Additions and Alterations to Cross Lease Properties

Posted on Saturday, November 23 2013

Additions and Alterations to Cross Lease Properties The resulting Issues and Title defects

 

Cross lease titles were introduced around the 1970s as a temporary form of title however they have endured for far longer than what was originally anticipated. These titles each incorporate an undivided share of the underlying freehold land together with a 999 lease of the structures on the site which are shown on the flats plan as prepared by a surveyor. The initial advantages of cross lease titles were;

(a) They allowed for the division of head titles where a ‘subdivision’ could not be completed due to the area of the planned new Lots being under the minimum subdivisable levels allowed by the Local Authorities at that time. The minimum subdivisable levels have now been significantly reduced by the Local Authority allowing for subdivision of head titles into much smaller lots negating the need to complete cross lease subdivisions.

(b) Cross leases in the early days were not classed as ‘subdivisions’ therefore were not subject the same rules as ordinary subdivisions including the liability to pay the Local Authority Reserve Fund Contribution.

In today’s environment there is very little advantage to completing a cross lease subdivision and most people elect to complete subdivision of land into freehold titles.

IMPORTANT: When purchasing a cross lease title where additions and alterations have been carried out there are three issues to be mindful of;

1. Consent of Other Co-Lessors
1.1 Most cross leases contain a provision that any structural alterations to the leased structures must have the written consent of the other cross lease owners in that development. The absence of consent constitutes a breach of the cross lease. In addition clause 8.3 the current form of ADLS Agreement for Sale and Purchase provides for a ‘current consent’ to be obtained for any unauthorised structures.

2. Local Authority Consent
2.1 It is important to check that any additions or alterations have been permitted or consented to as appropriate by the Local Authority.

3. Cross Lease Title Defect
3.1 If additions and alterations have been carried out, which are attached to the leased structures and also enclosed creating a different footprint for the structure on site as appears on the legal flats plan then a defective title is created. This can only be remedied by a surveyor preparing a new flats plan, the Local Authority approving the plan, the defective lease surrendered and a new lease prepared. This can be a timely and expensive process. In addition the other cross lease unit owners will need to sign the surrender of lease and new lease documentation with their mortgagee’s consent also being required usually all at the cost of the owner with the defective title.

We advise you to proceed with care, and if in doubt consult us to help you though the process.

Feel free to contact Anne Needham on +64 9 3034089 or +64 (0)272266084

By Anne Needham: Urban Legal


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Expert's Bio

Anne Needham

I have over 30 years experience in providing excellent residential property legal services to clients. I have an established local (NZ based) practice and also an extensive off shore client base having acted for clients dealing with New Zealand property who are located all over the world - the internet and cellphones have made this so very easy! In addition Rennie Cox/Urban Legal has been providing legal services since 1923 and is now a progressive modern law firm providing a wide range of legal services to clients.

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