conversion decision

The decision of Re Mckay [2018] NZEnvC 180 has been released.

Don McKay sought a declaration from the court that the conversion of a cross lease to fee simple was not a subdivision. That would mean resource consent would not be required. Debra Dorrington discussed the case in her May blog if you would like more background.

Deliberation

From the outset, Judge Kirkpatrick acknowledged that his decision would have administrative implications on the RMA. Accordingly, he invited various affected government departments and NZ Institute of Surveyors (“NZIS”) to make submissions on the issue. Only the NZIS responded to this request.

The judge considered the issue in the context of the law of property. Specifically the subdivision provisions of the RMA. Section 2 of the Act says a cross lease is:

“the lease of all or part of a building held by a person who has an interest or estate in the land on which the building is or is to be erected”.

In comparison, the subdivision of land means the “division” of an allotment. It can also mean an application for a separate certificate of title for land shown as a separate allotment on a surveyor’s plan.

The owners of a cross lease hold a combination of a lease of a building and an undivided share in the whole of the land on which that building and other buildings are erected. The share in the land doesn’t give the owner exclusive rights to use the land. It only gives the owners the right to use and enjoy the land in common with each other. The surrender of the cross leases alone will not create a sufficient title for the cross lease owners. They will also need to create separate allotments out of the underlying land that they own together.

Therefore, for an undivided share of an allotment (land) to become divided, the division of the land into two or more allotments is required. This constitutes a subdivision within the language of the Resource Management Act. It, therefore, requires a subdivision consent pursuant to sections 11 and 87B(b) of the RMA.

Decision

Although the judge declined to make a declaration that a conversion was not a subdivision, he did give some useful pointers. The judge noted that Councils should generally assess cross lease to fee simple resource consent applications practically. They should be mindful of the possibility that there may be few if any, material environmental changes warranting a full-scale assessment of the proposal as if it was a new subdivision creating additional parcels of land.

The judge referred to the Court of Appeal decision Spark New Zealand Trading Ltd v Clearspan Property Assets Limited [2018] NZCA 248. He noted that the definition of a subdivision in the Resource Management Act is not really concerned with land transactions unlikely to intensify development. These transactions neither increase the density of occupation nor impact adversely on infrastructure and other amenities.

By Zak Nasir