I went to the Environment Court last week; mainly out of curiosity. A case was being heard that will impact significantly on people who own cross lease properties.

It was an application to the Environment Court for a decision on whether a cross lease conversion to a fee simple title is a subdivision (and as a result whether it needs a resource consent).

The issue is one of statutory interpretation.

Unfortunately, I could only stay for a short time but while I was there the arguments made were extremely interesting. An experienced surveyor, Don McKay, brought the application. He described cross leases as “the greatest conveyancing problem facing New Zealand since the introduction of the Torrens system.” He said that cross leases “needed to go”. Mr McKay recognised the application to the court was only the beginning and believed legislation was required to get rid of them.

The judge was interested to understand why conversions of cross leases to unit titles did not happen more frequently. The Unit Titles Act anticipates that this can be done and provides a relatively seamless way for the change to take place. However, the conversions in this way have not been popular. He asked why. Those in the courtroom suggested that the main reasons the conversions were not taking place were due to two factors:

• the need for agreement between all the owners; and
• irrelevance of the unit titles regime to small developments

I also think the complexities and difficulties with cross leases create reticence. The unit titles regime allows for a unit to be established in precisely the same place as the lease area. The Unit Titles Act process is of no use whatsoever where the cross lease is deficient.

My colleagues and I will look out for the court’s decision with interest as it may open up significant opportunities for conversions.

Our experience of conversions

A number of clients have recently been asking us about how difficult it is to convert. They need to know how long it takes and how much it costs – this really varies. When all owners are cooperating, the exercise can be relatively painless. If any of the owners do not want to cooperate, the conversion can take a very long time. That, of course, adds to the expense.

We were pleasantly surprised to find that the requirements of Council in relation to a conversion were minimal. Our expectation was that the client would need to put in place new services. This was not required. Instead, a consent notice recognising current arrangements was registered against the title.

Find out more

For more information about cross leases vs fee simple titles check out the blog I wrote way back in 2012 which fully outlines the issues you should consider before buying.

The government website, settled.govt.nz also has a useful page on understanding the different types of property ownership.

Next steps

If you would like to pursue a conversion, we can help. Just give us a call on (09) 375 2770.

By Debra Dorrington

Read about the outcome of this case in Zak Nasir’s blog: Do you need resource consent to convert cross leases to fee simple?