Cross-lease switch raises cost fears

By Ric Oram

property reporter

The Law Commission has received wide support for its proposal that cross-lease properties be converted to freehold title. But there are worries about what the move would cost homeowners.

Conversion of a cross-lease property could cost from several hundred to several thousand dollars, depending on how many people own homes on the property and how many alterations and additions have not been noted on the lease plan.

"There is general acceptance that something needs to be done about shared ownership," says a commissioner, Doug Dugdale.

However, the commission has delayed sending its report on the problem to the Government while it searches for an affordable conversion formula.

It wants a ban on new cross-lease properties and the compulsory transfer of existing ones to freehold within five or 10 years.

Public submissions say the cost of transfer will be a problem to some owners.

"There is no question that transforming the title will improve the value of their property, just like painting a house or putting on a new roof does, but that's no consolation if you don't have the money to pay for the improvement," Mr Dugdale says.

Justice Minister Tony Ryall is also worried about compulsion.

"A lot of people on cross-lease properties in rural electorates like mine are on low incomes and many have lost equity because of declining house prices. Converting to freehold is therefore not affordable."

He admits that freeholding might increase property values in the cities, but doubts it would have much impact in depressed country areas.

The commission says the basic problem with the cross-lease system is that people are unaware of the snags.

Buyers of cross-lease property may be told by a real estate agent that they are "as-good-as" owners. But the commission says this is not true.

For example, they cannot erect a deck outside their unit without the consent of all co-owners.

They must also have the lease plan altered to show the addition. That can be costly, but without it the title is defective.