If you’re looking to buy an affordable house one of the options to consider is a cross lease property. We have received many questions from clients about how cross leases work, as this type of property title can be confusing to understand. This doesn’t mean you should take cross leases off your potential purchase list, but it is important to get good advice before you go ahead, so you can be confident that you know how the cross lease works.
By contacting our Property Law team we can help guide you through this process.
What is a cross lease?
Cross leases are a form of ownership that was used from the 1960s to the 1980s as a way of getting around subdivision restrictions, and are especially associated with semi-detached houses and pensioner flats. The main difference between standard freehold properties and cross lease properties is the ownership structure created by the records of title, which are the legal ownership documents for a property. For a standard freehold property the record of title will show that the registered owner(s) own the whole of a specified area of land.
A cross lease property on the other hand is made up of two legal components:
- An undivided share of the land for the entire cross lease development; and
- A lease, which is usually for 999 years, of one of the individual flats or houses in that development for a nominal rent such as 10 cents per annum (this normally doesn’t need to be paid).
Let’s consider a simple example. For a cross-lease development of three flats, each of the three flat owners will own an undivided 1/3 share of the land that makes up the entire block of flats. It is “undivided” because the freehold land is not subdivided, i.e. the owners hold a share of the land rather than owning a specific area of the land. Then collectively, all three owners lease each of the flats back to each other. This is what creates the “cross lease”. When one of the flats is purchased the new owner will receive the seller’s share of the underlying land and the seller’s right to lease the flat, which is set out in the cross lease.
Rights, Obligations and Restrictions
The cross lease document itself, usually called the Memorandum of Lease, sets out the terms of the lease for each flat, including the right to exclusively occupy the flat. Cross leases also impose rules on each of the flat owners which need to be followed. This can be a headache if you don’t get along with the other flat owners, so it’s a good ideal to talk to your real estate agent or the vendor to get an idea of what the other owners are like.
These are some common examples of terms:
- Maintenance
A cross lease will either say that all external maintenance on each flat is to be done by that flat’s owner, or that some parts of the external maintenance are to be shared by all the flat owners. It is important to be clear about what who is responsible for what.
- Unauthorised structures and alterations
Cross leases generally require the written consent of all the flat owners to any structural alterations or extensions to the flat, and consent may also be required for any new outbuildings such as sheds, pergolas or conservatories. It is important to check if consent to any changes has been obtained, otherwise there is a risk that the other owners could demand that any previously built unauthorised structures are removed.
Internal structural alterations may also require the consent of the other flat owners, particularly when the flats share an internal wall.
- Pets
The lease will often include a restriction on owning pets that might annoy the other flat owners, such as noisy or menacing animals.
- Residential use only
There may be a requirement that your flat can only be used for residential purposes. If you are considering running a home business which would increase traffic or noise during the day, then the other flat owners could object to your using the flat for business purposes.
There is no standard form for a cross lease and these terms can vary, so we recommend a careful review of the lease documents for each property that you are considering buying.
Check the Flat Plan
Apart from the cross lease document, the other key document that should be checked carefully before your purchase is the flat plan. This document shows the original footprint of the flat, which can help you to identify whether there have been any unapproved additions made to the building or structures added. If the footprint on the flat plan does not match the actual building, then the cross lease is defective, and a new flat plan will be required. This involves significant costs, including surveying, legal and council fees so it is important that if there is an issue, it is identified before you commit to purchasing the property.
The flat plan will also show you if there are any “exclusive use areas”. These reserve parts of the land, such as driveways and front or back yards, for the exclusive use of a particular flat owner. If there are no exclusive use areas, then any flat owner may set up their deck chair on any part of the land, even if it appears to be your back yard!
How Can Our Team Help You?
Our team of property law experts are well equipped to help guide you through how cross leases work. Whether you are looking at purchasing a cross lease property, or have already purchased and want to understand your rights and any restrictions to making changes to your property, our team at Carlile Dowling are happy to help. Don’t hesitate to reach out to us for advice, fill out our online form here and we will get back to you as soon as we can.
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