Cross-lease owners in stronger position to undertake alterations

July 2026

The Court of Appeal decision in Liow v Martelli signals a new era in the common law relating to cross-lease properties. Owners no longer have an effective veto over building improvements by others in the development. If changes are proposed, owners must now consider a broad range of interests.

It was a standard term of the cross-lease in Liow that neither of the two owners could make structural alterations without the consent of the other, subject to an express proviso that the other owner could not unreasonably withhold their consent.

One of the two owners sought the consent of the other to allow them to expand the size of their house, bringing it closer to the boundary fence, and to add an in-ground swimming pool. The other cross-lease owner refused. Legal action followed.

At issue was whether the test in Smallfield v Brown was still good law, i.e. that withholding consent will only be unreasonable where the benefit of the proposed alteration will be substantial and any detriment caused by the alteration trifling. In other words, did cross-lease owners still have the power to prevent all but the most minor of alterations?

The Court decided Smallfield should not be followed given the desirability of allowing building alterations over the long life of a cross-lease. Owners should be able to take advantage of changes in architectural and building practices to optimise residential dwellings. The correct test is to ask what a reasonable owner would do, taking into account the interests of each owner in the development, and the context of the cross-lease.

The Court stated this involves consideration of:

• the desirability of maintaining good relations between owners

• that some ‘give and take’ is necessary over the life of a cross-lease

• the need to engage constructively with proposals by other owners

• changes in planning laws and changes in societal expectations

It is likely that more cross-lease owners will seek to undertake alterations. As urban development intensifies, objecting cross-lease owners will find it more difficult to oppose residential improvements which reasonably reflect the changing nature of our cities.

If you have a property dispute the lawyers at Grimshaw & Co can assist with sound advice and high-quality representation.