Property knowledge series: What’s the difference between cross lease and unit title?

Property knowledge series: What’s the difference between cross lease and unit title

If you look in older suburbs, it is common to encounter these two types of titles: Cross Lease & Unit Title.

Cross Lease:

A cross-lease creates two layers of rights – rights of ownership (fee simple interest), and rights of use (leasehold interest).

Let’s look at an example:

Assume we have a common small cross lease development containing two dwellings. The two dwellings are constructed on one piece of land, with each owner typically owning an undivided half share in the fee simple estate.

By virtue of mirrored lease documents registered on their respective titles, each flat owner then leases from both owners of the land the exclusive right to occupy their flat and the land immediately surrounding it for a prescribed amount of time (leasehold interest). Each flat owner will have their own title, combining their half share in the fee simple estate and a leasehold estate.

This is the key: the owners of the 2 dwellings collectively own the entire land and act as “landlords”. Then separately, each dwelling owner will lease their dwelling from both owners. In this case, the purchaser of a cross lease estate becomes both a lessor and a lessee.

Things to beware about cross lease: If you want to make external changes to the property, it must be consented to by the owners of the other flats.  If the neighbours are difficult to deal with, you will likely find that putting a garage or deck on the property to be trickier than expected.

Unit Title:

Unit titles also are common when there is more than one unit on one piece of land.

Usually associated with apartments, they can also be found in terrace homes and what we call flats. The key difference is with unit title the dwelling owner owns as fee simple their dwelling and the land marked out on the plans. However, the common property (driveways or shared carparking) is owned by the body corporate. The body corporate usually insures the outside structure (eg roof) too. The body corporate is a seaparte legal entity set up which is made up of all the owners.

With apartments, the common  property are usually lifts, fire stairs and ground lobbies. These are maintained by the body corporate and that is why apartment owners pay body corporate levies.

Things to beware about unit titles: Look at the Body Corporate minutes and pay attention to the Body Corporate Levies. In particular, you want to know what the levies are spent on and whether there are significant capital expenditure expected. It’s always a good idea to get a property inspection because you don’t want to buy into a development that requires expensive maintenance or leaky building type scenario.

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