In March 2012, I published an article on cross lease to fee simple conversions. At the time it was stated that Council’s expectation was that services had to be brought up to current Council standards. This particularly applied to Auckland Council.
Since publishing that post, there have been a consistent level of enquiries from owners of Auckland property owners, yet not a single project has gone ahead. The reason for this has always been the cost associated with bringing services up to standard.
While every case is different and each must be assessed on its own merits, it is common to find that drainage has to be separated and new connections have to be provided. Adding to that the cost of a new shared driveway, Council’s fees, legal fees and consultant’s fees and the total conversion bill can be as much as $100,000.
This amount has to be evaluated against the actual gain in independent services, a new driveway and the enhanced valuation of the properties once fee simple titles are obtained. To date, clearly the viewpoint has been that the level of costs exceeds the benefits and enhanced valuation.
This begs the question; are Councils realistic in their expectation of upgrading of services? Converting the cross leases to fee simple does not introduce any effects on the environment. No new activities arise. If an old driveway is still good enough to service the two cross lease houses, why must it be upgraded? Similarly with drainage. Surely the shared drainage can be adequately covered by appropriate easements?
The above is exactly how Tauranga City Council treat these conversions. There requirements are simply that the properties have separate water meters. Driveways are not an issue and drainage is generally covered by appropriate easements. Conversions typically occur when a house is altered. Instead of upgrading the cross lease plan, a conversion to free hold take place.
Until there is a mind shift from Auckland Council on the requirements for converting cross lease to fee simple, it is unlikely that many cross lease to freehold conversions will take place in Auckland.
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