Cross-lease titles

Farmer Freddy finds out about cross-lease titles

Farmer Freddy is sitting reading the paper after his breakfast and a full on morning on the farm.  A large colour advertisement catches his eye for a lovely unit in town which would be perfect for his aging mother.

Freddy reads the article a little closer and notices that the property is a cross-lease. 
“Hmm, I wonder what that means, I thought all titles were freehold titles, like my farm title.  I will give Pebbles a call, she will be able to tell me”.

“How are things on the farm, how many calves do you have now?”, asks Pebbles.

“230!  Anyway Pebbles, what I rang for is that I have seen an ad for a property in town which would be great for your grandmother.  It is in her price range but the ad says it is a cross-lease title.  What does that mean Pebbles?”, quizzes Freddy.

“Dad, a cross lease title is a type of ownership where people own their own unit, but they also own a share in the freehold title (or the land).  Take for example a block of 3 units, the units are each owned by different people X, Y and Z.  Together X, Y and Z own an “undivided 1/3rd share” in the freehold land as “tenants in common”.  They cannot do anything to the land without all agreeing.  They each lease their units from each other on exactly the same terms, this is set out in the lease agreement.  If X wants to build another room on his unit he must gain the permission of owners Y and Z before he starts work.

“This process will also involve owner X in having the flats plan redrawn for his unit, as the footprint of the building would change.  He would need to have a surveyor draw up the plans and obtain new titles for each unit.  This also involves obtaining the consent of his bank or any other owners mortgagees.  This can be a costly process, but one that needs to be followed should he wish to make the alteration.  If he does not do this it may make the unit difficult to sell in the future.

“So Dad, if you take grandma to have a look at the property, make a mental note of the exact outline of the building and we can compare it to the title, should grandma wish to proceed with the purchase”, says Pebbles.

“Thanks Pebbles”, muses Freddy, “I’ll give Mum a call and see if she wants to go to the open home this weekend.”

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document. 
If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser.
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