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Cross Lease – What Exactly Is This?

July 30, 2018
Categories
  • Corporate & Commercial Law
  • Property Law
Tags
  • Commercial
  • cross lease
  • development land
  • homes
  • leases
  • Property
  • residential
Crosslease housing

 

Now that the worst of winter seems to have passed and the property market is heating back up, it’s time to look at one of the questions our property team is commonly asked. There are a number of different type of property titles around but one of the less common ones is a cross lease and will usually apply to a development of flats or townhouses.

So what exactly is a cross lease?

With a cross lease title you will own a share of the freehold interest in all the cross lease development land, together with a leasehold interest in one of the dwellings in the development. The number of separate flats in the cross lease development dictates the undivided share in the underlying land that you will own. If there are 5 separate flats in the development, you will own an undivided 1/5th share in the underlying cross lease land. The other undivided shares in the underlying land are owned by the owners of the other flats in the development.

In addition to owing a share of the underlying ‘fee simple’ (freehold) estate in the development land, you will also have a leasehold interest in the flat itself, whereby you ‘lease’ the dwelling from the land-owners, usually under the terms of a 999 year lease. Under the lease you will have exclusive use of the flat and you will share the common areas, and responsibility for their maintenance, with the other flat owners.

The Landlord of each of the flats in the cross lease development comprises all the owners of the fee simple estate in the underlying land. Accordingly, if you purchase a cross lease property, you will become a Landlord as well as being a Tenant.

What do I need to look out for as a buyer of a cross lease?

1.     Check the flats plan! This plan indicates the layout, shape and dimensions of the property and it is absolutely imperative that the flats plan mirrors the external layout of the property. If it doesn’t, the title is defective and this can be very costly to fix and involves, amongst other things, the work of a surveyor to draw up a new flats plan and obtaining the consent of other cross lease owners in the development.

2.     Check for any structural alterations to the property (eg. an extension) or any structures not connected to the property (eg. a garage). This amounts to a breach of the cross lease if alterations have been made without the consent of the other owners, who could require these alterations to be pulled down/put back to the original form at your cost. Also, any structural alteration that is attached to the property and enclosed, which changes the footprint of the property (eg. an extension) needs to be reflected on the flats plan which, as stated above, can be a costly exercise. Practically, ask the person who carries out your building inspection to record any structural alterations they become aware of during their inspection.

3.     Check that Council consent was obtained for any works that required it. (This goes for whatever type of property you are purchasing, not just a cross lease.) Again, ask the person who carries out your building inspection to record any works they believe would, or may, have required Council consent.

4.     Read through the cross lease. You should familiarise yourself with the terms of the cross lease so you know what you can and can’t do in relation to the property. Understanding these terms is something your lawyer can help you with.

Why does that matter?

These types of issues can impact upon your ability to get mortgage finance and insurance. In the best case scenario you would check over all of these things before putting an offer on a property, however that might not always be practical due time or cost restraints. In this case, your lawyer will be able to help you put the appropriate conditions on your offer to ensure that, should it be accepted, you are in the best possible position before moving forward with the purchase.

Check out our article on “What’s Hiding in Your Lease?” for more: https://www.wakefieldslaw.com/whats-hiding-lease/

If you’re looking to purchase a property, let us help you make the complex simple. Give us a call on 04 970 3600 or send us an email at info@wakefieldslaw.com.

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