In recent times, it has become increasingly common for property owners to opt out of cross leases. They seek information and ideas on how to convert cross lease to freehold NZ. This shift is driven by several advantages associated with freehold (or fee simple) titles, including enhanced property market value, simplified property management, and the ability to undertake renovations without written consent from neighbours.
Conversely, under a cross lease title, even minor changes like converting a window to a French door may necessitate the consent of your neighbour. In cases where consent is withheld, there is a possibility that you may be required to undo the alterations (in the worst-case scenario).
Converting a cross-lease property to fee-simple titles can result in an immediate increase in the property's sale price, typically ranging from 7% to 20%. While the process may take some time, our team is dedicated to simplifying the process and making it a stress-free experience.
Convert Cross Lease To Freehold
Converting a cross lease to freehold ownership can result in an immediate boost in property value. However, the conversion process to change your cross-lease title to fee simple ownership is typically lengthy, taking approximately 8-9 months.
Below are some steps involved in the conversion process:
● First you need to discuss the proposed conversion with your cross-lease neighbours. Since all cross-lease properties will transition to freehold simultaneously, unanimous agreement among the owners is necessary. This phase may involve negotiations to ensure everyone is comfortable with the process and agrees on cost-sharing arrangements.
● After securing agreement from your cross-lease neighbours, you will need help from licensed cadastral surveyors, like CIVIX to further navigate the process. Our team will assist you in obtaining subdivision consent and create a new survey plan that outlines the new boundaries of your fee simple titles according to the cross lease legislation.
● Once subdivision consent and the survey plan are in hand, any required physical work specified in the subdivision consent must be carried out. This may encompass tasks such as installing individual water metres for each property, modifying driveways, or setting up infrastructure for shared services. After completing these works, an application will be submitted to obtain Council approval, enabling the conversion process to proceed.
Our legal team includes a skilled barrister who will remain actively involved throughout the entire process, ensuring full compliance with cross-lease regulations. Our lawyer's role encompasses several critical tasks:
● Meticulously review the resource consent, survey plan, and existing cross-lease titles to ensure legal adherence.
● Draft new easements between property owners as required by the subdivision consent and collaborate with Council and other service providers to secure any necessary easements.
● If your property carries an existing mortgage, our lawyer will liaise with your bank to facilitate the discharge of the mortgage associated with the cross-lease title and register a new mortgage over the newly acquired freehold title.
● Compile and submit all essential information to Land Information New Zealand (LINZ) to obtain the new freehold titles for your property.
● After the issuance of the new titles, our lawyer will assist you in updating your insurance coverage to reflect the changes in property ownership.
Do Both Parties Get Equal Parts After Conversion?
There's a common misconception that when two owners of a cross-lease property convert it to fee simple titles, they automatically split the land equally. This assumption often doesn't hold true due to the fact that the "occupying area" of the property determines the legal boundary.
Here's an example:
Let's consider you and your neighbour are the owners of a 1000 metre square, 2-lot cross lease. However, the current placement of your fence reveals that your property occupies 600 metre square, while your neighbour’s takes up 400 metre square. Your neighbour might assume that post-conversion, he'll acquire 500 metre square of land (half of the original plot). In reality, he'll only receive the 400 m2 portion on his side of the fence.
While you both hold a half share in the underlying land use, the legal boundaries upon converting from cross-lease to freehold are defined by their current occupied areas. It's not uncommon for neighbours to address this by reaching an agreement.
For instance, your neighbour could attempt to negotiate for a larger portion of land if there's a good relationship between you and your neighbour. However, it's important to note that you have the right to decline, and the matter may conclude there.
Benefits of Freehold Titles
In simple terms, if you were comparing two identical properties for sale, one with a fee simple and the other with a cross lease title, the freehold title property would generally be more appealing to buyers and likely achieve a higher selling price than the cross lease property.
Furthermore, under the Auckland Unitary Plan, there may be potential for additional development on fee simple properties. Depending on the size of your land share, you might have the opportunity to build multiple townhouses instead of a single dwelling.
Other advantages include:
● You won't have co-owners of the land, which can simplify the process of making additions or alterations to your property.
● When selling, you won't encounter disputes over potential title defects, which can arise if the property plan doesn't accurately depict your dwelling or any later-built structures (e.g., a garage).
Cross Lease To Freehold Conversion Cost
The cross-lease conversion cost is not fixed, it varies based on the location and the size of the property being converted. However, as a rough estimate, in Auckland, a 2-lot cross lease conversion typically costs between $38,000 and $40,000, while in Christchurch, it ranges from $20,000 to $22,000. These costs encompass surveying fees, legal expenses, and council LIMS fees.
In Christchurch, a $20,000 conversion expense generally corresponds to an increase in property value of approximately $20,000. In contrast, in Auckland, the potential increase in property value is often more substantial, potentially doubling the investment. For instance, if you spend $40,000 on converting your property in Auckland, it might result in an increase in value of around $80,000.
Auckland has a significant number of cross leases, some of which are highly valuable in today's real estate market. This makes the conversion to fee simple titles a worthwhile consideration.
It's important to note that all property owners must unanimously agree to the conversion, even if one owner covers the entire conversion cost. Typically, the cost is evenly divided among the owners because the benefits of converting to fee simple titles are shared among all parties involved.
Contact CIVIX to Convert Cross Lease To Freehold
Changing titles of cross-lease properties can be a multifaceted process. This entails a thorough legal subdivision of the property, which encompasses a land-transfer survey, including the placement of boundary pegs, among other crucial steps. Approval from LINZ (Land Information New Zealand) is also required.
Our team at Civix has done plenty of cross-lease conversions in Auckland, NZ.; our experience enables us to make the process simple & stress-free for you.