Articles

Defective Cross Lease Titles

Friday, October 11, 2013

Looking at buying or selling a cross lease property? One of the most common issues plaguing cross lease properties throughout New Zealand is the likelihood the flats plan (which is meant to show the boundary lines of the house, garage etc) is out-of-date and has not been updated following structural additions or improvements. The reason: it's not, strictly speaking, necessary from Council's perspective, and building consent may be granted without any reference or requirement to update the property's flats plan. The flow-on effect from this is the flats plan (which is attached to the certificate of title) is "defective", arguably giving a purchaser the right to pull out of an otherwise unconditional sale and purchase agreement.

Rectifying a defective cross lease title's flats plan is relatively straightforward and mainly the domain of a registered surveyor. Basically, the property is re-surveyed and a new flats plan registered with Land Information New Zealand. To do this, the cross lease neighbours must have consented to the works, Council needs to grant building consent, and the works need to have been completed. The costs involved (circa $5,000.00) are significant enough to put most people off doing what is often believed to be non-essential paperwork!

The trouble arises when it comes to the property being sold. Purchasers who are properly advised by their lawyer about the defective flats plan will almost always demand a discount on the purchase price, on the basis they will have to arrange for the flats plan to be corrected after settlement. Vendors have little ability to argue without risking the purchaser pulling out of the purchase entirely. Well-prepared vendors who are aware of the issue can avoid it by inserting a condition in their sale and purchase agreement, effectively saying that the purchaser accepts the defective flats plan and waives any right to require such to be rectified. Well-prepared purchasers, of course, should know what this means in dollar terms and reduce their offer accordingly!

Practically speaking, a defective flats plan is of no real concern to the owner of the property until they wish to sell (although sometimes it can affect finance). Whether you are the potential purchaser or the owner of a defective flats plan cross lease property, you should know and understand the issue before entering into an agreement. $5,000.00 is $5,000.00 after all.

Brandon Cullen | Partner | Albany Office
(09) 966 3609 | bcullen@mcveaghfleming.co.nz

© McVeagh Fleming 2013

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.  


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