NEWS

Talking Property: Avoiding troubles with cross leases

John and Belinda are a young enterprising couple. They were both employed and were looking to break out of the rat race they were in and to provide their best for their two young children. About four years ago, John and Belinda started investing in property. They started off with a cross lease unit. They purchased it at a low price and leased it. They got good at it and eventually in February 2016, they owned six properties. Each time they planned to purchase a property they consulted their lawyer who would peruse the Title, LIM report and Building report for them.

In February 2016, they looked at a one bedroom cross lease property which was managed by a Body Corporate company. John and Belinda thought it would be a good investment if they made some alterations and leased out the property. The real estate agent indicated that there was wide interest from prospective purchasers so they bid for the property at the auction before checking the Title as they thought that they knew all about cross lease properties.

A “cross lease” is where a number of people own an undivided share in a piece of land and each flat owner owns an equal undefined share in the underlying fee simple title. By way of a lease agreement the flat owner then “leases” from the other flat owner the exclusive rights to occupy their flat and associated grounds for a set amount of time (usually 999 years). The lease for each flat is registered on the Title of the respective flat. It is common for the lease to provide that prior to undertaking any alteration works to the flat, the lessee is to obtain the prior written consent of the majority of the lessors. Some leases provide that this consent should not be unreasonably withheld by the lessors. John and Belinda thought that their lease would be similar.

About a month later, John contacted the Body Corporate company to seek permission from the rest of the lessors to carry-out alteration work to add an additional study room to his dwelling to make it attractive to tenants. The Body Corporate company responded by saying that the complex owners had experienced some unpleasant situations with some owners who had undertaken alteration work on their dwellings and that they (the body corporate) were now taking a strict stance when approaching similar requests to undertake alterations. 

John tried to talk to the Body Corporate Administrator and the chairperson of the Body Corporate committee (represented by the owners) but was unsuccessful. John at this stage was panicking as it would be difficult for him to find a tenant with just a single room. Each day the flat is untenanted, he is losing money. Furthermore, John realised that his problem was not just obtaining the lessors’ consent but the Body Corporate company was making the whole process difficult for him.

John immediately contacted us. We perused his lease and advised him that his lease registered on the Title did not have a provision that consent from the rest of the lessors should not to be unreasonably withheld. We further found that the Body Corporate company had no right to manage the property in the way it did. Following our intervention, John and Belinda received the consent they required to proceed with their proposed alteration works.

Generally, not all agreements are the same. It always pays to refer agreements to your lawyer before signing, and consult with your lawyer regarding your plans or purpose for wanting to purchase that piece of property. Because no situation is the same, good advice is catered according to your needs.

Subscribe to our mailing list

* indicates required

View previous campaigns.