2 units under 1 title, on cross leased land

[learningInProgress]

Hi All,

Would love to hear expert opinion please!

I stumble into a property consist of 2 single level units, both with 2 brms and it's being built on a cross leased property.

I would estimate that the rental of this units would be able to cover the mortgage loans.

What concerns me is the cross leased title as I would imagine it will be problematic to subdivide the land or if I wan to do some improvements.

Any thoughts for this kind of property?

[ivanp]

We've just finished subdividing a cross-lease of two halves into two freehold properties. We didn't need to move any communications to subdivide, so the whole exercise was just surveyors + lawyers, and it took something like half a year (including Christmas period in the middle). The cost for my half was $7900 (so total cost to subdivide was $15.8k)

[Damap]

Do you mean your half of the cross lease has 2 units on it or you are buying both halves of the cross lease?

If the latter then as ivanp says it is no problem. If you're in Auckland check the future zoning as a lot of crosssleases are reverting to 1 dwelling if you try to develop them.

If the former then you need neighbours consent to do pretty much anything but if the yield is good buy them!

[Gladdynook]

We've just finished subdividing a cross-lease of two halves into two freehold properties. We didn't need to move any communications to subdivide, so the whole exercise was just surveyors + lawyers, and it took something like half a year (including Christmas period in the middle). The cost for my half was $7900 (so total cost to subdivide was $15.8k)

Did you need to run new sewer, storm water etc? If not, how was the drainage set up? Separate lines already, or ok to leave joined?

We're about to do our own house so am very interested in your experience. Cheers

[ivanp]

We had everything separate already, so didn't need to dig/move anything. Not sure what are the requirements though.

[learningInProgress]

Do you mean your half of the cross lease has 2 units on it or you are buying both halves of the cross lease?

If the latter then as ivanp says it is no problem. If you're in Auckland check the future zoning as a lot of crosssleases are reverting to 1 dwelling if you try to develop them.

If the former then you need neighbours consent to do pretty much anything but if the yield is good buy them!

Hi, thanks for your comments. The property is 2 units on one cross leased title. There are at least 3 other "cross leased" title on this plot of land.

I want to understand more, why you only look at the yield that will cover the rental and not really bothered about the cross lease title that may make things difficult for doing anything?

[Anthonyacat]

I want to understand more, why you only look at the yield that will cover the rental and not really bothered about the cross lease title that may make things difficult for doing anything?

The idea here is that if the property is a good buy as-is, why go to the effort of changing it? There are plenty of good rentals out there that need nothing 'done' at all - just some maintenance and internal refreshing, which isn't affected by the cross lease nature.

The first property I purchased was a cross lease. I have the grand ambition of one day owning all 6 titles and doing something with it, but in all likelihood that'll never happen. I'm not able to make any changes, but it happily pays for its own expenses, give me a small amount back each week, and has almost doubled in price since 2012.

[Damap]

The problem with cross lease is you are somewhat at the mercy of other owners. There are legal avenues to get things done if you have trouble but it is better to look at the purchase, especially in this case with multiple owners, on it's current merit. Are you happy to buy it as is and just enjoy the income? If you are looking for a development site then you need to look at the flats plan and most importantly read the lease details. You need to know exactly what is written intot he lease for dealing with conflict resolution.
If it doesn't mention "binding arbitration" then don't buy it if you want an easy development option. If you google NZ cross lease binding arbitration you will see the top entries are high court cases.