Change to “Reasonableness” Interpretation for Cross-Lease Consents

On 16 April 2026, the Court of Appeal issued their decision in the case of Liow v Martelli. The case looked at the meaning of a clause that is commonly used in cross-lease titles. A cross-lease title often has a clause that requires no changes can be made to the structure of the house, or any other buildings without consent from the neighbour. This consent cannot be unreasonably withheld. The Court had been asked to decide what “unreasonable” meant for this context.

Why do we have cross-leases in the first place?

In the 1950s, local authority rules did not allow subdivision of land that would assist high density developments. However, a lease of part of a building was not a subdivision of land. This meant more than one residential unit could be provided in one building. The result of this was individual flats that could be separately owned without subdividing the land. In 1991, the Resource Management Act changed this, which means that cross-leases are now considered a subdivision of land, so consent is required.

What was the previous position?

In Smallfield v Brown, it was decided that consent is only unreasonably withheld when the proposed alteration results in “trifling detriment to the neighbour”. This case was decided in 1991 and had since been used as the test for unreasonable withholding of consent for cross lease structures. In the case, the addition of a deck and French doors was likely to result in a loss of privacy, increase in noise and visual intrusion so it was decided that the consent was reasonably withheld.

What was Liow v Martelli about?

The Martelli’s wished to make alterations to their cross-lease property, including increasing the size of the house, adding a pool and a deck, and removing a garage. The Liow’s disagreed and the matter went to arbitration. The arbitrator said the changes would give a large benefit to the Martelli’s and acknowledged the Liow’s concerns were greater than “trifling”. The Martelli’s then appealed to the High Court. The Liow’s disagreed with the High Court ruling and appealed to the Court of Appeal.

What did the Court of Appeal decide?

The Court of Appeal confirmed that they agreed with the High Court.

The High Court had previously decided that the test for when consent is unreasonably withheld was wrong in law. The High Court also said that reasonableness is not to be determined solely by the extent of detriment to the neighbour. The decision was that the neighbour must consider what a reasonable landlord would do when asked in the particular circumstances. This was made up of two parts, identifying the concerns and then determining if consent can be reasonably withheld. When considering to withhold consent, all of the owner’s interests all need to be considered. The decision was sent back to arbitration to be reassessed.

Why did they change the definition?

One of the reasons the Court changed the definition is the lifespan of a cross lease title. Most cross leases have a 999 year term. The Court recognized that over this term the structure will require rebuilding multiple times. As such, the goal was not to keep structures in the same layout for the entire term.

There was also a look to the future, as approximately 20% of cross lease dwellings in New Zealand were built in the 1970’s or earlier and are based in Auckland. A 2017 report from the Auckland Council noted that as these dwellings reach the end of their physical life, the ability for them to be redeveloped is restricted due to the consent requirements.

The test was considered too restricting. Using “trifling” as the measuring point means that when assessing a withheld consent, anything more than an insignificant effect will result in reasonably withheld consent. Trifling was also not used in the lease, and the Court determined it was not appropriate to include it. Both owners are on the lease and as such, all neighbours must consent.

The Court said a flexible approach was needed as circumstances change, particularly in respect of aging dwellings.

What happens if I didn’t get consent for my cross-lease alterations?

If you make alterations or additions in breach of the lease, then you may be required to restore the dwelling to its original condition, partly reverse the changes or pay damages. You can also be prevented from starting the work or continuing it if the breach is noticed soon enough.

What does the change in interpretation mean?

The biggest takeaway is that each case is going to rely on its own specific facts. The goal of this is to reduce unnecessary or overzealous withholding of consent. This will lead to more balanced assessments when looking at whether it is reasonable for the neighbour to withhold consent for alterations.

How do I get or give consent?

Consent in writing is suitable. If the neighbours do not provide such consent, then there is often a clause in the lease for when a decision needs to be made. All owners of dwellings on the cross-lease title are required to have their positions considered and to give or withhold consent as a whole.

The court also suggested that neighbours should consider a “Give and take, live and let live” approach. If parties engage constructively, a solution can often be found without having to involve the courts.

Next Steps? 

If you have questions about getting consent for works on your cross-lease title, get in touch with Brayden Cottom to guide you through the process.