Court decisions on subdivision

 

How interesting. Two recent court decisions each considered something that looked like a subdivision and asked whether it really was. Both involved common ownership.  Both involved exclusive use areas.

 

Environment Court

One was the result of a unilateral application by surveyor Don McKay.

Don wanted to simplify the conversion of cross leases to fee simple titles. The Environment Court was asked to declare that a cross lease conversion was not a subdivision. It refused.

In fact, the court tried really hard to find someone who would give an opposing view to Don’s, but without success.  Everyone seemed willing to see the demise of cross leases. In the end, the court appointed someone itself.  Dr Ken Palmer was given the role of assisting the court to consider the legal issues and make independent submissions.  Nonetheless, the court insisted a cross lease conversion was a subdivision.  Read Zak’s blog on that decision

 

Court of Appeal

Around the same time, the Court of Appeal was being urged to describe the sale of a share in land, with an associated encumbrance limiting the use of the land, as a subdivision. It refused.

And so we have the situation where, on one hand creating a title where property is owned in identified shares, subject to a lease and with a land covenant reserving an exclusive use area is a subdivision.

On the other, owning property in identified shares, subject to an encumbrance reserving use to a particular area, is not.

There are some brilliance and some daring in the proposal considered by the Court of Appeal. Clearspan Property Assets use it and I wonder the extent to which others may use similar scenarios for other purposes.  Clearspan touts itself as buying land under cell towers. Actually, it buys a share in land that has a cell tower on it. It then covenants that land to limit their area of use. So while they own a share in the whole of the land, they are able to use only relevant parts.

I wonder whether this is a useful alternate answer for those wanting to get rid of their cross leases? If a fully subdivided freehold title with easements is too expensive, whether because of council requirements or otherwise, how about simply surrendering the leases by agreement and registering land covenants creating exclusive use areas?  From a legal point of view, it is less appealing than a full subdivision. However, for those faced with the costs of conversion, it may be a viable option.

Debra Dorrington