The Court of Appeal has overturned a long‑standing test governing when someone can refuse consent to their neighbour carrying our structural alterations under a cross‑lease.
For more than 35 years, courts applied the Smallfield v Brown test, under which it was deemed unreasonable to withheld consent if the proposed works produced only a ‘trifling detriment’ to neighbours (while giving a substantial benefit to the applicant). The Court has now confirmed that approach is wrong in law – it was too narrow.
New legal test
The correct question is now whether a reasonable lessor, acting on behalf of all cross‑lease owners and having regard to the purpose and context of the cross‑lease, could withhold consent in the circumstances. This is a more flexible approach, that is going to determine on the facts of the situation rather than a rigid threshold test. The question you might ask yourself, is:
Would the ordinary, reasonable cross-lease neighbour withhold consent to the proposed alterations, on the facts of this situation?
Relevant considerations
The Court indicated that relevant factors may include:
- impacts on privacy, outlook and amenity
- effects on future development potential
- market value impacts
- current planning rules
- changing residential expectations over time
The Court emphasised that since most cross‑leases run for around 999 years, alterations and redevelopment are not merely expected but are going to be inevitable over time.
Why this matters
This decision modernises cross‑lease law and makes it harder for neighbours to rely on technical or minimal objections to block reasonable development. At the same time, consent can still be refused where genuine and reasonable impacts exist (for example if the proposed changes impact privacy or views).
Interested in the detail? You can read more about Liow v Martelli [2026] NZCA 101, here.
If you have any questions about cross-leases, how the operate, or how to covert it to freehold – feel free to reach out to one of the Foley Douglas team today!
