Why cross leases exist

If cross leases cause so much trouble, why did anyone make them? The short answer is that they were a way around the council rules on cutting up land. From the late 1950s they let people put more than one home on a section without cutting it up. The law changed in 1991, but by then there were a great many of them, and they are still here.

A cross-lease means you own a share of the whole section with your neighbours, and you lease your own flat back from all of the owners, usually for 999 years. So you are one of the landlords, and also a tenant of your own home. The paperwork calls each home a flat, even when it is a whole house.¹

If you are looking at a cross lease house right now, start with what a cross lease means in practice. This page is the background.

Most of this history comes from the Law Commission, the independent body that recommends changes to the law, which reviewed cross leases in 1999. It put their origin plainly: they began “as a means of exploiting a loophole in the rules restricting subdivision of land”.⁵ Auckland Council’s 2017 study of whether cross leases hold back rebuilding in Auckland tells the same story in more detail.

Before 1958: one house, one section

Until the end of the 1950s, owning a home here usually meant owning a house on its own section of about a quarter or a fifth of an acre. Normally a section held only one house. Council rules would not let people subdivide, meaning cut a section into pieces small enough to fit more homes.¹

The country was also short of houses. The council’s study gives an official estimate of 20,000 homes short in 1942, and says demand stayed strong after the war.

Flats could have helped, but there was no simple way to own one. You could hold shares in a company that owned the building, or be one of several owners under a deed. What you could not get was a flat on its own title, the official record of who owns a property and what rights and restrictions come with it.²

1958: a way to own a flat

In 1958 Parliament changed two Acts so that leasing part of a building no longer counted as subdividing the land. The cross lease was designed to rely on that change.⁵

A lawyer saw the opening and drafted the first cross lease. Everyone who owns a flat also owns a share of the whole section, and together they lease each flat to its owner. That lease did not count as a subdivision, so the section stayed in one piece. Yet each flat got its own title, and for the first time people could own a flat on its own.²

1971: separate houses on one section

At first a cross lease could only cover flats inside one building. In 1971 the law changed again, so that people could cross lease separate buildings on the same section too.

The Law Commission says this greatly helped the spread of infill housing: new houses built on part of an existing section, usually the old back garden.⁵ A big old section could now hold more than one home, each with its own title, without anyone subdividing it.

Why they caught on

The council’s study says cross leases became a popular way to develop older, larger sections, and gives the reasons. A cross lease did not have to meet the smallest section size the planning rules set for a subdivision. It was also cheaper to set up:

• The homes often shared drains and stormwater pipes, which saved laying separate ones.
• It avoided some council charges that a subdivision had to pay.
• Nobody had to set up a formal right of way over a shared driveway.²

1991: new cross leases count as subdividing

The Resource Management Act 1991 names cross leases in its list of what counts as subdividing land.³ Under that Act any subdivision needs the council’s consent, so from then on a new cross lease did too.¹

Even so, new cross leases did not stop overnight. The council’s study says the savings only went once each council had new rules in place under the Act. In Auckland the new rules came in between 1999 and 2011. After that, a cross lease saved little or no money, and people made fewer.²

New ones do still appear, but mostly when an existing cross lease is redone. If someone extends or rebuilds a house on one, a surveyor draws a new plan, it goes to Land Information New Zealand, and new titles come out. The 2017 study says most new cross lease titles in the years before came about that way.

Parliament is now replacing the Resource Management Act with a new Planning Act. The new law keeps the same rule: granting a cross lease counts as subdividing land.⁴

Why there are still so many

As at March 2016 there were 215,958 cross lease titles in New Zealand, and 47 per cent of them were in Auckland.² That was twenty-five years after the law changed.

They are especially common on Auckland’s North Shore. Planning rules there often stopped owners splitting quarter-acre sections, so cross leases took off. As at March 2016, about one title in three in the Kaipātiki area, which includes Northcote, Birkenhead and Glenfield, was a cross lease.²

A plan to phase them out, which never happened

In its 1999 review, the Law Commission proposed phasing cross leases out. Parliament never took the proposals up, so none of what follows became law.¹

The Commission’s first aim was to stop new ones being made. Eight years after the 1991 Act, it still saw new ones as a problem. For existing ones, owners would be able to convert whenever they chose. After a date at least ten years away, a cross lease would have to be converted before it could be sold.⁵

Its reason was the long run. Where infill put a new house beside an old one, the old one would wear out first. The Commission thought its owner could end up with a house that cost more to repair than it was worth.⁵

Because none of this happened, a cross lease today stays a cross lease unless the owners on that section choose to convert it.

For what a cross lease means if you are buying one today, see what a cross lease means in practice. For how owners convert one, see can you get a cross lease converted to freehold?

What to ask your lawyer

1. When was this cross lease set up, and does its plan still match the houses as they stand today?

Say these as they are written. They are normal questions to ask.

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