Cross lease conversion discussion over coffee

In 2019, the New Zealand Herald ran an article ‘Cross about Cross-lease: battles from the property combat zone‘, it featured AlexanderDorrington urging cross-lease property owners to turn their minds to converting their cross-lease titles to fee simple. Despite being frustrated by the complexities of living with a cross-lease, many owners are reluctant to proceed with a conversion. Some because of costs and others simply feel overwhelmed by the task at hand.

That’s why we aim to make the process as simple as possible. We have successfully guided our clients through many cross lease conversions. Those that have been easiest to complete have several consistent themes:

 

1. Communication

Successful conversions occur when there has been clear communication from the outset. We encourage our clients to first have the conversation with their neighbours, best done over a cup of coffee or some other choice of beverage (I am partial to a cocktail myself but maybe leave that for the celebratory stage). Discuss whether your neighbours have had the same thoughts. Many are not aware that a conversion is even an option and what benefits there are. Others worry about the costs involved. You could refer them to our current cross-lease offer, to get an idea on pricing.

 

2. Compromise/Consensus

Unfortunately, nothing in life is achieved without compromise. This is especially so with conversions where you must have consensus between the property owners to be able to surrender the leases, obtain the consents and complete the necessary transfers. One of the compromises we have seen is that if one particular owner is more enthusiastic than the others, they agree to front the cost of the feasibility report. The feasibility report is usually from the surveyor. It sets out whether, under current planning rules, the conversion would be achievable. It also sets out a more clear structure for both surveying and legal costs.

We find it is often necessary for the parties to compromise around how the underlying land will be shared. It is an issue that sometimes hinders consensus but with compromise can be overcome. For example, by way of monetary compensation.

 

3. Coordination

Coordination is imperative for any successful enterprise. Without someone at the helm, it’s easy for a project to lose its way. We recommend the property owners nominate one of them as the main spokesperson. They coordinate with the surveyor and solicitor throughout the project. The spokesperson ensures the consultants receive one collective message after consulting with all parties (who also receive all correspondence).

 

Real-life example

By way of example, one of our recent conversions involving three lots, utilised the above principles. It was successful mainly due to the parties’ willingness to discuss and come to an agreement on many of the main issues. These included the share of costs, the consultants to employ and the value of land transfers. The owners discussed and agreed on these issues without our involvement. Our role was simply to implement what was agreed on, by way of land covenants, easements and the like.

 

If you are considering a cross-lease conversion to fee simple, please call me for a no-obligation chat about what’s involved (09) 375 2795.

By Christine Cechova