Business, Property & Finance

Guide to Buying a Cross Lease Property

on Wednesday, 08 June 2016. Posted in Business, Property & Finance, Property

Guide to Buying a Cross Lease Property

Cross leases are a common form of property ownership in New Zealand which is relatively common but often misunderstood. In this Guide, Deborah Miller, Partner, in the Business Property & Finance team at Brookfields Lawyers provides a guide to understanding how cross lease titles work, matters to check before entering into an agreement to buy a cross lease title and the standard terms which appear in cross leases.

1. How cross lease titles work

If you have a cross lease title (sometimes called a composite title) you have two ownership interests which form the parts to the whole title.

The first interest you will have, as owner of one of the dwellings (together with the owners of the other dwellings), is an undivided share in the underlying fee simple estate. Such shares are specified on the title.

The second interest you have is in a lease of a specified dwelling and any exclusive use areas identified on that plan for a term of 999 years for a nominal rental of $0.10 per annum, if demanded.

Essentially, in purchasing a cross lease property, the purchaser becomes a Lessor, jointly with the owner of the any other dwelling on the site, and a Lessee pursuant to the lease.

2. Matters to check out before signing an agreement to purchase a cross lease property

In addition to the other matters which you should look into before buying any property, for a cross lease title you should:

  • Check that the bird's eye view of the dwelling reflects the foot print outlined on the cross lease plan. If there are any differences then this will mean that the title is defective and needs to be rectified.
  • Check that all other structures on the property have been consented by the other owners.
  • Make sure you understand the terms of your cross lease and when you need to get the consent of the other owners, what limitations exist and what your obligations are in relation to any common property (e.g. drive ways).
  • Consider whether a building inspection report should be obtained to determine if there are any issues with cladding or infrastructure of the dwelling.

3. Standard lease terms to be aware of

As stated above the lease relates to the dwelling being purchased. It grants the exclusive use of the dwelling and any exclusive use areas identified in the lease and on the plan.

Standard lease terms include:

  • A Lessee covenants that it shall pay all rates and charges separately levied in respect of the house, together with an undivided share in all rates and charges in relation to the whole of the land which are not separately levied in respect of the dwelling, provided that the cost of reparis of any works or repairs to the property which are required as a result of a willful act or negligence of a house owner, its agents or invitees shall be payable solely by that owner.
  • The lease would normally specify that a dwelling may only be utilised for residential purposes, and that the Lessee shall not cause a nuisance, disturbance etc. In particular, this includes the keeping of pets which may cause such nuisance or disturbance, which is something that may be of relevance.
  • A Lessee is not to store on the premises highly combustible materials, in particular materials which increase insurance premia, as well as limits the use of a dwelling for legal purposes only.
  • A Lessee is required to keep and maintain the interior and exterior of the dwelling including the roof, plumbing, electrical equipment, drains, spouting, downpipes etc. in a good state of repair.
  • Should an owner intend to make any structural alterations or additions to the dwelling which have the effect of altering the external dimensions of the building as identified on the plan, that owner must obtain consent from cross lease neighbours prior to any building work commencing. It may also prove necessary to amend the plan, as any additions to the external dimensions of the property will need to be recorded on the plan and on the certificate of title to the property.
  • A Lessee has the right to tenant the property, but records that any tenancy arrangements entered into are required, under the lease, to be documented by way of formal tenancy agreement, such agreement to include a covenant on the tenant not to do or permit to be done anything which is in breach of the terms of the lease.
  • Leases usually provide that the exterior colour scheme of the buildings on the land are to be as agreed between the Lessors, and if agreement cannot be reached, the colour scheme shall be similar to the existing colour scheme of the dwellings on the property.

For more information or assistance on purchasing a cross lease property please contact Deborah Miller, Partner on (649) 979 2134 or .

DISCLAIMER

This information is intended to be general in nature. You are strongly recommended to seek your own legal advice in relation to the matters dealt with here.

© Brookfields Lawyers 2016 – All Rights Reserved

 

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