As a rough indication, costs in 2023 are usually between $23,000 and $25,000 for a two-unit lot cross-lease conversion. However, the costs can vary, often involving legal and surveying expenses. It may also depend on the number of owners involved and potential complications.
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“My partner and I want to put in an offer on a first home in Christchurch. It ticks all the boxes for us however it is a cross lease with the house behind, with both houses sharing 950 m2 odd.
I am aware of the complications that can occur with a cross lease Vs freehold. Does anyone know how much a houses value is affected by it being freehold? And how much it would roughly cost to eventually convert the title to freehold?
Thanks”
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Hello! I can help you understand the differences between cross-lease and freehold properties. The difference in value between a cross-lease property and a freehold property can vary depending on several factors, including the location, property condition, and local market conditions. Here’s some information to help you understand the difference and choose the best option:
Differences Between Cross Lease and Freehold
Cross-Lease: When you enter into a cross-lease agreement, you become a co-owner of the land along with other property owners. This means that each owner holds a lease over their respective portion of land and a share in the common land owned collectively. As a result, you may be subject to certain limitations on what you can do with your property and the common areas. Additionally, if you wish to make any significant changes or additions to your property, you will need to receive the consent of the other property owners.
Freehold: With a freehold property, you have complete ownership of the land and its buildings. You have more control over your property and don’t need to seek permission from other property owners for changes or developments.
Impact on Property Value
In general, freehold properties are considered more valuable than cross-lease properties because they offer greater control and flexibility to the owner. However, the impact on property value can vary depending on factors such as the terms and conditions of the cross-lease, the property’s location, and the local real estate market. It’s crucial to obtain a professional property appraisal to accurately determine the value difference in your specific case.
Converting to Freehold
As a rough indication, costs in 2023 are usually between $23,000 and $25,000 for a two-unit lot cross-lease conversion. However, the costs can vary, often involving legal and surveying expenses. It may also depend on the number of owners involved and potential complications.
It’s advisable to consult with a property lawyer or conveyancer who can guide you through the conversion process and provide an estimate of the costs involved.
Choosing the Best Option for Home Buyers
Choosing between a cross-lease and a freehold property depends on your preferences, budget, and willingness to deal with potential limitations and complexities.
If the cross-lease property meets your needs and is priced competitively, it can still be a good option, especially if you plan to live in the property for a shorter period. Just be aware of the potential complications and consult with experts.
Seeking Financial Advice
Before making any decisions, it’s advisable to consult with a financial advisor or a mortgage broker. They can help you assess your financial situation the overall cost of the property (including conversion costs), and determine the best approach for your specific circumstances.
To summarise, cross-lease properties may be cheaper than freehold properties but have potential complications. Choosing between the two will depend on your unique requirements, financial status, and willingness to manage the limitations associated with cross-lease properties. Seeking advice from property law and finance professionals can assist you in making a well-informed decision.
I hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The information in this post is only general in nature and is not personalised financial advice. Please get in touch with us if you want financial advice.
