If you’re considering buying a house, unit, flat or apartment on a cross lease title, you should acquaint
yourself with the implications of what this means for you – not only at the time of purchase, but also
looking ahead in case you want to make alterations.
Owning a cross lease
A cross lease title consists of two parts; the first is an undivided share of the whole piece of land that the dwelling or ‘flats’ are built on; the second is a registered lease (Memorandum of Lease) for a fixed year period 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 and any land allocated to that flat. Each owner enters into a covenant agreeing not to enter into each other’s exclusive area. Any land that’s outside the covenants (such as a shared driveway) can be used as a common area by all the flat owners.
There are some downsides to cross lease ownership. Each owner may not cause annoyance, grievance or disturbance to each other. You also need the consent of the other owners to make alterations to the outside of your flat – there’s more on this below.
Cross lease insurance
The Memorandum of Lease states that you must keep your property insured at all times. You may insure your own flat independently or there may be an arrangement where all flats are insured under a single policy and the premium is shared. You must notify your insurer of any changes you make to the footprint of your flat. If your flat is damaged there’s likely to be an obligation for you to repair/rebuild your property to the original footprint before the damage occurred. There may also be a standard of repair that has to be met.
Often other interests will be in place on a cross lease title such as a bank as mortgagee; these parties may need to reach an agreement regarding settlement of your claim.
Making alterations to your dwelling on a cross lease title
If your alteration is structural but non-load bearing, you’ll need consent from the other flat owners. This could include moving internal doors or partitions. Consent can’t be unreasonably withheld and, generally, this type of alteration will have little impact on neighbouring owners.
Alterations which involve any movement or replacement of load-bearing beams or that change the exterior shape of the building (including the addition of an extra storey) are structural and must have the consent of other owners.
A cross lease plan shows the flat footprint and where this is changed by alterations, a surveyor will need to complete a new flats plan to show the new dimensions and a new cross lease will need to be completed. If you plan to build any enclosed structure attached to the original flat such as a conservatory or extension you must also follow this procedure.
Often owners who have completed work will have obtained any required building consents and aren’t aware that a new flats plan is required. Consents granted by the council for any work done will not mention the requirement to update the flats plan and therefore it’s not picked up until you come to sell your property.
If you’ve completed your structural alteration but haven’t completed a new flats plan (where required) you can insert a clause in the Agreement saying that the purchaser accepts the defective flats plan and will waive any right to raise any issues arising from the Certificate of Title.
Cross leases are often not fully understood by real estate agents or purchasers. If you’re buying a flat on a cross lease title or making alterations, make sure you talk with us early on so we can explain how it will work best for you.