A review of cross-lease issues
It is said that a cross-lease is one of the most complicated forms of property ownership. A cross-lease title creates two or more legal estates having multiple owners who all have a separate lease for the house or flat with an undivided share in ownership of the entire land/site. The lease of the property can also include and specify exclusive use areas for each house or flat, and with 216,000 cross-leases in New Zealand, owners, prospective buyers and lawyers are most commonly facing the issue of consent.
When making alternations and/or additions to a property, unlike most property ownerships where resource and council consent is all that is required, cross-leases have historically required that all other cross-lease owners must consent to such works. In more recent times, alteration and/or addition clauses usually only require that consent is to be obtained by the other cross-lease property owners when the works are deemed to be structural.
What is a structural alteration or addition? Whilst this is unclear, you should always have consideration to what affect your alteration or addition will have on your cross-lease neighbour and how your proposed structural alteration may affect their enjoyment of their property.
In the case of Ferguson v Walsh the Court set out a list of different types of alterations and advised whether they would require consent or not. It was held that cosmetic changes do not require consent. Other alterations such as loadbearing walls that impact the strength and support of the building, or changes affecting the exterior shape or structure, or that impact the use and enjoyment of the neighbouring cross-lease properties, require consent.
The lease agreement wording will ultimately determine whether or not consent is required. Where consent is required, section 224 of the Property Law Act states that consent cannot be unreasonably withheld, however, it is noted that where a neighboring cross-lease owner is potentially negatively impacted, they may have grounds to notify that consent is withheld.
Where consent has not been obtained, injunctions can be sought to put a stop to the alterations/additions to the property. If works have been taken out on the property and alterations/additions have been made to the external dimensions at the property that are not shown on the flat plan, this then creates a “defect” in the title which can be expensive to rectify.
To avoid issues arising from cross-lease property ownership, it is important to seek legal advice and have the flat plan and lease agreement reviewed to ensure that all rights and obligations as cross-lease property owner are understood. Understanding what obligations and restrictions are in place in accordance with the lease agreement will minimize the risk of disputes. However, where disputes do arise, clause 26 of the ADLS Memorandum 2018/4343 requires that disputes are to be referred to an arbitrator.