Why Cross Lease Converter took Auckland Council to the Environment Court — and won
By Brent Clode
Article 4 in our ongoing series for Auckland real estate professionals on cross leases, property values, subdivision law and marketing opportunities.
1. A common misconception about cross lease conversions
There is considerable information on the internet suggesting that converting a cross lease property to fee simple requires owners to alter existing dwellings, separate drainage systems, improve driveways or bring infrastructure up to current development standards. This information can discourage owners from considering conversion and lead real estate agents to assume the process will be expensive or complicated.
For a conversion involving lawfully established dwellings and existing services, this is incorrect.
Cross Lease Converter has consistently maintained that existing, lawfully established development should not be treated as new development simply because the form of title is changing. This principle was central to our successful Environment Court appeal against Auckland Council in April 2024.
2. Why we challenged Auckland Council
Cross Lease Converter, through Development Partners Management Limited, funded and supported the proceedings that led to the Environment Court decision:
McDonnell & Mackenzie v Auckland Council [2024] NZEnvC 076 — 11 April 2024.
The case involved two existing cross lease dwellings at 86 and 86A Michaels Avenue, Auckland. The owners wanted to convert their two cross lease titles into separate fee simple titles. There was no proposal to build additional houses or intensify the residential use of the property.
Auckland Council granted subdivision consent but imposed conditions requiring the owners to demonstrate that the existing wastewater and stormwater systems were fit for purpose. These conditions went beyond identifying where the services were located. They required the owners to establish that the existing drainage systems were functioning adequately. We considered that approach inconsistent with the purpose of a conversion involving existing lawful development.
The matter proceeded to the Environment Court.
3. What the Environment Court decided
The Environment Court agreed that the disputed conditions could not be imposed in the circumstances of this controlled activity conversion. The Court made several important findings.
A. A conversion changes the title, not the physical property
The Court explained at paragraph [52]:
"In simple terms, the purpose of a cross lease subdivision is to replace a composite (freehold/leasehold) record of title with a freehold record of title."
In other words, the existing buildings and services remain as they are.
B. Existing services must be located
The Court confirmed that the relevant subdivision standard concerns the location of service connections and on-site infrastructure. Where services cross new property boundaries, appropriate legal rights may need to be established, usually through easements.
C. Council cannot require existing pipes to be proven fit for purpose
At paragraph [30], the Court found that the relevant specific standard concerned the location of services and did not extend to their condition, adequacy or functionality. For the conversion before the Court, this meant Council could not use the title conversion to require additional testing or upgrades of existing drainage systems merely to establish that they were fit for purpose.
D. The appeal succeeded
The Environment Court allowed the appeal and cancelled conditions 8 and 9, which related to the adequacy of the existing wastewater and stormwater systems. The judgment provides important guidance for qualifying cross lease conversions across Auckland and New Zealand.
4. What about existing houses and driveways?
For a standard conversion, the objective is to create separate fee simple titles around existing, lawfully established dwellings. The conversion itself does not require:
Existing development must have existing use rights which is demonstrated by a building permit or consent.
The important distinction is that converting the title does not, by itself, make an otherwise lawful existing house or service system a new development.
5. What does Auckland Council need to know about drainage?
One area that continues to require attention is the location of existing private stormwater and wastewater infrastructure. Auckland Council has a legitimate interest in establishing where services are located and ensuring that the new titles have appropriate legal rights to use them. For example, if a wastewater or stormwater pipe serving one proposed lot crosses the other lot, an easement may be required. Likewise, where a stormwater soakage system serves an existing dwelling, its location may need to be identified on the relevant plans. This is where CCTV drainage investigations to establish an as-built drainage plan is essential.
The objective is to locate the existing infrastructure and establish the appropriate legal arrangements.
6. The practical difficulty with older stormwater systems
In our experience, most conversions proceed without significant problems involving the existing infrastructure. However, some older Auckland properties present challenges. Common issues include:
These issues can make it difficult to establish the precise location of the infrastructure. In some cases, limited investigation or remedial work may be necessary to locate the services accurately. This is not the same as requiring all existing drainage systems to be reconstructed or upgraded to modern standards.
7. Repairs and maintenance are not the same as subdivision upgrades
This is an important distinction for property owners and real estate agents. All properties require maintenance, regardless of whether they are cross lease or fee simple. Older stormwater systems may become blocked, damaged or difficult to access. These issues may need attention as part of normal property ownership.
A blocked pipe is a maintenance issue. Changing a cross lease title to fee simple does not itself create that blockage.
Where drainage defects are discovered during a conversion investigation, the appropriate response will depend on the individual circumstances. The Environment Court recognised that existing environmental effects do not necessarily arise from the subdivision simply because a title is being changed. Separate obligations relating to maintenance, unlawful discharges or other regulatory requirements can still apply independently of the conversion.
8. What this means for real estate agents
For agents, the message is straightforward.
Do not assume a cross lease property is too difficult or expensive to convert simply because the house, driveway or drainage system is old.
The April 2024 Environment Court decision has clarified important limits on the conditions Council may impose for qualifying controlled activity conversions. Agents should consider discussing conversion with vendors before marketing, particularly where:
That could make conversion a realistic option for more owners than agents previously believed.
9. Obtain a customised conversion quotation
Cross Lease Converter specialises in converting existing cross lease properties to fee simple for $19,900 plus GST per flat/new title. We also offer an accelerated process under which suitable properties may be market-ready for sale as fee simple in approximately five working days, with settlement arranged for when the new titles issue.
Agents can obtain a customised quotation at: https://www.crossleaseconverter.nz/
The quotation includes the registered proprietors' names, legal descriptions, title references, pricing and conversion process information. It can be provided to vendors or included in a property appraisal or marketing information memorandum.
10. The important message
Older dwellings, driveways and drainage systems should not automatically prevent an owner from investigating conversion to fee simple.
Before advising a vendor that conversion will require expensive infrastructure upgrades, obtain a property-specific assessment.
The answer may be considerably simpler than expected.
Legal references
McDonnell & Mackenzie v Auckland Council [2024] NZEnvC 076
The Court allowed the subdivision appeal and cancelled the disputed stormwater and wastewater conditions. The separate application for general declarations was declined.
This article provides general information about existing development and cross lease conversions. Individual applications must be assessed against the applicable planning rules and circumstances.
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