Freehold or “fee simple’ title is the greatest legal estate
in land. It confers on the owner almost unlimited rights in relation to the
land. Those rights have been curtailed by various statutes. For example, all
land in New Zealand is subject to the Resource Management Act and, subject to
the zoning of the particular land, it is not possible to carry out any
activities on the land which are not permitted as of right without a resource
In recent years, it has become increasingly popular in subdivisions,
for developers to register land covenants against freehold titles regulating
such matters as building materials that can be used on the land. This is a
private form of regulation of the activities that can be carried out on freehold
Leases can range from as short as a weekly tenancy to
“ground leases”, which effectively run in perpetuity. All leases share the
common factor of being granted by a person with a greater estate in the land.
That greater estate may be either freehold or leasehold. Where the lease is
granted by the owner of a leasehold estate the new lease granted is called a
sublease. In the current market leasehold developments have become increasing
popular, particularly in Auckland where they have been used in the Prince’s
Wharf, Viaduct Harbour and Scene developments, among others. In those cases the
apartments within the buildings are held by the purchasers by way of a
registered lease and the lease sets out the terms and conditions on which the
apartments are occupied. For example, as to payment of rent, rent reviews and
the length of the term of the lease and whose responsibility it is to maintain
the apartment and the building in which it is in.
The Unit Titles Act was passed in 1972. It was recognised that the time had come
to make provision for individual ownership of units where the existing common
law relating to freehold titles struggled to contend with the complexities of
the ownership of units in multi-unit developments. The Act made provision for
subdivision of freehold or leasehold land into two or more principal units with
accessory units, for example carparks, and made provision for regulation of the
common interests of the owners of apartments within the building.
Over time a
number of problems have been identified with the Unit Titles Act and a review
of the Act by the Law Commission is currently under way. The review is likely
to identify areas where the Act can be updated to deal with some of the
problems identified and also to catch up with changes in lifestyles and
The Act is somewhat inflexible in dealing with alterations to the
units among other things.
The form of title known as cross lease was created in the late 1960s and early
l970s as a response to local authority requirements relating to minimum lot
sizes for subdivisions. At that time the quarter-acre dream was still a
reality, but an increasing population put pressure on to create infill housing.
The response was to create a cross lease which did not then constitute a
subdivision in terms of the Local Government Act, meaning that local authority
approval for splitting a parcel of land could be avoided. In order to explain
what a cross lease title is, it is best to use an example.
In the case of a two
dwelling cross lease, both owners own an undivided share (usually one-half
each) in the underlying land and each of them then takes a lease of their
respective dwellings usually for a term of 999 years. The leases confer
exclusive possession on the respective owners of their respective dwellings and
set out the terms on which each owner occupies his or her respective dwelling.
In some cases the ability of the owner to make structural or other alterations
to his or her dwelling is severally restricted and this can cause problems,
especially where the two owners are not seeing eye to eye. Also, even if the
alterations to the dwelling are carried out with the consent of the other owner
it is necessary to show the amended dwelling on a replacement plan deposited at
the Land Titles Office in order to ensure that the lease relates to all of the
new dwelling and not just the original dwelling. Failure to do this can cause
the loss of a sale in some circumstances.
Since the introduction of the Resource
Management Act 1991 cross leases have constituted subdivisions so all of the
benefits of avoiding the subdivision regime were lost then. Accordingly, it is
now very rare for new cross leases to be created.