Converting your Cross Lease Title

Cross leases were originally developed in the 1960s as a way of getting around restrictive subdivision requirements and saved developers in cost and time.  They have however been labelled New Zealand’s “greatest conveyancing issue”.   A majority of the remaining cross leases are located in Auckland. 

If you have a property with a cross lease title, together with the other owners of the cross lease title, you own undivided shares as tenants in common in the underlying land.  You then ‘lease’ your separate dwelling or flat on the land from all owners (usually for 999 years in perpetuity). 

Because of this dual nature of land ownership, you will have limited rights as the owner of a cross lease property.  You will most likely need to get the consent of the other owners if you want to make any improvements to your property (e.g .build an extension to your house or add a garage). Often we find that this can lead to significant and expensive disputes between owners. 

A fee simple title (this is where you own the whole of the property), on the other hand, gives you absolute ownership over both your land and dwelling so you can alter or make additions without having to get your neighbour’s consent (subject to local bylaws and legal requirements).

So, What Can I Do?

It is possible to convert your cross lease title to fee simple, although this does involve time and expense and will require Resource Consent.  However, a recent ruling in the Environment Court, directed that local councils are to “approach an application mindful of the possibility that there may be few, if any, material environmental implications warranting a full-scale assessment of the property as if it were a new development”.  In other words, Councils were directed not to overcomplicate such applications.

All owners of the cross lease title will have to agree to the conversion, however this means that you will all benefit from the results, including being able to share the costs of the conversion.

Why Would I Convert my Property to Freehold?

Simply put, if two identical properties were being marketed, one on a cross lease and the other a fee simple title, the fee simple title would most likely always look more attractive to buyers and therefore reach higher sale figures than the cross lease. 

In addition, the Auckland Unitary Plan may allow for further development potential.  Depending on the size of your share of that land, you may be able to construct two or more townhouses in place of that one dwelling.

Other benefits include:

• You will not be a co-owner of the land with other people who can then make it difficult if you wish to undertake additions or alterations; and
• When selling you will not get drawn into any argument as to whether your title may be defective or not.  This can happen if the plan which accompanies the title of your property does not show the correct outline of your dwelling or is missing another building (e.g. a garage) which was constructed later than the dwelling;

Ultimately, as owner of your own land you have the highest degree of freedom of use and ownership.

Ok, What Do I Do Now?

First, talk to your neighbours to find out whether they would also be interested in gaining the benefits from the title conversion.  It is always easier working together as a team. Once you have reached a verbal agreement get your lawyer to draft an agreement in writing so that the parties involved have certainty to what they have agreed to.

From there we recommend you complete a feasibility study , engage a surveyor to assist you with this but also talk to your individual mortgage advisers or your bank to ensure they would be happy to consent to the changes. Confirm that if you need funds to complete the work, they will be available from your lender.

The surveyor should as part of this feasibility study stage,  visit the site and gather relevant information such as on confirming access points, determine the position of drainage infrastructure, confirm the position of existing dwellings, and record any other details that will be necessary to ensure the cross lease can be collapsed and new freehold titles achieved.

An Engineer will also be required to review and report on the existing infrastructure to see whether any separation of services is required (this includes sewage, water supply and stormwater drainage). 

Assuming the experts determine that the Freeholding of the Crosslease can be achieved, and all of your neighbours confirm the work is financially viable then the Surveyor will prepare a Resource Consent application for approval by your local Council. 

The Council may set conditions on the consent that requires improvements to be undertaken to the existing infrastructure. If upgrades are required, then it will be necessary to complete this work before the surveyor finalises the final survey plan and obtains the relevant permits and certifications from Council

Once the certificates are issued (pursuant to section 223C and 224C of the Resource Management Act 1991) Turner Hopkins will then take over. We will work with the Surveyor, all the landowners and their lenders (if any)  to lodge the required documents with Land Information New Zealand. Once the application is approved by Land Information New Zealand the old Cross Lease Titles will be cancelled and the new Fee Simple (freehold) titles will be issued.

Why Choose Turner Hopkins?

Turner Hopkins has an experienced property development team that can assist with all types of subdivision and property development needs. Our team is engaged in multiple projects encompassing work such as collapsing a cross lease/free holding land, small 2-3 lot subdivisions all the way through to multi - lot large scale subdivision and construction projects. We are also able to assist with developments that involve both unit titles (body corporate) and/or resident society management structures.

Our point of difference is that we are reliable, accessible, and work with you every step of the way. Regardless of what your property needs are – you will have someone here at Turner Hopkins that understands your needs and is available to assist.

Should you wish to find out more, please contact our team leaders, Joy Yuan (joy.yuan@turnerhopkins.co.nz) or Kate Chivers (Kate.Chivers@turnerhopkins.co.nz)