A Landmark Court of Appeal Decision and What It Means for Cross-Lease Properties

Cross-lease ownership is a common form of title in New Zealand, where multiple owners share the same underlying land and lease defined “flats” from each other. These arrangements usually require neighbours to give consent before any changes are made to buildings or improvements on the property.

A recent Court of Appeal decision in Liow v Martelli has clarified how these consent rules should be applied. While the original decision was issued in 2024, it remained under appeal until April 2026, when the appeal was dismissed. This means the Court of Appeal’s decision now carries significant weight and will guide how similar disputes are dealt with going forward.

In this case, one owner wanted to carry out upgrades, including extensions and outdoor features. Their neighbour refused consent, which led to a dispute that went through arbitration and into the courts. The key issue was a clause commonly found in cross-lease agreements stating that consent must not be “unreasonably withheld.”

For many years, the courts followed a fairly strict approach based on an earlier case called Smallfield v Brown. That approach focused on whether the proposed work provided a clear benefit to the owner while causing little or no negative impact on the neighbour. In practice, this often made it easier for neighbours to say no.

The Court of Appeal has now moved away from that approach. Instead, it said the correct question is whether a reasonable owner, in the same position and considering the interests of everyone involved, could refuse consent. This is a more flexible, case-by-case approach.

This does not mean neighbours have to say yes. They can still refuse consent if there are genuine concerns, such as impacts on privacy, sunlight, outlook, use of the property, or future development potential. However, they now need to have a sound and reasonable basis for doing so.

The decision has a few practical implications:

• Decisions need to be more balanced
  Neighbours cannot rely on a strict “minimal impact” test. Each proposal needs to be considered properly, taking into account the effects on both parties.

• Property upgrades may be easier
  Owners looking to improve or extend their homes may have a better chance of getting approval, especially where impacts can be managed.

• Good design and communication matter more
  Clear plans and early discussions with neighbours will help show that a proposal is reasonable and reduce the risk of disputes.

The Court of Appeal did not make the final call on whether consent should be granted in this case. Instead, it sent the dispute back to be reconsidered using the correct legal test.

For anyone with a cross-lease property, it is still important to get proper planning and surveying advice before starting work. Talking to your neighbour early is also one of the best ways to avoid issues later on.