Background: Cross Lease and Fee Simple Titles

Cross leases were a popular form of “subdivision” going as far back as the late 1960’s. In the earlier cross leases there was often no distinction made between common areas and exclusive covenant areas.

Drainage was generally combined and kerb discharge for stormwater was common practice. This cost effective form of service provision ensured the continued popularity of cross lease developments amongst property developers.

With the introduction of the Resource Management Act and resultant district plans, Councils started to impose more rigorous controls on cross lease developments. In some instances reserve contributions were being charged. Drainage rules were brought in line with those required for fee simple subdivision by mid 1990. This brought virtually all cross lease development to an end.

When undertaking a conversion to fee simple title, there are three issues to consider:

  1. Planning
  2. Services
  3. Contributions

Planning

Cross lease “subdivisions” from the 1990 era are likely to comply with Council planning requirements for parking and open space. Covenant areas were generally fenced and it is not likely that there will be any issues creating the new fee simple boundaries to reflect the previous covenant areas.

Earlier cross leases will often not comply with current planning rules. Councils generally accept the situation as existing and accept that the conversion of the cross lease to fee simple does not introduce additional effects.

Services

It will generally be the expectation of Councils that services are upgraded to current subdivision standards. This can often be costly depending on the location of Council services in the area and the style of drainage that was used for the cross lease. It should also be noted that different Councils have different service requirements.

Some Councils require all overhead utility services to be replaced with underground services. Again, this can be a significant cost.

It is unlikely that a common driveway being 20 – 30 years old comply with Council requirements for joint driveways. Depending on the condition of the existing driveway, there may be a Council requirement for replacement of the driveway.

The combination of drainage, driveway and utility services costs can easily outweigh the benefits and increased value that a fee simple title will create.

Contributions

Early cross lease developments attracted no contributions. Because the conversion to fee simple is not considered to be “development”, no contributions should be payable. The one gray area is that of reserve contributions. In some instances, Councils started charging reserve contributions on cross lease developments in the 1990’s. Where no reserve contribution was charged, it will definitely be payable upon conversion of the title to fee simple.

Conclusion

Upgrading a cross lease title to fee simple title will generally enhance the value of property. Associated costs can in some instances offset the enhanced value. It is important that proper due diligence is undertaken prior to proceeding with the conversion process.

We advise that you contact RPC Land Surveyors to assist you with due diligence or the process of converting your cross lease title to fee simple.

Andre Conradie
09 273 7505