Cross leases and insurance obligations


We continue to come across home owners who do not understand the extent of their obligations under a cross lease in relation to insurance for earthquake damage.

The cross lease will usually contain a term obligating an insured to spend any insurance money received on reinstating the damage.  So an insured that takes a cash settlement could be sued later by other owners if they do not spend the money on reinstating.  All owners can agree to vary the cross lease if needed to delete this requirement.

If an owner repairs or rebuilds, but builds it different to what was there then the insured will need the consent of the co-owners. The plan may also need redrawing.  This can be an expensive and time consuming legal process.

Be very careful with any transactions involving cross lease properties.

 

 

Cash settlements