal Fees.
Alternatively, you could convert to fee simple. This also requires a subdivision consent from Council, and a legal survey will be undertaken where new survey pegs placed to demarcate the boundary. To convert to fee simple costs are slightly increased and an assessment of the services will need to be undertaken. Costs involved are Council Fees, Surveyors Fees, Legal Fees & dependent on the site potentially the need to upgrade or separate services. As all Cross-Lease titles will need to be converted costs can be shared between all individuals involved.
For more information please contact Joe Fletcher.
Mob: 027 244 7125 Office: 09 478 4305