Review of the Unit Titles Act 1972
IV. Issues
Flat-owning Companies and Cross-lease Schemes
This discussion document has referred in various places to the Law Commission’s 1999 Report Shared Ownership of Land, and its discussion of and recommendations on various aspects of the Unit Titles Act. The Report also discussed, and made recommendations on, issues relating to flat- and office-owning companies, and cross-lease schemes.
Issues relating to flat- and office-owning companies and cross-lease subdivisions were of particular concern to the Law Commission. In a flat- or office-owning company the development is owned by the company. Each occupier owns a parcel of shares in the company. Each parcel of shares carries with it the benefit of an exclusive lease or licence to a part of the building owned by the company. Specific amendments to the Land Transfer Act provided for registration of such licences.
The concept of cross-leasing originated with 1958 legislative initiatives that provided that leases of parts of buildings were not subdivisions of land. This basic concept was elaborated on in subsequent legislative changes and by various practices adopted by District Land Registrars. These developments enabled multiple units to be developed on sections that might not themselves have been subdivisible into separate titles.
The Law Commission described flat- and office-owning companies and cross-leasing schemes as "ingenious schemes" devised by conveyancers, prior to the passage of the Unit Titles Act, to enable medium- and high-density housing development.
While the Law Commission did not identify significant issues with flat-owning companies, it concluded that with the advent of the Act the reason for the existence of flat- and office-owning companies had effectively ceased.
The Commission also saw, following the Act, cross-lease schemes as no longer being required. More fundamentally, the Commission concluded for a variety of reasons that such schemes were "irremediably flawed". In the Commission’s view, they provide an essentially unsatisfactory form of tenure. The Commission thought that those problems were already significant, but would become especially severe as such developments neared the ends of their useful lives.
On the basis of those considerations, the Law Commission recommended that no further flat- and office-owning companies or cross-lease developments should be permitted. Voluntary conversion of cross-lease arrangements to unit titles was to be facilitated by a range of measures. More controversially, as proposed by the Law Commission, conversion of cross-lease arrangements would become mandatory after ten years.
Questions
81. Do you agree with the Law Commission that no further flat-owning company schemes should be created? If not, why not?
82. Do you agree with the Law Commission that cross-lease schemes are irredeemably flawed and that no further such schemes should be created? If not, why not?
83. If you do agree with the Law Commission on cross-lease schemes, do you agree with the Law Commission’s proposals:
• to facilitate their conversion to unit titles
• to make such conversion mandatory?
If not, why not? What other solutions do you suggest?