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So you want to want to make your cross lease section freehold...

Do you own a cross lease property? Have you ever considered converting cross lease to freehold?

With freehold ownership, you have full and absolute ownership rights over the land and the property. You are not bound by lease agreements or cross lease restrictions. This gives you complete control over your property, allowing you to make changes without needing consent from other leaseholders. Potential buyers highly value this level of ownership and control.


What you need to know Cross lease developments are a solution to constructing multiple houses on a single property without the need for a subdivision. This approach allows all owners to enjoy an equal share in the property value, while certain areas of the site, eg: houses and garages, are exclusive to individual owners. Your record of title may refer to your house as a ‘flat’ or an ‘area’ and describe the sharing of the land as a ‘lease’. If you wish to make changes to your part of the property, you often need your neighbour’s approval. Issues with cross lease properties Cross lease arrangements often involve shared property and responsibilities eg: driveways and fences. It is likely you’ll need their consent if you want to make changes to your property, so a good relationship with your neighbours is essential. Any changes may affect their property rights as well. Better communication means you can discuss your plans, address any concerns, and negotiate potential compromises. It is because of these restrictions that cross lease properties often have a lower market value compared to freehold or fee-simple properties.


so.... how do you do it? Let’s look at the 5 key steps to ensure a smooth property conversion.


1. Talk to your neighbours: The first step is to discuss the proposed conversion with your cross-lease neighbours. All of the cross-lease owners will need to agree to the conversion because their properties will all be converted to freehold at the same time. This process may require some negotiation with the other owners to ensure that everyone is comfortable with the process and agreement has been reached about how the costs will be shared.


2. Engage a surveyor: Once agreement with your cross-lease neighbours has been reached, you will need to engage a surveyor to obtain a subdivision consent and draw up the new survey plan to define the boundaries of the new fee simple titles.


3. Complete physical works: Once you have obtained a subdivision consent and survey plan, you will need to complete any physical works required by the Council as set out in the subdivision consent. This could include things such as installing separate water meters for each property, making alterations to the driveway, or installing infrastructure for other shared services. Once the works have been completed, you will need to obtain Council’s sign off to proceed with the conversion.


4. Talk to your lawyer: You should discuss your conversion plans with your lawyer early on in the process. Your lawyer will assist by:

  1. Reviewing the resource consent, survey plan, and the current cross-lease titles;

  2. Streamlining processes with your surveyor and the neighbours’ lawyers;

  3. Drafting surrenders of the existing cross-leases;

  4. Drafting new easements between the owners and working with Council and other service providers to obtain any other easements required by the subdivision consent;

  5. Dealing with your bank in order to discharge the existing mortgage from your cross-lease title and registering a new mortgage over the new freehold title;

  6. Submitting all required information to Land Information New Zealand (LINZ) to obtain the new freehold titles.


5. Update your mortgage: If your property has a mortgage, your bank will need to be notified of your intention to convert the property to freehold ownership. The bank will need to consent to the conversion and agree to discharge the existing mortgage over the cross-lease title and register a new mortgage over the new freehold title. You should also update your insurance cover once the new titles have issued.

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© 2023 by Jess Pronk Mortgages. 

JESSICA PRONK NEE BARLOW GIVES FINANCIAL ADVICE THROUGH HER COMPANY JESSICA PRONK

FINANCIAL SERVICES LIMITED TRADING AS THE MORTGAGE SUPPLY CO

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