Commercial Property: Cross Lease Owners' Consent.
Sam and Maureen needed new premises for their expanding GP practice. They found the perfect house which could easily be converted to a GP clinic.
The property was a cross lease title. The current owner used the house for residential purposes. Sam and Maureen checked the zoning with the Council and were told it was mixed commercial and residential zoned. They purchased the property and immediately undertook renovations. The renovations extended the house and therefore changed the footprint of the house. They obtained resource consent to carry out the building works.
Two years later they decided to sell the premises. They listed the property for sale and entered into a conditional contract for sale. The purchaser’s solicitor came back to them to say their title was defective.
They had failed to obtain the other cross lease owners’ consent to the alterations. In addition they had failed to update the title plan to show the change to the footprint of the premises. Also the cross lease governing their cross lease title only allowed for residential and not commercial use of the premises. They were in breach of their cross lease.
Sam and Maureen were confused. They had undertaken alterations to their previous property which was a fee simple title and hadn’t required their neighbour’s consent. Why did they need consent now? Also the Council had told them the zoning allowed for commercial premises.
They contacted their solicitor who informed them that cross lease titles are very different from fee simple titles. Most cross leases require the consent of the other cross lease owners to alterations of this nature. Where there is a change in the footprint of the premises you need to correct the title plan attached to the record of title which also requires your neighbour’s consent.
Their solicitor advised them to approach the other cross lease owners to obtain their consent retrospectively. The owners could not unreasonably withhold consent.
Once consent was obtained they would need a surveyor to prepare the new title plan. Registration of the new plan would involve surrender of their existing cross lease and replacement with the same cross lease just a different plan. If the other cross lease holders agreed they could also remove the clause restricting the use of the premises to residential only.
Their solicitor advised them that next time they wanted to do alterations on a cross lease title they should speak to their solicitor and their cross lease neighbours first.
If you feel you could use some specialist advice, don’t hesitate to contact the Property Team.
