Cross lease to freehold subdivision
A cross lease is a title when there are two or more people who own an undivided share in a property, and then the individual owners lease a piece of that land from the other lot-owner and vice versa.
An example may be where there are two dwellings on one lot which each owner having a half share in that freehold estate. Each owner then leases from both owners of the land the exclusive right to occupy their dwelling and the immediate land surrounding the building for approximately 999 years. There is a plan accompanying the lease documents that identifies the existing buildings and exclusive use areas and this commonly referred to as a ‘Flats Plan’.
Cross lease developments evolved in the 1970s as a quick, cheap and easy alternative to traditional subdivision. When the Resource Management Act 1991 defined subdivision as including cross leases, there was no advantage in undertaking cross leases instead of freehold subdivision. Cross lease subdivisions are rarely undertaken today.
What is a ‘freehold’ property?
A freehold title is where the owner of the dwelling has full control and freedom of not only the dwelling but the land surrounding it. The owners have absolute ownership of the land and it is the most common form of ownership.
What is the advantage in becoming ‘freehold’?
A cross leased property requires you to approach the other party in the cross lease when you want to build a garage or extend your house, as the property is jointly owned. When the house extension or garage is completed you then need to update the ‘flats plan’ for the cross lease, which is time consuming and expensive, and again needs the joint owners’ approval. If you separate the areas on the cross lease into individual titles you will have individual ownership and no longer need to go through this process.