CrossLeases & Freehold Titles

Posted on 14 MAR

Crossleases

Q: I am new to NZ and have been told I should be wary of cross-lease titles. What is a cross-lease exactly? Raymond W.

A: Fee Simple cross-lease is not a leasehold title in the normal sense of the word. It is a freehold title that consists of an undivided share of the whole piece of land that the dwelling or ‘flats’ are built on, and a registered lease (Memorandum of Lease) for a fixed year period (usually 999 years) for each flat owner. Each owner has exclusive possession of their own flat for residential purposes and they are referred to as lessees and lessors. You will have exclusive use of your flat/house and any land allocated to that building. The terms of the lease include agreeing not to enter into each other’s exclusive area. Any land that is not shown on the lease as ‘exclusive’ (e.g. the driveway) can be used by any of the flat owners as a common area. There are some downsides to cross lease ownership, e.g. you may not cause annoyance, grievance or disturbance to each other and you also need the consent of the other owners to make alterations to the exterior of your property if it affects the flats plan as shown on the title – this is to protect all owners from losing ground coverage for the whole section. Things like internal modifications (still subject to council approval of course), repairing a fence or painting your home a different colour can all be undertaken without your fellow lessees consent. There are around 216,000 cross lease titles in New Zealand with almost 50% of those in Auckland – so they are certainly not unusual! When looking at buying a cross lease property be sure to ask the agent for a copy of the Memorandum of Lease and then, as with anything to do with buying a property always have your lawyer check all the documentation before you make an offer or bid at auction.

Easements against a title

Q: I am looking at buying a property that is at the end of a Right of Way. The Agent says that I should “check out the easements”. What are these and why are they important? Susan H.

This is a question for our lawyer Nick Birdsey, of Birdsey & Associates and here is Nick’s answer.
A: That is good advice from your agent because yes, the easements are important. A landowner can grant to another landowner number of rights. These things include important items like a right of way, so that the owner of the “dominant” piece of land taking the benefit can use a piece of the “servient” piece of land, for access to the road, or a right to convey power, water, gas or drainage and communications. All these things typically need access to a road, rather like a landlocked nation needs a corridor to the sea. Important facts to note then, are firstly that easements are registered against the Title, secondly they bind present and later owners, and thirdly you need to be sure what rights or burdens, are involved. Easements are different to licences, which do not “run with the land” or bind later owners.
Because it is registered against the Title, the document that creates the easement can be obtained and studied by your lawyer. This is absolutely essential if you are to know “what you are buying”.

1. We are looking at a cross-lease property and the agent keeps referring to the “flats plan” but hasn’t really explained what that is. Can you help?  John M.

A: We sure can John. A flats plan is simply the plan attached to the cross lease title which shows the outline of the buildings on the land, allocates the building a “flat” or “area” number (e.g. Flat 1 or Area 1), and identifies the “exclusive use” area(s) related to that flat or area.  The exclusive use area is for the use of that particular flat owner to the exclusion of all other flat owners and is marked with a letter. The flats plan also shows any “common area” which is an area shared by all or some of the owners of the fee simple land and is usually a driveway or accessway. Always be sure to check that the building’s outline is the same as shown on the flats plan. If not check with your lawyer as the tile may be “defective”.

Q: Can you explain what the difference is between a Fee Simple and a Freehold title please? Olivia S.

A: Fee simple is often referred to as “an estate in fee simple” and is the same as “freehold”. (Freehold: not to be confused with having no mortgage!)  A fee simple title is the most straightforward and generally most preferred type of title. An example of a legal description of a fee simple title is, 1234 square metres more or less being Lot 1 on Deposited Plan 12345

The advantages of freehold/fee simple is that you own the whole of the land and are able to make any additions or alterations to your property (subject of course to Council bylaws and consent requirements) without having to get the consent of neighbouring property owner(s) unlike a cross lease title and unit title.

Just be aware that there may be covenants registered against the title to the property that impose restrictions so you should make sure you are aware of these by having your legal advisor search and review the title for you.