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Changing a cross lease to a Fee simple or freehold property

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  • Changing a cross lease to a Fee simple or freehold property

    Hi team

    I have a cross lease property and I want to explore the option of converting it to a fee simple of Freehold title.

    First of all i guess I better ask if this is possible?

    if so

    - What is the process or first step to get the ball rolling?
    - Costs involved?
    - There is only one other property in the cross lease
    - Time Frames?

    Any advice would be greatly appreciated from some one who has knowledge or has done this before

    Thanks in advance and I look forward to some advice

  • #2
    Hi Jaza,

    Firstly, if all you want to do is to transform into one freehold section with two houses on it, then no problem whatsoever....surrender the leases, apply for a new certificate of title. Mortagee consents might be an issue but that will be it. Cost 1-2 grand max, quite possibly less, not counting any bank fees. Pretty quick, too, 3-4 weeks, most of which will be waiting for a new title from LINZ.

    If you want two freehold titles, perfectly possible as long as you qualify under freehold subdivision criteria (check with Council, or your surveyor if you have one lined up). Might be difficult if the buildings are very close or actually touching, but that's what party wall easements are for.

    First step is to check eligibility and make sure all parties concerned with the property consent, including mortgagees.

    Second is obtain subdivision consent, with a draft survey plan

    Third do the formal survey plan and have it approved as to survey,

    Fourthly the legal side required to deposit the plan and obtain new titles, including any easments/covenants that might be necessary.

    Overall cost or time frame I'm not really able to say, as I don't generally get to see the costs from Council or the surveyors, and those tend to be the bulk of it. Legal side might be $2-3k, but could vary hugely depending on easements and Council requirements...could also be quite straight forward and less than indicated. Timeframe on legal side...around 4-6 weeks, maybe more if other parties are slow to respond, half of which is awaiting deposit of the survey plan and production of new titles. Part of that timeframe will overlap with the survey side.

    I guess I should add that if you own only one of the properties, the other owner may try to insist you pay their legal costs, even though it is to their mutual benefit.
    Last edited by Ivan McIntosh; 01-06-2011, 06:50 PM.
    Consultant, Vosper Law
    07 827 6140 / 021 499 646 [email protected]
    The Alpha Street Lawyer
    | The NZ Property Lawyer

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    • #3
      We had a 'off the top of the head' estimate of 30K-50K, depending on what, if any, work was needed to separate underground services - pretty much the cost of getting a new consent!

      In theory would have unlocked $80K-$100K value (value of two separate titles compared to value of one title, two houses).
      DFTBA

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      • #4
        Speak to a land surveyor, from memory a non complex Cross lease conversion to a Freehold title used to cost about $4k or so.
        Eitherways, a LS will give you a free quote and tell you the ins and outs etc

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        • #5
          I looked into doing the same thing and it was going to cost $2k just in council & LINZ fees. On top of that would be writing the consent application, installing any necessary services (or changing the existing ones), survey work & legal costs.

          In terms of time frames council require 20 working days pretty much every time you get their approval for something - probably 2 x 20 days for this scenario. Then about the same for LINZ to approve & deposit a survey plan & issue titles. The time between all that is dependant on the surveyor & any servicing requirements.

          As a first step I would either talk to Council or a surveyor - they will be able to tell you what your options are. The bonus of talking to a surveyor is that they should be able to give you an idea of costs & timeline for the whole process except for the legal side of things.

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          • #6
            go for it Jaza and add value!!

            Or should I say Sellabilety... (if you spell it like that)
            Last edited by Orkibi; 01-06-2011, 07:59 PM.
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            • #7
              Originally posted by Orkibi View Post
              go for it Jaza and add value!!

              Or should I say Sellabilety... (if you spell it like that)
              agreed, I wont even look at a crossleased property

              Comment


              • #8
                Conversion of Cross Lease Title to Fee Simple Title.

                Conversion of Cross Lease Title to Fee Simple Title

                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.

                By Andre Conradie
                - RPC Land Surveyors

                www.RPC.co.nz


                Source: The Property Investor Network
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                • #9
                  When converting a cross lease to a fee simple, does a development fee apply? The cross lease in question was done in the 1990's.

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                  • #10
                    When converting a cross lease to a fee simple, does a development fee apply?
                    Probably NOT but you may need to upgrade some services.
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                    • #11
                      I know this is an old post but has some relevant points I'm trying to research. I'm creating a subdivision from multiple small titles to form two separate properties each with a dwelling on. I'm happy to separate services such as water, storm-water, power, phone, but the Council is insisting that we also separate sewer. This seems crazy to me as the sewerage line from property one currently runs across property two. Property two feeds into the same sewerage line. Property one will need to have an easement across property two for sewerage and the council want property two to break at the junction and have a separate sewer line running right beside the line for property one. In an ideal world property one sewerage should run out to the street it faces but the Council hasn't provided sewerage on that street. Given that the council cant provide a line to connect property one and we are forced to run it over property with an easement I don't see the logic in separating the two. They have existed this way for over 10 years. Can I do anything about this?

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                      • #12
                        you need top talk to civill engineer and see what they suggest and if they can argue your case with council.
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                        • #13
                          IF you want separate titles you need separate services. It's quite standard. Otherwise if you block your line the neighbours is also blocked. Council won't allow that.

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                          • #14
                            I can understand that logic but it has been that way for 10 years with it never being a problem before. And was that way for 50 years before the previous house on property 2 burnt down. It also means if there is a blockage in property one's line property two has to deal with having their section dug up. Which means destroying all the gardens and a lot of inconvenience, so two sides to the issue and not very clear cut.

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                            • #15
                              I disagree. It is 100 percent clear cut. Separate titles means separate services.

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