The land governance cost on co-ownership: A study of the cross-lease in New Zealand

K.S. Cheung, S.K. Wong, H. Wu and C.Y. Yiu

Land Use Policy, 2021, vol. 108, issue C

Abstract: Higher land-use intensity can be achieved by subdividing the land or by subdividing the structure built on it. The former avoids co-ownership but is subject to topographical constraints, whereas the latter (e.g. apartment units) uses each unit of land more efficiently but entails management of the common parts. This study examines a hybrid approach to subdivision, known as “cross-lease” in New Zealand, where land is co-owned, and each co-owner singly and separately holds his or her structure (a detached or semi-detached house) through a very long lease. The delineation of boundaries and the maintenance of communal resources relies on self-governance. From the owners’ perspective, how well does the self-governance of cross-lease work, as compared to government regulation of unit titles? Based on preferences revealed by property transactions, cross-lease is found to trade at a price discount of 0.42% per owner relative to unit titles of property of equivalent quality. Moreover, the discount increases with the number of owners sharing the land. Self-governance is, therefore, more costly than government regulation when there are multiple co-owners, making monitoring and conflict resolution difficult.

Keywords: Land governance policy; Institution; Land subdivision; Transaction costs theory; Cross-lease (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:lauspo:v:108:y:2021:i:c:s0264837721002842

DOI: 10.1016/j.landusepol.2021.105561

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