Converting Your Cross Lease Title to Freehold

Converting Your Cross Lease Title to Freehold

Last year we talked about the benefits of a freehold title over a cross lease, so this month we would like to give you an idea of what is involved in converting your title to freehold.

The Process to Convert Your Cross Lease Title

To convert your cross-lease title to a freehold (‘fee simple’) title you will need to follow the below steps:

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 benefits, which include:

  • Increased Control: With a freehold title, you have complete control over your property. This allows you to make additions or alterations to your property without needing to get written consent from your neighbours or needing to re-survey the cross-lease ‘flats plan’ to correctly show any changes you (or a previous owner) have made.
  • Avoiding defective titles: ‘Defective titles’ occur when cross-lease owners have made additions or alterations to a property without updating the cross-lease ‘flats plan’ to correctly show the changes. Cross-lease properties with defective titles can be harder to sell as purchasers don’t want to take on the additional risks or costs associated with fixing the title issues. Banks and insurers often place greater restrictions on lending applications for defective cross-lease properties for purchasers. Once you have a freehold title, you can avoid this costly issue altogether.
  • Reduced Risk: Cross-lease ownership can be complex and involves shared responsibilities between neighbouring owners. By converting your cross-lease property to freehold, you can reduce these risks and avoid disputes with your cross-lease neighbours over shared maintenance, insurance, and use of common areas.
  • Increased Value: Freehold properties are generally considered to be more desirable and consequently more valuable than cross-lease properties because you have full control over the property. Potential buyers do not need to worry about the complexities of cross-lease ownership or any defective title issues. This can make freehold properties easier to sell.

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 (e.g. drainage) for other shared services. Once the works have been completed, you will need to obtain the 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:

  • Reviewing the resource consent, survey plan, and the current cross-lease titles;
  • Streamlining processes with your surveyor and the neighbours’ lawyers;
  • Drafting surrenders of the existing cross-leases;
  • Drafting new easements between the owners and working with Council and other service providers to obtain any other easements required by the subdivision consent;
  • 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;
  • 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 been issued.

Costs When Converting Your Cross Lease to Freehold

Of course, there are costs associated with converting your cross-lease title to a freehold title, including survey costs, council consenting costs, legal costs, and the costs of completing any required physical works. Once you have obtained an estimate of these costs you should try to reach an agreement with your cross-lease neighbours to share these costs giving the benefit to all owners in converting their properties to the more desirable freehold titles. Cross-lease owners should weigh up the costs of completing the cross-lease conversion against the many benefits listed above.

Lisa and Steve Stone

Elite Agents for Ray White

Thestones.co.nz

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