We field plenty of enquiries relating to cross lease titles.These enquiries can occur prior to the purchase of a property, or when there is some work to be done on a cross lease title, either by the client themselves, or their neighbouring cross lease owner.There are some very important aspects to a cross lease title that owners of such properties need to be aware of.

Cross leasing evolved in the 1970s as a means of bypassing the onerous requirements imposed by councils on subdivisions of land.  Cross leasing also allowed the changing living patterns and greater urbanisation of the population at that time.

The advantages of cross leasing have now been largely eliminated by the Resource Management Act 1991, which includes cross leases in the definition of subdivisions.  However, the high number of cross lease titles already in existence will require continuing conveyancing expertise in an area of practice with many potential pitfalls.

A cross lease title is essentially an undivided portion of the freehold land combined with a 999 year lease of the buildings on part of the land.  The share in the freehold land is normally calculated according to how many proprietors there are.  For example, if there are two owners, then each might have an undivided one-half share, although there are occasions where two owners have unequal shares of the freehold land.

The leases are of the buildings described on the “flats plan”.  This plan clearly delineates each “flat”, the exclusive use areas of each owner, and any common areas.  Importantly, as the lease is only of the building that is depicted on the plan, if there are additions to the building that are not shown on the plan, then in strict legal terms, the owner of that property is not entitled to a lease of those “unlawful” parts of the building.  Underlying this, most cross leases contain a term that prohibits the owner from making structural alterations or additions to the building without the consent of the other owner.  We have had many situations where owners of cross lease properties have made such changes without the consent of the other owner and have found themselves in difficult situations when attempting to correct their cross lease title.  If you own a cross lease title, we recommend not being one of these parties.

If you are thinking about doing work on the building, there is case law that suggests that the definition of structural alterations or additions in the lease is not the same as what it would be under the Building Act.  So the lesson from that is simply this: if the work does not require a building consent, under the lease the work could still be considered a structural addition or alteration.

The wording of the lease becomes very important in situations like this.  Some leases prohibit structures on the land itself (without consent) and that can include minor things like fences or garden sheds.  Some leases require written consent of the co-owner, while others just refer to consent itself, implying that consent over a “cup of tea” with your neighbour is sufficient. 

Many years ago, recommendations were made to parliament for the phasing out of the system in favour of a simpler form of land ownership. However nothing has come of this as yet.