What Is A Cross Lease?
In a cross lease, all owners are 'tenants in common' and own an equal share in the land while having exclusive use of their own unit/flat or area. Let’s say, three families collectively purchase an undivided piece of land and all live on the property, each on their own specific sections of the property. While all own the entire property, each family cross-leases their specific section from the other home owners. All changes to the property can only be done with the other owners’ agreement.
A cross lease is not the same as a body corporate.
In a cross lease, you're subject to the rules under your individual Memorandum of Lease, while in a body corporate the rules are under the Unit Titles Act 2010.
In a cross lease, all owners (known as "Lessors") are 'tenants in common' and own an equal share in the land and will have exclusive use of a unit/flat or area. You may also have exclusive use of a carport or garden, and this will be noted on your certificate of title.
The building on the land (referred to as "flats" or "areas") is leased from all the land owners to the individual owner (known as "Lessee") who owns that particular flat or area.
Many complexes on a cross lease title will be older blocks as this was the best way to have a shared building community before the Unit Titles Act and bodies corporate existed.
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Frequently Asked Questions
What is a Memorandum of Lease?
The Memorandum of Lease is basically the rules that all owners in the cross lease must abide by.
It will record the obligations and requirements of all cross-lease members and sets out how decisions are made. It will show any restrictions on members, such as:
- Restrictions on alterations / erection of other buildings
- Restrictions on leasing the flat
- Restrictions as to the colours which may be used in repainting the flat
- Restrictions on keeping pets.
In addition the lease may contain provisions obligations of the owners such as:
- Maintaining the common areas (areas not the responsibility of any particular owner)
- Maintenance obligations on their flat.
- Property insurance - In some cases individual units and in others, all owners are required to insure under a single policy with each person meeting a proportionate share of the premium.
- Following procedures when there is a decision to be made or a dispute amongst owners.
- How costs and expenses are allocated which are not the responsibility of any particular owner (common drive way maintenance etc), are usually shared on a "land share" basis irrespective of the comparative value of the flats (ie 1/3 share in the land, you will pay 1/3 of those expenses)
Alterations to your flat or the erection of additional buildings on your exclusive use area usually requires the written consent of all owners. If you plan on making any alterations you should check with your legal advisor before proceeding. Depending on the alteration contemplated, you may need to obtain:
- The consent of all owners
- The deposit of a new flat plan redefining the flat. This would involve a resurvey and a variation of the cross lease
- Resource Consent
- Building Consent
Buying or selling a cross lease property
When selling your unit in a cross lease you are not required to provide disclosure documents as you would if the unit was in a body corporate. However we do suggest that any Minutes of Annual General Meetings, annual accounts, insurance information, Memorandum of Lease, along with anything else relevant should be given to your realty agent as this will answer questions potential purchasers may have. A certificate of levies can be provided for $320+GST from your Crockers Account Manager.
The "flats plan" must accurately reflect what is physically on the ground. If there are alterations to a flat or exclusive use area that are not shown and the footprint is now different then the "flats plan" is considered defective. This is a particular issue at time of sale and there are normally two options for the vendor:
- Update the "flats plan" themselves, or
- Enter into negotiations with the purchaser, where the purchaser agrees to fix the flats plan however this will normally lead to a reduction in the house price. The purchaser, in certain circumstances, can object to a cross lease title on the grounds that the "flats plan" is not accurate. This is called "requisitioning the title" and allows the purchaser the right to cancel the agreement if the vendor does not agree to rectify the title.
If you are thinking of selling, talk to Mary Amodeo, AREINZ for a FREE property appraisal:
Phone 09 623 5654 Email firstname.lastname@example.org
Crockers Realty are specialists in cross lease properties and can list your unit.
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