Cross lease titles, why they are not so simple

Cross lease titles were invented to get around the minimum area rate and subdivision restrictions on certain types of smaller subdivisions. Subsequently, there are now a big number of properties on the property market that are cross lease properties. QCL Lawyer Melinda Li talks through Cross lease title issues and why they are not so simple.

As a previous owner of a cross lease property and a lawyer, I hope this blog will be a timely reminder of some of the common issues that you should be aware of no matter whether you are selling or purchasing a cross lease property.

Issue 1: Incorrectly recorded flats plan and dimensions of flats

Melinda LiAn example is a standalone garage.  I have come across a cross lease title where the existing standalone garage was not recorded on the title plan.  It was unclear whether the previous owner who built the garage ever obtained the other flat owners’ consents on this.  Even if the consents had been obtained later, correcting this error (defect) on the title would have been time-consuming and very expensive.  This is because consents must be obtained from all current owners and their respective banks (if any), a new survey plan might be required to be registered on all the affected titles, and each owner needs to receive independent legal advice on this before signing the relevant documents.  Guess who would pay the bill to get all of this done?  Of course the owner of the “flat” who is enjoying the benefits of the garage.  Imagine only discovering this problem with your property’s title after you signed an unconditional contract with a purchaser (and your standard rights to question the title within 10 working days has passed), after buying at auction (where you have no right to question the title) or after you settle and purchase?  You would be placed in an awful position.  Buyers beware!

Issue 2: Pay attention to which parts of the land are common area

One example of this is in relation to the rear or front grass area.  Do not just assume that you are the only one that can use the area just because it is right by your door step.  If the area does not fall into the category of “exclusive use” area, it is a shared space for all flat owners.  Also generally speaking, the neighbouring owners would share the costs of maintaining this area including mowing lawn costs or cracks in the concrete driveway.  So if you fall in love with the flat because if offers a big garden to the small flat, it might become an issue in the future when your neighbours have their BBQ party in “your” garden. Although most of the time, the area is only used by the nearest owner for practical reasons.  However if you are try to block this precious space for exclusive use, the other flat owners may not necessarily allow you to do this.

Issue 3: Incomplete Memorandum of lease

A memorandum of lease provides that the owner has the sole right to use and occupy the flat and generally names certain areas of land that each owner is entitled to use. It also places certain duties on each owner in respect of things like maintenance, insurance, payment of rates and other outgoings, causing nuisance to neighbouring owners, additions or alterations.

I have come across quite a few lease memorandums that are incomplete in my opinion because the relevant options covering the duties and obligations are not correctly crossed out or selected.  This is often an error made during the preparation and submission of the memorandum in the past.  My view is the incompletion of the lease document constitutes defect on the cross lease title and should be fixed when it is discovered.  Again, it demonstrates how important it is to get your lawyer involved as early as possible to get everything checked.

If you have any queries with the above please do not hesitate to contact us and we would be happy to assist you.

 

Melinda Li Contact Details:

Queen City Law Level 8,

203 Queen Street

PO Box 6908, Wellesley Street Auckland

Office: 09 970 8810

Fax: 09 970 8820

DDI: 09 970 8827