Cross Lease Subdivision
Cross Leasing (or Flathold) is a system of subdivision which was developed largely to short-circuit planning rules and to avoid reserves contributions. Hugely popular around the 1980’s, cross lease subdivision has now lost favour and is widely considered an inferior form of title.
A cross lease title normally comprises two forms of ownership, an undivided share of the fee simple interest of the underlying land parcel and a long term lease (including areas of exclusive use) over the land occupied by the “flat”. This is technical jargon and can be more simply described as a “Composite Title”.
This type of ownership is considered inferior for a number of reasons including:
- Cross lease creates a relationship in tenure (ownership) between the co-owners.
- Building additions typically require the approval of co-owners and an amending cross lease survey.
- There is no standard approach to cross leasing. This means there has been variation in the way sites are divided and can lead to difficulty in understanding the ownership, which can in turn compromise marketability.
- Maintenance of shared property e.g. access and services, is often not provided for in the cross lease arrangements. This can create real issues where co-owners disagree over the cost sharing or need for maintenance.
Today there is no reason for new subdivision to be undertaken under the cross lease system and we will not undertake new cross lease subdivisions.
However, we frequently undertake amending cross lease surveys (cross lease amendments) to ensure new structures or building additions are reflected on a cross lease title. These are often completed urgently as a condition of sale, where a deficiency in the title has been identified. The amending process requires a site survey and Council consent. An amending plan then needs to be lodged with LINZ, and strong liaison between client, solicitor and surveyor should ensure the process is completed with a minimum of fuss or delay. LINZ processes need to involve the co-owner(s), and possibly their lawyers and any mortgagees.
A preferable solution is a cross lease conversion, a process which converts cross lease titles to conventional freehold titles. A conversion survey is more expensive than an amendment but does add value by improving the title. We have received valuation advice which confirms such a process could add far greater value to the underlying titles than the costs associated with the conversion.
Cross lease conversions also involves Council and LINZ processes (and need to involve all co-owners) but can be completed reasonably quickly. As always, good client / solicitor / surveyor coordination is critical to ensure a smooth efficient process.