Purchasing A Cross Lease Property – What You Should Be Aware Of
When you are purchasing a Cross Lease property your Conveyancing Practitioner should be completing a Search of the Certificate of Title, Flats Plan, Lease and any other encumbrances registered.
In particular they should be checking the exclusive use of the Flat, and checking with you as the Property Purchaser to ascertain whether there have been any additions or alterations to the Flat which are not identified on the footprint of the Flat. If there have been additions or alterations which are attached to the original flat and enclosed and not noted on the Flat Plan then the Title should be requisitioned under Clause 5.2. This condition requires notice to be served on the Vendors Conveyancing Practitioner or Property Lawyer and must be done within the 10 working days from the date of the Sales and Purchase Agreement.
The notice served will require the Vendor to rectify the defect by updating the Flats Plan. The process involved would be very costly to the Vendor and both parties would have the right to cancel the Agreement for Sale and Purchase or come to some other arrangement.
There is a process to create Cross-Lease Subdivision and this is as follows:
1. The Flats Plan is drawn up by the Surveyor and this will show the foot print of each flat and the exclusive use area which goes with each flat together with the common areas.
2. The Flats Plan is approved by the Local Council.
3. The Flats Plan is lodged with Land Information New Zealand under Section 167 of the Resource Management Act 1991.
4. Lease documents for each Flat are prepared, each owner is both a Lessor and Lessee. Each Lease must contain:
- A term which is usually 999 years.
- The Lessee must remain as the owner of the share in the fee simple.
- Exclusive use area for the individual flat and covenant not to use the exclusive use area of the other flats.
- Covenant that each Lessee shares specified outgoings in relation to the buildings and land.
- Collective decisions of all Lessees.
- Covenant to use common areas for access purposes only and any other matters pertaining to the usage of the flats.
- Leases are registered with Land Information New Zealand and Certificates of Titles are issued for each flat which will note the Covenants.
