What happens to council valuation (and rates) after cross lease conversion to f/hold?

[krypton_john]

Hi, we have a cross lease that is a little unusual. Our cross lease title says we have 75% share and neighbor has 25% share. The actual exclusive use boundaries are a little different - we have exclusive use of 78% and the neighbour 22% of the combined area.

We have a proposal under way to convert this to freehold. What will happen to the CV? The survey and resource consents are all based on the exclusive use boundary and everything has been approved by council and it is ready to be deposited with LINZ. However, it has ground to a halt because the neighbour has changed his mind and does not agree to proceed.

His main concern that the title says 25% but when he ends up with 22% his CV will drop, and this has become a sticking point to him agreeing to the freeholding.

Cheers
JohnO

[John the builder]

get a valuation?

[Sanya]

I Agree with John the builder. Get a valuation done. Usually when cross-leases are converted to fee simple the valuation increases. Freehold titles look far more attractive to buyers and therefore reach higher market prices.

Since you say everything has been approved by council which means you've completed a lot of work (presumably jointly?) already including surveying and possibly engineering reports, the reason for your neighbours change of mind needs to be understood. It may have nothing to do with valuations. It may be the neighbour is hoping for some compensation for his "perceived" loss of share.

[John the builder]

also you have to compare his current value which presumably only comes with 25% land use share so uless distorted by improvement valuesmeans you already have the more valuable share.As sanya says his value can only go up.

I agree with Sanya but be careful that you dont invite negotiation. Did you have an afgreement to do this? if so enforce it he shpould have thought this through already.

[donna]

^^ Plus if they only have 25% share they should only be paying 25% of the rates for the shared land.

A lot of cross leases have one property with a lions share of land yet the rates on the land are split 50/50. Going fee simple will ensure they're only paying rates on their land

cheers,

Donna

[heugumper]

A side question, does anyone have information on how much values rise when the CL title is changed to freehold? Even rules of thumb or specific examples. E.g. X% increase or $Y increase. We own a cross leased place and the neighbours are thinking of selling, so maybe I can get them to share the costs of freeholding to increase their sale price.

[krypton_john]

^^ Plus if they only have 25% share they should only be paying 25% of the rates for the shared land.

A lot of cross leases have one property with a lions share of land yet the rates on the land are split 50/50. Going fee simple will ensure they're only paying rates on their land

cheers,

Donna

In this case his rates are $4k and mine are $5.2k. So I'm 25% more but my CV is 33% more than his.

[krypton_john]

also you have to compare his current value which presumably only comes with 25% land use share so uless distorted by improvement valuesmeans you already have the more valuable share.As sanya says his value can only go up.

I agree with Sanya but be careful that you dont invite negotiation. Did you have an afgreement to do this? if so enforce it he shpould have thought this through already.

I should have explained better - the freeholding work was all done by the previous owner of our property. He just couldn't get it over the line so sold as a cross lease. Poor guy, he had a conditional offer $200k over ours but the condition was the freeholding completed.

We bought the property as a cross lease but are trying to convince the neighbour to proceed with freeholding it. I think someone's been giving him some bad advice.

[krypton_john]

A side question, does anyone have information on how much values rise when the CL title is changed to freehold? Even rules of thumb or specific examples. E.g. X% increase or $Y increase. We own a cross leased place and the neighbours are thinking of selling, so maybe I can get them to share the costs of freeholding to increase their sale price.

We've talked a lot about this with the surveyor. He estimates 10-15% increase in value.

[John the builder]

have you talked to council in how they will treat this?

[krypton_john]

have you talked to council in how they will treat this?

Talking to council ... involves going through a phone process with annoying menus and interminable waits before ending up with the wrong person so you go back to the interminable wait. Was hoping someone already had done this and had the answer.

[donna]

I should have explained better - the freeholding work was all done by the previous owner of our property. He just couldn't get it over the line so sold as a cross lease. Poor guy, he had a conditional offer $200k over ours but the condition was the freeholding completed.

We bought the property as a cross lease but are trying to convince the neighbour to proceed with freeholding it. I think someone's been giving him some bad advice.

Why couldn't he get it across the line?

cheers,

Donna

[krypton_john]

Why couldn't he get it across the line?

cheers,

Donna

The cross-lease neighbour changed his mind and wouldn't sign off on the freehold. that's still the issue I have now. He thinks that the CV on his property would drop because I'm not about to give him the 50m2 of land that is the difference between his exclusive use area and his title % share.

[donna]

What's more likely is your CL neighbour with the fee simple title will not immediately realise a rise in value but going forward it would and fee simple gives the homeowner more freedom etc.

You could get a valuer in - so your neighbour hears it from someone in the industry.

cheers,

Donna

[krypton_john]

What's more likely is your CL neighbour with the fee simple title will not immediately realise a rise in value but going forward it would and fee simple gives the homeowner more freedom etc.

You could get a valuer in - so your neighbour hears it from someone in the industry.

cheers,

Donna

Thanks Donna, yeah that's definitely a possibility.