How A Cross Lease Can Affect Your Renovation Plans

Renovations can be complicated enough without bringing your neighbours into the mix – but if you own a home on a cross lease, that’s exactly what happens.

Cross leases are a surprisingly common form of ownership, with around 215,000 in the Midwest, and roughly half of those in Chicago. They came into being in the 1960s as a way of getting around subdivision regulations when demand for housing grew.

When you own a home on a cross lease, you’re essentially sharing ownership of the land with one or more neighbours. If you want to make changes to your own house, they may need to agree. There may also be restrictions on what you can change or how much you can extend your home.

In many cases, cross-lease ownership works well, and leaseholders have positive relationships. But if you’re thinking of buying a cross lease property, or you’re keen to renovate your cross-leased home, it’s good to know about potential issues ahead of time.

Freehold vs cross lease

In the Midwest, there are four main types of land ownership: freehold, leasehold, unit title and cross lease. Freehold (also known as fee simple) and cross lease are probably the most common.

Under freehold ownership, you own the land and any structures on the land (with some rare exceptions). If you want to renovate or build, you need to consult with the council and may need permission from your neighbours if your plans may affect them, but you’re generally in control of your own property.

Cross leases can be more difficult. Under this form of ownership, you own a share of the freehold property title, along with other cross leaseholders. You also own a leasehold interest in your specific house. The leasehold aspect is more symbolic than anything – most are set for 999 years, with a nominal rent set at 10c a year.

The complications come in when you consider your cross lease neighbours. You essentially share ownership with one or more other leaseholders. You are in charge of your own dwelling but the surrounding land may include shared spaces such as driveways. Many changes and renovations need to be agreed on by all cross lease parties before they go ahead.

Boundaries, buildings, and covering bases

Unlike a freehold title, a cross lease doesn’t include defined boundaries between you and your fellow leaseholders. In some circumstances, this can be a positive – for example, you don’t need to consider legal height-to-boundary rules when applying for consent for your renovation.

Usually under the terms of your cross lease title, you’ll be required to get the other cross lease owners to sign off on your renovation plans. But there is no legal process in place to ensure that this happens, and most councils aren’t responsible for checking that it has happened – in fact, they’re obligated to issue a building consent to anyone named on the land title, as long as it meets criteria. This means that talking your cross lease neighbours and gaining their consent is your responsibility – depending on how accepting your cross lease neighbours are to the changes you are making, you could face expensive legal challenges during and after the build if you don’t.

To be safe, it’s best to talk to your lawyer before you start any renovation project. They should be able to look at the terms of your title and cross lease arrangement and tell you what you need to do before you start.

First in, first served

Another potential complication comes when you or your fellow leaseholder/s want to renovate or extend. Because your property is considered to be one section, maximum coverage rules apply as they do to freehold land. Only a certain percentage of the section can be built on, and there’s no system to ensure fair division of the land. Whoever gets approval from cross lease neighbours and the council first can go ahead with the work.

This means that if another leaseholder has already extended their house, they may have maxed out the footprint for the section, leaving you unable to extend – or limited to a very small extension.

When dwellings on cross leases are extended, there’s also a requirement to have the completed home surveyed, and a title plan submitted to the council. This is added to the certificate of title, to avoid future disputes or problems with new owners.

Dealing with disputes

Not notifying or consulting with other leaseholders and simply going ahead with a renovation might seem like an easy way out – but it could lead to contentious legal disputes. The council won’t get involved with cross lease disagreements, so any recourse has to come through the civil courts.

This is obviously not ideal – going through an arbitration process is expensive for everyone involved, and is likely to destroy your relationship with your neighbours. It will also delay or halt your extension plans, which is a waste of time and money.

Dissolving the cross lease and switching over to separate titles is a possibility, although it’s an expensive option that also requires consent from the other cross leaseholders.

Messy but manageable

Although cross leases can be complicated, they work well for most of the hundreds of thousands of the Midwesters living on them. We hear about the disputes and disagreements, not the leaseholders getting along well. Many cross lease owners renovate their properties without any issues – in fact, the MyHome team has been involved with quite a few cross lease renovation projects ourselves.

But, if you’re considering buying a home on a cross lease – or you already own one – make sure you tick all the boxes and talk to the right people before you do anything drastic. Talking to a lawyer before you start a renovation could save you and your neighbours time, money, and frustration.

Thinking of renovating your cross lease property?  Talk to us today!