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Commercial

Postscript

Commercial, Property, Your Own Business
0

Mainzeal case

The implications of the Mainzeal case[1] are being felt far and wide amongst the directorship community. We summarise below the findings of the Supreme Court case.

 

In August, after the case worked its way through the High Court and Court of Appeal, the Supreme Court found that the directors should be personally liable for $39.8 million plus interest payable  at 5% pa from the date of liquidation – together more than $50 million. The chief executive of Mainzeal (who was also a director) is responsible for the full sum, and the personal liability of the three other directors was capped at $6.6 million each plus interest.

 

In 2013, Mainzeal went into receivership and liquidation. It was calculated the company owed around $110 million to unsecured creditors. The liquidators believed that the directors of the company had breached s135 (reckless trading) and s136 (trading whilst insolvent) of the Companies Act 1993 and should be held personally liable for the losses of the company’s creditors.

 

Many directors may want to take a moment to reflect on what the Supreme Court decision may mean for them now and in the future. Becoming personally liable for a company’s debts is a significant risk associated with accepting (or continuing) a director role.

 

If you are considering taking on a directorship, you should take independent legal and accounting advice to not only carefully assess whether your skills are a good match for the company and the sector in which it operates, but also to be clear on any potential personal liability.

[1] Yan v Mainzeal Property and Construction Limited (in liquidation) [2023] NZSC 113.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Receivership, voluntary administration and liquidation

Commercial, Property, Your Own Business
0

What are the differences?

It’s been a challenging time for many businesses since the pandemic hit our shores. If you find your company in financial difficulty, you may be forced to make some difficult decisions.

This may involve receivership, voluntary administration or liquidations – but what are the differences?

 

Receivership

Receivership occurs where a receiver (typically a licensed insolvency practitioner who may also be a chartered accountant) is appointed to deal with secured assets or manage the business of a company for the benefit of the secured creditors.

 

A receiver can be appointed by a court order or by a secured creditor under the terms of a deed or agreement, under which a contractual right to appoint a receiver has been granted by the company (or any other entity).

 

The specific powers of a receiver include the right to demand and recover income of the property in receivership, issue receipts, manage property and inspect any documents relating to the property. The receiver may also have additional rights in the deed or agreement under which it has been appointed.

 

The receiver’s primary duty is to try and bring about a situation in which debts are repaid, and the company’s property is managed – not for the benefit of the company, but for the secured creditors. To do so, a receiver will collect and sell one or more secured assets on behalf of a secured creditor, and manage other preferential claims against the company. The directors of a company in receivership have restricted powers. They must co-operate with the receiver so that the financial affairs of the business can be resolved fairly and equitably. Directors must provide company accounts, records and other information required by the receiver.

 

Voluntary administration

Voluntary administration is an option aimed at giving a business the opportunity to survive and avoid liquidation. An administrator can sometimes save a failing business; administrators are generally appointed by the company directors to deal with all a company’s creditors and its affairs.

 

In considering whether voluntary administration is an option for the company, directors must weigh up whether it has the support of creditors, and whether creditors are likely to gain more financial benefit from the company avoiding liquidation and continuing to trade.

 

Other considerations include the extent of the company’s debt, the attitudes of suppliers, its history with creditors and the availability of cash flow.

 

Liquidation

In receivership and administration situations, there is a chance a business can be saved and return to normal trading. Liquidation, however, is the end of the road.

 

Previously known as ‘winding up’, liquidation can be voluntary or compulsory. The main reason a company will face compulsory liquidation is if it is unable to pay its debts and it is insolvent. A voluntary liquidation can be used if the shareholders want to cease trading.

 

A liquidator’s principal duty is to preserve and protect the company’s assets to enable distribution to its creditors and, in a solvent liquidation, its shareholders.

 

Liquidators will recover what they can and distribute the proceeds to a company’s preferential, secured and unsecured creditors and, in a solvent liquidation, to its shareholders. Although the liquidator has control of the assets, the company keeps ownership of them and holds the assets on trust for the creditors. When the liquidation is complete the company is removed  from the Companies Register.

 

Ask for guidance

When your business is facing financial strife, it’s easy to feel overwhelmed. We recommend you contact us for guidance to support you through the process.

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Generative AI and copyright

Commercial, First Job, Latest news, Your Own Business
0

Are you taking the right precautions?

Many businesses have been using artificial intelligence (AI) for a long time to gather insights into their data and make strategic decisions. Recent generative AI improvements, however, have brought the power of AI into the public’s hands like never before. As a certain spider[1] once said: With great power comes great responsibility.

 

Generative AI technologies can now be used to create almost any type of content you can imagine; everything from a poem about pineapples to music in the style of Mozart and even three-dimensional models of motorbikes. However, the legal and human issues these technologies create are far less inspiring.

 

At its core, generative AI models are trained on large datasets of predominantly human-generated works to generate new works, that are ‘inspired’ from works within the training dataset. This approach raises several important legal questions, including:

  • Are companies allowed to train an AI model on content which they do not own? This is particularly significant considering much of the content is not in the public domain and is, arguably, covered by copyright
  • Once a model has been trained, who owns the content the model produces, and can it be used without infringing the intellectual property (IP) of others, and
  • Can you own and protect the output from an AI model?

 

There are also the ethical and fairness issues of using the creative works of others without compensation.

 

Many of these topics are currently being litigated in courts around the world, and while it would take a lengthy article to cover each issue in detail here, we discuss three key issues below.

 

  1. IP laws vary from country to country
    While there are international agreements on copyright provided under the Berne Convention, there are still significant differences in copyright law in different countries. This is particularly important when it comes to issues such as relying on ‘fair use’ as a defence to copyright infringement.

    Copyright is also only a small piece of the puzzle. Depending on how you use AI, you may need to also consider local and international laws covering moral rights, consumer protection such as the Fair Trading Act 1986 and the tort of passing off, breach of contract, violations of the American statute Digital Millennium Copyright Act 1998 and unfair competition laws – to name just a few.

 

  1. AI-generated content can still infringe the rights of others
    Even if an AI is tasked with creating new content, this does not guarantee that content can be used without infringing the rights of others. Most AI models have been trained on datasets that include works protected by copyright, patents, trademarks and registered designs. Therefore, before being used, the generated outputs should be reviewed to assess potential infringement issues.

 

  1. The use of a generative AI may prevent you from asserting copyright in the generated works
    Most guidance from overseas markets at this stage is that to be copyright-eligible, the creative work requires a human author. Prompting an AI to generate content is unlikely to meet the human authorship standard. The extent to which you can claim copyright on an AI-generated work is likely to be limited to a detailed analysis of exactly what the human inputs were when compared with the computer-generated outputs.

 

What can you do to reduce risk?

Despite these above issues, you can take practical steps to help reduce your risk in using AI-generated content. These include:

  • Searching to determine how different your AI-generated content is from existing, potentially protected works
  • Ensuring that key issues such as privacy and confidentiality are not breached by your use of the AI
  • Fact checking the outputs of the AI
  • Ethical use of the AI, including not using the AI as a tool to copy or mimic the art style of another person or company, and
  • Keeping detailed records of what the generative AI was used for, including details of prompts, intermediate outputs, manual edits and so on.

 

Since generative AI technologies can be used in a seemingly endless number of different applications, your risk exposure will depend on exactly what you are using these technologies for and what precautions you can take to reduce your risk.

[1] Spider-Man said this, but it has also been attributed to Winston Churchill.

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

New retention monies legislation gives better protection

Commercial, Property, Your Own Business
0

Comes into force on 5 October

The Construction Contracts (Retention Money) Amendment Act 2023 was passed on 5 April this year with the legislation coming into effect on Thursday, 5 October 2023.

If your business retains funds as part of a construction contract, or a contractor retains funds from you, you should ensure you are familiar with these upcoming changes.

The primary intention behind the amendments is to provide greater clarity and to strengthen the rules regarding retained funds under the Construction Contracts Act 2002. The government wants these changes to provide more reassurance to subcontractors that they will be paid for work completed – even if a head contractor becomes insolvent.

 

Retention monies must be held separately

Previously, there was no obligation for the business retaining money to hold it in a separate account unless a trust relationship had been created. From 5 October, all funds retained under a construction contract must be held in a separate bank account that meets specific criteria.

This bank account must be held at a New Zealand bank, with a chartered accounting or law firm, or by a trustee company; and the account provider must be told that it is an account holding funds on trust. If you are required to retain funds, you may use that account for multiple contracts (you do not need an individual account for every contract with retained funds), but the account may not be used for any other purpose.

 

Reporting obligations

If you are retaining funds under a construction contract, you will also need to comply with reporting obligations on your retained funds account. If there is more than one party for whom you are holding funds, you must maintain a ledger that clearly indicates whose funds are coming in and out of the account, and report to each party individually.

On receiving funds to be retained, you must report as soon as practical to the party for whom you have retained funds. Your report must include:

  • The amount being retained
  • The date it was received
  • Details of the bank account in which the funds are being held, and
  • A statement that shows the funds in the account, including any deposits or withdrawals relevant to their retained funds.

You also must ensure that you regularly report to all parties; the Act specifies this means at least once every three months. These reports must also be produced promptly upon request from the party for whom you are retaining funds. As well, you may not charge for the administration of producing these reports.

Do note, however, that as the retention holder, you are entitled to the interest on the account; this presumably may help cover the account fees and maintenance.

 

Use of the funds

There must be agreement in place around when the funds are to be accessed. If there are any issues that arise during the contract that would result in the retained funds being used, before accessing the funds the holder of the retained funds must (at a minimum) provide notice of the intention to use the funds and why, and give at least 10 working days to the other party to rectify the issue.

 

Penalties

Significant penalties have been introduced to enforce the new legislation; failing to comply with the retained funds management regime is considered a criminal offence. For each breach of the Act, a company can be fined up to $200,000 and each director can be fined up to $50,000.

Given that these charges are applicable per offence, there are serious financial consequences for non-compliance. The amendment also has added a fine for failure to report, or for false or inaccurate reporting (even if the funds are being held in a compliant manner), of $50,000.

 

Alternatives

Given the new significant penalties and associated additional administration for retained funds, many construction contracts are being amended so that the retention holder obtains a security bond in lieu of a retention. The NZS 3910:2013, that is commonly used by the construction industry, does not set comprehensive criteria for how a bond should be provided or released. Therefore, any contractor who prefers to avoid running a retained funds bank account by using bonds, should carefully (and urgently) review and amend their contracts to ensure they comply with this new legislation.

If you are engaged in construction contracts and would like to discuss your obligations under the new amendments, please don’t hesitate to contact us.

 

 

DISCLAIMER: All the information published in Commerical eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Mainzeal decision

Commercial, Latest news, Property, Your Own Business
0

Major implications for company directors

Taking on the responsibility of a directorship is not a decision to be taken lightly. For New Zealand directors, the magnitude of the director role has been hammered home with the decision of the Mainzeal case from the Supreme Court in late August.[1]

This decision has sent a strong signal from the New Zealand justice system that directors can, and will be, held personally liable for financial losses experienced by creditors if the directors allow the company to trade recklessly and/or trade while insolvent.

 

About Mainzeal

Mainzeal Property and Construction Limited was one of the largest New Zealand construction companies in the years leading up to its financial collapse.  In 2013, the company went into receivership and liquidation owing unsecured creditors around $110 million. The Mainzeal liquidators believed that the directors of the company had breached s135 (reckless trading) and s136 (insolvent trading) of the Companies Act 1993 and should be held personally liable for the losses of the company’s creditors.

 

Supreme Court decision

While going into the nuances of each of the court hearings is too complex for the scope of this article (the Mainzeal case has been heard in the High Court, Court of Appeal and Supreme Court), it is noteworthy that each court accepted that the directors should be held personally liable to some extent for a breach of their director’s duties.

At the highest court in New Zealand, the Supreme Court, the judges found that the directors should be liable for $39.8 million plus interest payable at 5% pa from the date of liquidation (together more than $50 million). The chief executive of Mainzeal is responsible for the full sum, and the liability of the three other directors was capped at $6.6 million each plus interest.

 

Facts rather than intentions

Critically, personal liability falling on a director due to a breach of directors’ duties under s135 (reckless trading) and s136 (insolvent trading) is a matter of facts, not intentions.

The Mainzeal directors were not accused of any conflict of interest or lack of honesty, and were taken on their word that they acted with good intention while running the company. Regardless, it mattered that on the facts they permitted the company to trade in a way that was reckless and allowed the company to trade while it was insolvent.

 

Companies Act 1993 may need a refresh

Both the Court of Appeal and Supreme Court indicated that a review and update of the Companies Act will be helpful.

The Mainzeal case reinforces to directors the consequences of failing to avoid reckless or insolvent trading, however the current legislation does not provide additional guidance or safe harbour for directors and their decision-making. Adding new guidance for directors’ duties into the Companies Act could enable directors to more confidently navigate the complexities of commercial decision-making with a need for accountability to their creditors.

 

Personal liability

After the announcement of the Supreme Court decision, many directors may want to take a moment to step back and allow the lessons of Mainzeal to sink in. Becoming personally liable for a company’s debts is a significant risk associated with accepting (or continuing) a director role.

Every director of a company should ensure they feel adequately knowledgeable about all key aspects of their company and the sector in which it operates. Accepting a directorship role where there are gaps in skills, or knowledge of the company or sector, can lead to an increased risk that the director may unwittingly allow, or join their other directors in, a decision that permits the company to trade in a reckless or insolvent manner, opening up personal liability and prejudicing creditors.

If you are considering taking on a directorship, you should take independent legal and accounting advice to not only carefully assess whether your skills are a good match for the company and sector, but also to be clear on any potential personal liability.

If you would like some help in assessing whether a directorship is a good fit for you, please don’t hesitate to contact us for further guidance.

 

[1] Yan v Mainzeal Property and Construction Limited (in liquidation) [2023] NZSC 113.

 

 

DISCLAIMER: All the information published in Commerical eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Postscript

Commercial, News, Property, Rural
0

Firearms Registry now up and running

The new Firearms Registry opened on 24 June 2023.

It is now mandatory for firearms licence holders to provide information about their firearms items. The development of the Firearms Registry follows major changes to New Zealand’s firearms laws made after the March 2019 terrorist attacks at two Christchurch mosques.

Firearms owners must register:

  • Non-prohibited firearms, including Specially
  • Dangerous Airguns (PCPs)
  • Prohibited firearms and magazines
  • Pistols
  • Restricted weapons
  • Major parts, and
  • Pistol carbine conversion kits.

You must also register firearms that do not work.

Antique firearms or airguns are not required to be registered. Registration is also not required for ammunition in your possession, nor do you need to record sales or purchase of ammunition to or from other firearms licence holders.

You can register online here: https://www.firearmssafetyauthority.govt.nz/firearms-registry or by phone at 0800 844 431 (04 499 2870) 8.30am-5pm, Monday to Friday.

 

Looking after your mental health

These days everyone is being advised to take care of their mental health, as well as making sure their physical (and emotional) needs are met. In busy working days, it’s easy (and tempting) to think things will sort themselves out if you are under pressure.

To help you manage your mental health and day-to-day activities, Spark Business Lab and The Institute of Organisational Psychology has designed an e-learning series to help you run your business more effectively and to help make your life easier.

The videos have practical advice, you can download useful tips and templates you can use every day. Go here to get started: www.business.govt.nz/wellbeing-support/brave-in-business-e-learning/

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Time changed to raise personal grievance for sexual harassment

Commercial, First Job, Relationships, Your Own Business
0

Extended from 90 days to 12 months

The Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Act came into force on 13 June 2023. It has extended the timeframe in which a personal grievance (PG) can be raised when sexual harassment has occurred at work.

The timeframe now allows a PG to be raised within 12 months of the harassment occurring or coming to an employee’s attention, rather than the former period of 90 days. The purpose of this amendment is to allow sexual harassment victims more time to come to terms with what has happened before deciding whether or not to raise a PG.

Employment law fundamentals

Employment law in New Zealand is underpinned by the Employment Relations Act 2000; it promotes productive employment relationships and encourages employers and employees to act in good faith in all aspects of the employment environment. This is achieved by specific processes to help parties resolve employment disputes in a quick and flexible way, such as allowing an employee to raise a PG. A PG is a complaint that allows an employer and employee to address, amongst other things, a sexual harassment claim.

What is a personal grievance?

You may raise a PG against your current or former employer if you believe you have been treated unfairly or unreasonably. This includes situations where you think you have been:

  • Unjustifiably dismissed
  • Unjustifiably disadvantaged
  • Discriminated against in your employment
  • Sexually harassed in your employment
  • Treated adversely in your employment on the grounds of family violence, or
  • Racially harassed.

When deciding if an act or dismissal was justified, your employer, the mediator or the Employment Relations Authority must consider what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred.

You can choose to raise a PG with your employer directly or via the Employment Relations Authority. To raise a PG, you have 90 days, or  12 months for instances of sexual harassment, from the date the action or dismissal occurred or from when you became aware of it. You can, however, raise a PG after the 90-day period has expired in other circumstances if your employer agrees.

Defining sexual harassment

Sexual harassment is unwelcome or offensive sexual behaviour that is either repeated or serious enough to have a harmful effect. It can be direct or indirect. Sexual harassment does not have to be physical; it can also be through written, verbal or visual materials/actions. You may only raise a PG for sexual harassment if it has occurred during the term of your employment. Sexual harassment is defined in sections 108 and 117 of the Employment Relations Act 2000.

Know your rights

It is important for both employees and employers to know their rights and obligations surrounding personal grievances. Employers should ensure their employment agreements are updated to reflect the above amendments.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Property briefs

Commercial, House, Property
0

Unit titles legislative updates

Unit titles are most commonly used for apartments or townhouses that share amenities such as lobbies, lifts or driveways with other owners in the same building or on the same property.

The latest amendments to the Unit Titles Act 2010 came into force on 9 May 2023. These include broadening the scope of information that sellers must provide to prospective buyers, and bolstering the governance structures for body corporates that manage unit title buildings or developments.

These changes have prompted amendments in the unit title provisions in the standard ADLS Sale and Purchase Agreement. The amendments reflect the increased disclosure obligations: the wording in respect of the warranties has been updated to expressly refer to any pre-contract disclosures made by the seller.

The ADLS form has also been updated in respect of courses of action available to buyers where they don’t receive a pre-settlement disclosure statement at least five working days prior to settlement. The options available to buyers haven’t changed in themselves. Rather, the agreement clarifies where the buyer elects for settlement to take place without delay that this constitutes a waiver of any right for that buyer to delay or cancel the settlement.

The purchase process of unit title properties is different from buying other sorts of properties. If you are considering buying or selling a unit title property, these changes may impact on your rights or obligations.

 

First Home Grants thresholds increase

On 15 May 2023, the price cap thresholds across the country for Kāinga Ora’s First Home Grants (FHG) saw a number of increases. The rises were not limited to main centres; 37 areas had their price caps for new builds increased including Southland and Central Hawke’s Bay.

Similarly, the KiwiBuild caps were also raised. Notably Queenstown’s threshold increased to $845,000 and Hamilton’s rose to $860,000.

These increases reflect the rapid rise in house prices and land in the last few years which meant that in certain areas the caps were so low that they became almost inaccessible for prospective FHG applicants.

With interest rates still rising, the latest round of price threshold increases should help a wider group of first-home buyers into new or existing homes.

To find the price thresholds for existing homes or new builds in your region, click here. The Kāinga Ora website also has information on eligibility and where the territorial boundaries lie to determine which regions the thresholds apply to. We can help you in determining both your eligibility and how to access the FHG.

 

Loan to value restrictions eased

In November 2021, the Reserve Bank imposed more restrictions on banks in respect of their lending in order to help curb the rapid rise in house prices in the previous few years. This caused difficulty for potential borrowers (both owner occupiers and investors) to obtain finance.

Eighteen months on, the Reserve Bank has eased the previous restrictions on bank lending to lower equity borrowers and investors. The easing measures took effect from 1 June 2023.

Previously, banks could only allocate up to 10% of their total lending towards owner occupiers with a loan to value (LVR) ratio of less than 80%. The 1 June changes saw this increase from 10% to up to 15%. This means that banks now have more funds available for borrowers with smaller deposits.

With national house prices falling around 17% since the November 2021 LVR restrictions took effect, the Reserve Bank believes that the risks that prompted the tightening on bank lending to low equity buyers have reduced.

This is good news for first home buyers who may not be able to save a 20% deposit despite being in a position to service the loans required to enter the property market.

The increase in availability of loan funds for low equity borrowers, the increases to FHG price caps and a general easing of the property market could be signalling a turning of the tide for buyers.

To see how you may be able to take advantage of these market factors and get onto the property ladder, you could contact us or a lender to understand what assistance or options could work for you.

 

 

DISCLAIMER: All the information published in Property eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Owning a heritage building

Commercial, House, Property
0

A burden or a boon?

Owning a piece of New Zealand’s history may be a dream come true for some property owners, but it could be a nightmare for others. Whether ownership of a heritage building is a boon or a burden to you will depend on how your plans fit within the rules and whether you make the most of incentives available to heritage building owners.

In this article, we outline some things you need to think about when owning or buying a heritage building.

 

Defining a heritage building

The term ‘heritage building’ usually refers to a property on the New Zealand Heritage List/Rārangi Kōrero.  Anyone can apply to list a building, but Heritage New Zealand Pouhere Taonga makes the final decision on whether that building is significant enough to be included. All heritage buildings are categorised according to their heritage values. ‘Category 1 Historic Places’, for example, are places of special or outstanding historical or cultural significance, while places categorised as ‘Wāhi Tapu’ are places sacred to Māori. The full list of existing heritage buildings and places can be found here.

Listed buildings, however, are not the only ones that may be subject to special protections. Councils can recognise the heritage values of any building in their district plans. Property owners (or potential owners) should take care when checking whether a building is protected by a district plan as the rules may not necessarily use the words ‘heritage building.’ A building described as ‘a site of interest’, as being of ‘special character’ or in similar words may also be protected.

The status of a heritage building is not affected by its condition. Even buildings in need of serious repair could have heritage status. Also, there is no rule that a building must be of a certain age to be considered heritage; do not rely on age as the sole indicator of a building’s status. The best way is always to check the list and the district plan.

 

Effect of heritage status

If you own a heritage building, you must be cautious when dealing with your property. These buildings come with greater restrictions aimed at preserving their historic values. For example:

  • You must operate within district plan rules and seek council consent where necessary: Being on the New Zealand Heritage List/Rārangi Kōrero does not automatically protect a building. Instead, some relevant restrictions can be found in the local district plan. The scope of these restrictions could range from the removal of interior fixtures, to exterior design changes and/or to demolition.  Related bare land of potential archaeological interest or notable trees may also be protected in this way. Even where your proposed work is approved, the council may impose conditions requiring that the work be carried out in a manner in keeping with the building’s heritage or overseen by experts. Obtaining a consent and meeting such conditions can significantly increase your project’s cost and timeframe.
  • You must seek special authorisation from Heritage New Zealand Pouhere Taonga where work on or use of a heritage building may affect a pre-1900 archaeological site or land subject to a heritage order: Importantly, this authorisation is in addition to any council consents. While heritage orders can be found in the district plan, authorisation for disturbing pre-1900 archaeological sites is required regardless of whether that site is recorded. Again, the authorisation may come with conditions.
  • Overseas buyers may need Overseas Investment Office consent before buying a heritage property: Property with a listed heritage building or subject to a heritage order is likely to be ‘sensitive land’ under the Overseas Investment Act 2005.

On the bright side, owning a listed heritage building also comes with benefits designed to encourage history preservation and enhance the character of the area. For example, you may be entitled to:

  • Funding or other assistance: There are grants available to assist with the costs of preserving heritage buildings, such as the National Heritage Preservation Incentive Fund. Heritage New Zealand Pouhere Taonga also offers wider support services to heritage building owners, including advice on alterations and consent processes, and
  • Fee waivers: Some councils are willing to waive consent fees for work involving heritage buildings.

As changing the status of a heritage building can be difficult and failing to work within the rules can result in criminal prosecution, it is essential that you have all information upfront before buying or working on a heritage building.

Please contact us if you need help checking whether a property has heritage building status and/or navigating the relevant rules and consent processes.

 

 

DISCLAIMER: All the information published in Property eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Business briefs

Commercial, Property, Your Own Business
0

Update on construction contracts retention regime

In our Spring 2021 edition, we discussed the proposed changes to the retention money regime for construction contracts in light of the introduction of the Construction Contracts (Retention Money) Amendment Bill.  The legislation was passed on 5 April 2023 and it comes into force on 5 October 2023. In brief, the Act will require contractors to place retentions in a trust account with a registered bank in New Zealand (or other accepted form) and keep it separate from other money or assets.

All construction contracts entered into or renewed from that date onwards will be subject to the new requirements.

For more information about how the new legislation will work, please be in touch.

 

New obligations for businesses offering Buy Now Pay Later

The government recently announced it will introduce new regulations to extend the consumer protections in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) to apply to Buy Now Pay Later (BNPL) schemes.  BNPL provides consumers with interest-free credit to buy goods and services and pay for them later. Consumer advocates have raised concerns that BNPL is ‘easy money’, which leads to vulnerable consumers taking on more debt than they can afford to pay back.

The CCCFA imposes certain obligations on lenders to protect borrowers. It does not, however, currently apply to BNPL.  While the new regulations are not yet finalised, it is expected that obligations for businesses offering BNPL will include:

  • Only charging reasonable default fees
  • Varying repayments on request when a consumer suffers unforeseen hardship
  • Offering financial mentoring services to consumers who miss payments, and
  • Being a member of an external dispute resolution scheme.

The new regulations are expected to be introduced to Parliament later this year.

 

Large businesses may need to disclose payment practices

The Business Payment Practices Bill is currently being considered by Parliament and, if passed, will require large businesses to publicly report on their payment practices.  As currently drafted, the proposed legislation will require businesses with more than $33 million (including GST) in revenue for two or more consecutive accounting periods to report six-monthly on their payment practices on both a public register and on their own websites.  Information required to be disclosed will include time taken to pay invoices and the proportion of invoices paid in full. If businesses do not comply with the reporting requirements, they could face fines of up to $500,000.

The purpose of the Bill is to improve transparency for business-to-business payment practices and provide small businesses with information to help with making decisions when engaging with large businesses. The Bill also encourages large businesses to improve their payment practices given its transparent nature.

The Bill is currently awaiting its second reading so there may be some changes before being passed into law. We will keep you up to date with its progress.

 

Are your T&Cs unfair?

The Commerce Commission has filed proceedings in the High Court against holiday home company Bachcare Limited. It alleges that some of Bachcare’s contract terms with consumers are unfair under the Fair Trading Act 1986 (FTA).

The Bachcare contract terms in question are:

  • Regardless of how far in advance a guest cancels their booking the guest may lose up to 100% of the amount paid
  • Service fees are deducted regardless of whether the booking is cancelled by Bachcare or the guest, and
  • Where a booking is cancelled due to an uncontrollable event, such as an extreme weather event, and is unable to be re-scheduled, a guest could lose 100% of the amount paid.

Since 2022, the unfair contract terms regime has applied to contracts between businesses that have a trading relationship with an annual value of $250,000 or less (known as ‘small trade contracts’). The Commerce Commission appears to be increasing enforcement efforts now the regime has been in force for some time.

If you have not already done so, now is a good time to review your consumer terms and conditions, and small trade contracts to ensure they comply with the FTA.

Please contact us if you need help with unfair contract terms.

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

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