Cross-leases: Navigating your way through your earthquake insurance claim


Trying to sort out an insurance claim on a cross-lease property can be very difficult as consent is needed from all neighbours whether deciding to repair, rebuild or sell "as is where is" after accepting a cash settlement.

Careful consideration needs to be given when dealing with neighbouring properties in a cross-lease development. A cross-lease property is a form of property ownership where the owners jointly own the land under a single title and lease each other exclusive use of a dwelling, usually a flat or unit, built on the land. 

Settling your insurance claim where every flat owner has their own insurance policy can pose a myriad of issues as you need to consider and deal with the terms and conditions in your lease document that is registered against your title. Care needs to be taken before any decisions are made in respect to your cross-lease property as things can get complicated quickly due to things such as differences in your insurance policy and the insurance policies of the other owners, and damage to shared structures. 

Altering your cross-lease property

If you are looking to repair or rebuild the flat and taking the opportunity to do some improvements at the same time, such as redesigning your flat in a way that changes its external dimensions, you will need the consent of your neighbours (and their banks). If you don’t do this then not only will you be in breach of your lease, but your title may also become defective. This can cause you a lot of issues should you decide to sell the property and it means that your neighbours may be able to force you to remove the offending alterations. You may also have to engage a surveyor to redraw the title. This can be an expensive and time consuming legal process, so if you are in this situation we strongly recommend you seek our advice as early as possible. 

Cash settlements 

If you are looking at accepting a cash settlement with the EQC and/or your insurer, and do not intend to repair or rebuild, it is important that you are aware that you neighbour may be able to force you to repair or rebuild the flat under the terms of your lease.  

Furthermore if you cash settle then do not repair or rebuild the flat this may cause you an issue if you go to sell. In order to reach a settlement of your EQC and/or insurance claims you will more than likely need the co-operation of the other flat owners to avoid exposing yourself to legal action from your neighbours. 

If your neighbours agree with you accepting a cash settlement on the basis that you do not intend to rebuild, you are looking at selling the property on an “as is where is” basis, and all of your neighbours are in the same position, then you might like to consider joining with your neighbours in marketing and selling the properties as a whole.  

Selling your property jointly with your neighbours properties can make the properties easier to sell compared with attempting to sell them individually. This is because any potential purchaser of the properties will not have to deal with any breach of lease issues in isolation to the other leases, and it can be attractive to property developers who intend to add value by redeveloping the cross-lease properties into fee simple titles, or a unit title development. 

In any of the scenarios above it always pays to talk to your neighbours early on in the insurance settlement process to ensure you can do what you are intending to achieve. Although it is important to get legal advice on every insurance settlement, it is especially important to get advice in relation to an insurance settlement where a cross-lease property is involved, as you will more than likely need the formal agreement from your neighbour(s) on a number of issues before you settle with the EQC and/or your insurer. 

Chapters 8 and 14 CCC plan 

When assessing what path to take in relation to your earthquake damaged home, if you are contemplating rebuilding your flat and taking the opportunity to expand its size, there are compliance matters that you should start taking into account.  The Christchurch City Council has published Chapters 8 and 14 and these chapters may affect your rebuild and it may be that your insurer will not pay for these compliance costs if you are completing an insurer lead rebuild, or your insurance cash settlement figure has not taken these additional costs into account.  Either way, you should seek legal advice on what you may need to comply with so you don’t receive a surprise when you apply for a subdivision consent and/or a building consent. 

The surprises that you could face if you apply for a subdivision consent may include the following requirements:

  • where infrastructure servicing the land has been damaged by earthquakes, whether repairs are necessary before the proposed development can proceed and whether repairs will be or have been undertaken;
  • providing an effecting management system on your land to collect all surface water from all impenetrable surfaces;
  • the requirement to plant appropriate vegetation to absorb water  

There are also some residential requirements that may also take you by surprise, such as:

  • the height of the finished floor level now required;
  • building height;
  • daylight requirements and recession planes;
  • setback requirements;
  • landscaping strips;
  • life-stage / adaptive design – these are design requirements to ensure the unit is user friendly for all stages of life.  The council will look at matters such as, the kitchen is not being a thoroughfare, what space is around beds to support ease of movement, the location of plugs/light switches/handles/window latches which should be within easy reach heights.  

The council requirements mean that depending on your development proposal you could face a significant cost if you are looking to rebuild on your cross-lease property and take the opportunity to increase its floor area.  We are happy to assist you with your decisions to ensure that you achieve the best possible outcome.

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Copyright © Cavell Leitch. All rights reserved. Redistribution is only permitted with express written permission. For enquiries please contact us. This article by its nature cannot be comprehensive and cannot be relied on by clients as advice. It is provided to assist clients to identify legal issues on which they should seek legal advice. Please consult the professional staff of Cavell Leitch for advice specific to your situation.