Buying a cross lease property

[Lenaaz]

Hi all,

We've been looking to purchase our first home for a while now and came across this property that ticks most of our boxes. Our main concern is that it's a cross-lease property (1 of 2 houses). The seller considered converting it to fee simple but their solicitor advised them it'd be too complicated, so they never went ahead with it.

The owners of the other property are currently living overseas and renting their house out. We asked the real estate agent to get in touch with them as we would like to discuss the possibility of converting the title to fee simple, prior to the sale. There is fencing in place to indicate property boundaries, it looks like they are not even sharing a driveway. I think the biggest problem would be splitting storm and waste water disposal, cabling, etc.

We don't have any experience with cross lease properties, are they very risky? If we were to leave it as is, would it be hard to sell in the future? Any advice is appreciated.

Thanks!

[donna]

Personally I don't think they're a big deal at all especially if it's just a couple of homes on the cross lease. It's when there are multiple homes it can become tricky. Of course it depends on what the cross lease agreement is - if it's been customised or it's the standard agreement. Ideally fee simple is preferred as it does mean what's yours is yours to modify without needing consent from the other property owner. In some ways I quite like them as it stops the other property owner from building up or out that may affect your property. In saying this, there are many examples of the cross lease just being ignored.

I've heard the fees from the council can be steep and that's the put off of converting to fee simple - not the legal fees. So you'd need to weigh up the all the costs and decided if you've got the stomach for it. You could be looking at thousands to get it sorted. If the property ticks all your boxes you could get it and do the fee simple title later on?

cheers,

Donna

[Lenaaz]

Thanks, Donna! Yes, we were told it could cost up to $30k and take several months to get this sorted... On the other hand, the RV of a cross-lease property will always be lower than a freehold property, so we were thinking that converting the title would increase the RV (hopefully!).

[Anthonyacat]

The last estimation I saw for freeholding a cross-lease came in just over $30k for the whole project. Not sure whether that was at the high end or low end of complicated, was a client's work and I just glanced at the documentation.

But don't worry about cross leases. I own two myself, one was an owner occupied property until very recently. The only problem I've ever had was that some crazy neighbours blocked us from getting piped gas installed on the property - because of the chain reaction explosions killing whole neighbourhoods. Otherwise, there's no issue and it only affects sale price a little, but you buy it cheaper than you would a freehold section, so there's no loss there either.

[Merlot Mike]

Hi all,

We've been looking to purchase our first home for a while now and came across this property that ticks most of our boxes. Our main concern is that it's a cross-lease property (1 of 2 houses). The seller considered converting it to fee simple but their solicitor advised them it'd be too complicated, so they never went ahead with it.

The owners of the other property are currently living overseas and renting their house out. We asked the real estate agent to get in touch with them as we would like to discuss the possibility of converting the title to fee simple, prior to the sale. There is fencing in place to indicate property boundaries, it looks like they are not even sharing a driveway. I think the biggest problem would be splitting storm and waste water disposal, cabling, etc.

We don't have any experience with cross lease properties, are they very risky? If we were to leave it as is, would it be hard to sell in the future? Any advice is appreciated.

Thanks!

I assume each is a standalone dwelling yes? In that case not too much of a worry except for the fact that you might need your neighbour's approval for any work that requires a council consent. I would be wary though of buying a cross-lease dwelling that shares building elements (roofs, walls etc) with the neighbours due to the potential insurance issues. In that case you are better off with a well run body corp that can collectively insure such structures adequately.

[Lenaaz]

I assume each is a standalone dwelling yes?

Yes, that's right. They don't share any building elements.