Cross-lease properties are a form of land ownership unique to New Zealand where multiple individuals jointly own a section of land. Each owner holds a separate lease for their individual house or flat, but the land itself is co-owned. This arrangement comes with its own set of benefits and challenges, which are important to understand if you are considering purchasing or living in a cross-lease property.

Key Features of Cross-Lease Properties

Shared Ownership: In a cross-lease arrangement, you and your neighbours collectively own the land through a long-term lease, typically 999 years. This means that while you have exclusive rights to your house or flat, the land is shared with your co-owners.

Exclusive Use: Despite the shared ownership of the land, each owner has exclusive rights to their part of the property. This includes the house or flat they live in and any designated exclusive use areas, such as private gardens or courtyards.

Restrictions: Cross-lease properties often come with restrictions on what you can do with your property and the land. Any alterations, such as building a new deck or extending your property with a garage, will typically require the consent of the other co-owners of the land. This restriction can sometimes lead to complications and delays, and sometimes more serious disputes.

Legal Issues and Responsibilities

As a Cross-lease property owner, you will need to navigate several legal issues and responsibilities including:

1 Consent for Alterations: Any structural changes or additions to the property requires the consent of all co-owners. Without this consent, you might face legal challenges, including demands to remove unauthorised structures.

2 Updating Lease Plans: If changes are made to the property, the lease plans must be updated to reflect these modifications. Failure to do so can lead to disputes and complications when selling the property.

3 Shared Responsibilities: Maintenance and management of common areas, like driveways and gardens, are shared among the owners.  Continued disagreements over these responsibilities can lead to strained relationships with our neighbours or even costly legal battles.

Managing Maintenance

A common area of dispute for cross-lease properties is ensuring fair sharing of maintenance responsibilities and the consequential costs of maintenance. To minimise the chance of disputes, it is best for individual owners to have clear lines of communication with their co-owners, and to adhere to the terms of the cross-lease agreement. Here are some ways to do this effectively:

1 Review the Cross-Lease Agreement: Start by thoroughly reviewing the cross-lease agreement which is registered on your title and outlines the responsibilities and cost-sharing arrangements for maintaining common areas like driveways, gardens, and shared structures.

2 Regular Meetings: Schedule and hold regular meetings with all co-owners to discuss maintenance needs and costs. This will allow people to voice their opinions and concerns and put everyone on the same page.

3 Create a Maintenance Schedule: Develop a maintenance schedule that details how often certain tasks need to be performed. This can include gardening, driveway repairs, and exterior painting.

4 Set Up a Maintenance Fund: Consider setting up a joint maintenance fund where each co-owner contributes a set amount regularly. This fund can be used to cover the costs of common area maintenance and repairs.

5 Document Expenses: Keep detailed records of all maintenance expenses and share these records with all co-owners. Transparency in financial matters helps build trust and ensures everyone understands where their money is going.

6 Dispute Resolution: Include a clear dispute resolution process in your agreement. This can involve mediation or arbitration to handle any disagreements over maintenance responsibilities or costs.

Resolving Disputes

Disagreements among co-owners commonly arise when making decisions about the use of common areas, maintenance responsibilities, or consent for alterations. Here are some common steps to resolve these disputes:

1 Communication: The first step is always to try and resolve the issue through open and respectful communication. Discussing the problem directly with the other co-owners can often lead to a mutually agreeable solution.

2 Dispute Resolution Clauses: Many cross-lease agreements include specific dispute resolution processes, such as arbitration or mediation, which must be followed before taking legal action.

3 Mediation: If direct communication does not work, mediation can be a helpful next step. A neutral third party can facilitate discussions and help the co-owners reach a compromise.

4 Legal Action: As a last resort, legal action may be necessary. This could involve taking the dispute to court, where a judge can make a binding decision. However, this can be costly and time-consuming.

Consequences of Neglect

If a co-owner neglects their responsibilities in a cross-lease property, several issues can arise:

1 Breach of Lease: Neglecting responsibilities, such as maintenance or obtaining consent for alterations, is likely to be a breach of your lease agreement. This exposes you to legal action by the other co-owners.

2 Legal Action: Co-owners can take legal action to enforce compliance with the agreement. This might involve court orders to carry out necessary maintenance or to remove unauthorised alterations. Payment of any losses or damages incurred by the co-owners can also be awarded.

3 Financial Consequences: The negligent co-owner may be required to cover the costs of any repairs or maintenance resulting from their neglect. This can include compensating other co-owners for any financial losses they suffer due to the neglect.

4 Property Value Impact: Neglecting maintenance can negatively impact the overall property value. This can make it difficult to sell the property or secure financing, as lenders and buyers may be wary of properties with unresolved maintenance issues.

5 Strained Relationships: Neglecting responsibilities can lead to strained relationships among co-owners, making it difficult to manage the property effectively. Good communication and cooperation are essential to avoid these issues.

Cross-leases often create disputes among neighbours. It is also unfortunately quite common for the lease plan or lease agreement registered on your title to have errors which is known as a “defect in title” and if your conveyancing lawyer did not pick this up when you purchased, you may be liable to fix this at your cost when you go to sell.

Understanding the intricacies of cross-lease properties is crucial for anyone that owns a cross-lease title. By being aware of the legal issues, obligations, and potential challenges, you, and your co-owners (neighbours) will be able to work together effectively to manage your properties effectively and avoid conflicts. It is vital you know your rights and obligations. Please feel free to contact the Property team at Queen City Law for expert advice.