What is Cross Leasing

Cross leasing refers to a method of shared ownership of land and buildings by a number of people. It applies to situations where a single piece of land has more than one dwelling unit, which could be apartments or town houses. These units come with a composite title of ownership since both lease hold and freehold estates are part of the ownership.

Cross leasing is very common in New Zealand and is often referred to as Flat Plans. The basic idea behind cross leasing in the country was to ensure that the property does not get subdivided into smaller sections than what was originally permitted by the council. Thus several owners of land are linked to a single title. They also share the ownership equally and also any improvements carried out on the piece of land. Any changes, renovations or improvements need the consent of all the shareholders. Each of the shareholders then lease their apartment and associated buildings and a piece of the land which is generally the common land like a driveway. A cross lease has a definite time frame, which is usually 999 years.

When an individual decides to cross lease a property, he will be expected to pay a specific amount, equal to the sum paid by others who share ownership, and in return will get a definite share in the land and the building in question, and a long term lease for the building from all the co-owners which include the individual himself. Thus if the cross lease has five owners, each will get one fifth of the ownership and will lease his building from five people.

Problems linked to cross leasing

  • Any changes or alterations, upgrading work or renovation would require the approval of all the shared owners of the property
  • Conflicts can arise among shared owners when the perspectives of one are not shared by others
  • The use of common areas can often be a cause of conflict
  • Complete understanding of the concept of shared ownership is important to avoid confusion later
  • Restrictions are imposed on sub letting the building, apartment or town house
  • Alterations to one’s own dwelling unit are also in coordination with others
  • Sale of one’s share in a cross lease has to be sold after taking the consent of the other joint owners
  • Freedom to keep pets etc is not there, since prior approval may have to be sought.

While cross leasing has its disadvantages and can even curb the rate of appreciation of the property, it has served its initial purpose of preventing further subdivision of real estate areas. The ideal method of ownership may be freehold but cross leasing does inculcate basic human values like sharing, living harmoniously by adjusting with others, giving up something to gain something, and being able to develop the property in question in a much better manner with pooled resources. It fosters a sense of community living which in the long run is beneficial for individuals and society.

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