Does the title matter? ABSOLUTELY!

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Clients often ask, “what is the difference between a fee simple and cross lease title?” and “what is a cross lease?”

Records of title, previously called certificate of title (“title”) prove the ownership of land and record the rights and restrictions using encumbrances such as covenants and easements.

The most commonly seen titles include cross lease, fee simple, stratum in freehold and leasehold. This article will provide you with a quick overview of these commonly seen titles.

Cross Lease

  • Cross leases are very common in city areas where they became popular in the 1970s as an alternative to a subdivision.
  • An example of a cross lease title is where you own two interests in the property:
  1.  A share of the freehold title in common with the other cross leaseholders; and
  2. A leasehold interest in the particular area and building that you occupy.
  • A lease document is registered against each cross leaseholder’s respective titles setting out rights and obligations. Each cross leaseholder then leases from each other, the exclusive right to occupy their dwelling and the immediate land surrounding the building for approximately 999 years.
  • Cross lease titles can be subject to rights of way (easements). There will be a dominant tenement (the party gaining the benefit of the easement) and a servient tenement (party granting the benefit or suffering the burden), depending on where the dwelling is built.

Fee Simple

  • A fee simple title is where the owner of the dwelling has full control and freedom to use not only the dwelling but the land surrounding it.
  • The owners can enjoy the freedom of permanent and absolute ownership of the land.
  • A fee simple title is one of the most common titles we see when dealing with transactions for conveyancing.

Stratum in Freehold

  • A stratum in freehold, also known as a unit title is typically seen when there are two or more apartment type developments on a lot. This type of title is similar to a fee simple title, but on a smaller scale.
  • This means that instead of owning the dwelling and the land, the owners of a stratum in freehold will own the dwelling and possibly any adjacent area/courtyard that the dwelling may have.
  • They will own the dwelling in full and can enjoy the benefits of it. It should also be noted that unit titles will usually be subject to Body Corporate rules and levies.

Leasehold

  • A leasehold title is where a person buys the right to occupy the land and/or dwelling for a specific period of time according to the terms set out in a lease.
  • In some cases, you will own the buildings or other improvements on the site, but you rent the land from the freehold owner.  The land and/or premises will have special conditions, obligations and rights that are valid throughout the period of the term.
  • At the end of the term, the land and buildings will be returned to the freehold owner in the condition specified in the lease.
  • The lease will typically set out the following:
  1. the amount of rent you have to pay to the freehold owner, this is usually called ground rent (usually 5% p.a. of the freehold value of the land to the landowner). The ground rent can be changed and will usually increase;
  2. how often the ground rent is reviewed by the freehold owner; and
  3. rates and other expenses relating to the property.
  • Types of residential leaseholds are flats and apartments, although some dwellings can be under long perpetually renewable leases (often called Glasgow Leases).
  • This is usually cheaper than buying freehold as you are not purchasing the land outright but only a right to use it for the period of the lease.  However, a downside to a leasehold title is the increased rent and a shortening term can have a negative impact on your ability to sell your leasehold interest which makes this type of title less attractive to buy.

If you are looking at buying a property or have questions about your current property title, please get in touch so we can help!

Amy Cheng
Amy Cheng
Author

2 Comments

  1. Amy Cheng; Hi Amy, reading your article was interesting and brought a question to mind.

    I have a section that is able to be subdivided but would need to have a shared access with a neigbour’s driveway to the rear part. I’m happy to buy the right of a shared driveway and he is willing to do so, my question is:
    ” How do we go about doing this and what would it be known as, an easement, cross lease or…..”?

    Kind Regards
    Dick

    • Sarah Hughes says:

      Hi Dick,

      We recommend subdividing rather than cross leasing as cross leases have become somewhat archaic now.

      There are two ways of creating the shared driveway access as part of the subdivision process.

      These are as follows:

      1. Registration of an easement to provide a right of way over the driveway on the respective titles; or
      2. A more modern approach is to have a shared interest over the driveway registered against the respective titles. For example, Lot 1 (property A) and Lot 2 (property B) will both own a ½ share in Lot 3 (driveway). You will not require an easement if you take this approach and it will be clear that if any maintenance or formation costs are incurred on a shared driveway, the owners of the two properties will each have to meet one half of those costs.

      We suggest you check with a surveyor as to which of the two approaches above is more suited to your situation, and as always, please give us a call on 09 303 3764 if we can help in any way.

      Hope this answers your query.

      Amy

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