Can your neighbour say no to your cross-lease renovation?
Planning an extension, rebuild, deck, garage or pool on a cross-lease property? Your cross-lease may require the written consent of the other owners, even if the work also has building or resource consent. The recent case of Liow v Martelli[1] clarifies when that consent may be withheld.
In that case the Court of Appeal rejected the restrictive approach commonly associated with Smallfield v Brown[2]. The question is now a practical and fact-specific one: could a reasonable lessor, considering the interests of all owners and the context of the cross-lease, withhold consent?
How does a cross-lease work?
Cross-lease titles were popular from the 1960s through the 1980s in New Zealand. They were widely used during this time as a cheap and fast way to put more than one home on a single piece of land. There remains approximately 2150,000 cross-lease titles nationwide.
A cross-lease owner has two interests:
1. an undivided share of the underlying land, owned with the other cross-lease owners; and
2. a long-term lease of their own dwelling, often for 999 years.
The registered flats plan identifies the leased dwelling. Other parts of the property may be common areas or subject to restricted-use rights. The precise position depends on the wording of the lease and the flats plan, so those documents should be checked before plans are developed or work begins.
Many cross-leases say that structural alterations cannot be carried out without the prior consent of “the lessors”, and that consent must not be unreasonably withheld. The Court confirmed that “the lessors” means all owners acting together in their capacity as owners of the underlying land – not simply the neighbour who objects.
The old approach: Smallfield v Brown
For more than 30 years, a statement in Smallfield v Brown was often treated as a strict test. Under that approach, consent would be unreasonably withheld only where the proposed work gave the improving owner a substantial benefit and caused only “trifling” detriment to the neighbour.
That approach strongly favoured the status quo. A neighbour could often rely on any impact that was more than trifling without a broader assessment of the proposal and the shared nature of cross-lease ownership. The Court of Appeal has confirmed that this was wrong in law: the words “substantial” and “trifling” do not appear in the usual consent covenant, and should not be treated as if they do.
What happened in Liow v Martelli?
Brett Martelli and Susannah Keith proposed a substantial redevelopment of their dwelling. The plans included:
- increasing the house from 114.5 m² to 169 m² and moving it from more than six metres to 1.4 metres from the boundary with the neighbouring exclusive-use area;
- adding a 27.2 m² in-ground swimming pool one metre from the boundary;
- adding 28.8 m² of decking between the house and pool; and
- removing a separate garage.
The neighbours, Sue Lynn Liow and Sai Hoe Tan, refused consent. An arbitrator applied the Smallfield approach and held that the refusal was not unreasonable because the effects were more than trifling. The High Court held that the arbitrator had applied the wrong legal test and returned the matter to the arbitrator. The Court of Appeal dismissed the neighbours’ appeal and agreed that the Smallfield test was wrong.
Important: the Court of Appeal did not decide whether consent to these particular plans should ultimately be given. That question was sent back to the arbitrator to be reconsidered under the correct test.
The new test
The Court of Appeal held, where consent has been withheld, the assessment has two stages:
1. Identify the actual reasons for withholding consent.
2. Decide objectively whether those reasons could justify refusal by a reasonable lessor, having regard to the interests of all lessees and the context of the cross-lease.
An individual owner’s genuinely held concern is relevant, but it is not decisive. The issue is not whether that owner personally considers the proposal harmful. It is whether the owners, acting jointly as the lessors, could reasonably withhold consent. Personal animosity or an unrelated dispute is not a proper reason to refuse.
What will be relevant?
The Court deliberately avoided creating another rigid checklist. It said a reasonable lessor will normally take a balanced approach and may consider matters such as:
- effects on privacy, light, views, use and other amenities;
- any material effect on the value of another owner’s dwelling;
- the effect on another owner’s future development rights, including available site coverage;
- the nature and scale of the work, what is common in the neighbourhood, and current planning rules;
- what use could already be made of the dwelling or restricted-use area without the proposed work; and
- whether the proposal would create an additional household unit.
The reasonable lessor must also respect any specific rights protected by the cross-lease. For example, an express covenant protecting a view may justify refusal where the proposed work would interfere with that view.
Conduct matters too. The owner proposing the work should avoid unnecessary harm and consider modest design changes that could materially reduce the impact. The owner asked to consent should engage early and constructively. A refusal to discuss an ordinary proposal, or a late attempt to raise concerns, may carry less weight.
The Court’s broader message was that cross-leases are long-term arrangements in which alterations and rebuilding are inevitable. Owners may need to “give and take, live and let live”. In some cases, it may be unreasonable to refuse consent to work that is common and ordinary in the area even though it causes more than trifling detriment.
What process should cross-lease owners follow?
The process depends on the wording of the particular cross-lease. In Liow v Martelli, the lease contained a formal decision-making procedure. If written consent could not be obtained from all owners, the owner seeking consent was required to give formal notice. If there was no unanimous agreement within 14 days, the issue was to be referred to arbitration.
This means one neighbour saying “no” may not be the end of the matter. However, owners should not assume that every cross-lease has the same procedure or timeframes. The lease must be reviewed before any formal step is taken.
Practical steps if you are planning work
1. Check the record of title, cross-lease and flats plan before finalising the design.
2. Give the other owners clear plans and enough information to assess the likely effects, including any expert reports that are relevant.
3. Invite feedback and consider reasonable design changes that reduce avoidable impacts.
4. Obtain formal written consent before starting work, and record any agreed conditions clearly.
5. Remember that council approval and cross-lease consent are separate requirements.
6. If the work changes the dimensions of the leased dwelling, a new flats plan will be required and a replacement cross-lease may be required. Otherwise, the title will become defective, affecting a future sale, refinance or insurance.
Practical steps if you are asked to consent
1. Identify your actual concerns and link them to the property, the cross-lease or the effects of the proposal.
2. Consider the interests of all owners, not only your personal preference to keep things unchanged.
3. Engage promptly and explain whether reasonable changes could address your concerns.
4. Obtain evidence where value, privacy, amenity or future development potential is said to be materially affected.
5. Take legal advice before refusing consent or triggering any dispute procedure.
The key takeaway
Liow v Martelli does not give a cross-lease owner an automatic right to develop, but it also removes the idea that any more-than-trifling impact gives a neighbour an automatic veto. Consent decisions must be reasoned, even-handed and grounded in the particular lease, the proposal and the realities of long-term shared ownership.
Status note: As at 23 July 2026, an application for leave to appeal to the Supreme Court is pending (SC 52/2026). The Court of Appeal decision remains the current authority unless and until it is overturned or modified.
Special thanks to Partner Alysha Hinton and Law Graduate Jade Gawtrey for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
