Edmonds Judd

House

Co-ownership arrangements

Could be a good option to get on the property ladder

Getting on the first rung of the property ladder is becoming harder than ever to achieve. The reasons why are well known — sky-rocketing house prices, higher rents and costs of living, tight lending restrictions and a shortage of housing stock. This perfect storm presents a living nightmare for first home buyers. Is it time for prospective homeowners to give up on the Kiwi dream of home ownership? If not, there are other options.

The Kiwi dream

There are significant social and economic benefits to communities from the security that comes with having an established place to live. It brings freedom from the uncertainty and stresses of renting coupled with anxiety as house prices continue to rise. These benefits make the housing dream worth chasing and have driven private companies, the government and charities to provide innovative solutions to help Kiwis (with a variety of incomes and house price brackets) into home ownership. Necessity is, after all, the mother of invention.

Co-ownership

Co-ownership (or shared ownership) is a practical tool to get on the property ladder: by ‘shared’ we don’t mean pooling funds and cramming into one house with several other families (or your closest friends) bunk-bed style.

Co-ownership means buying the percentage of a property that you can afford now, with a silent partner (either a company, the government or a charity) providing the balance. Together you ‘co-own’ the property in those shares. The home is yours to enjoy. You are free to paint the walls, change the carpet, hammer in picture hooks and plant a garden. In return, you pay the rates and insurance, and maintain the property.

You pay a fee (or interest) for the co-owner’s share, and in time (either by an increase in the property’s value or because your financial position has improved) you can buy out your co-owner. Boom — full ownership!

Filling the deposit gap

For many prospective buyers, their inability to save a large enough deposit is the main barrier to getting a loan from a bank. Most are quite capable of servicing a mortgage but cannot save for the required (and ever-increasing) deposit amount because life gets in the way.

The gap between the deposit saved and the deposit required is just too wide for many. This is where co-ownership initiatives help people who don’t fit mainstream mortgage criteria.

Buying a first home provides Kiwis (who have been in KiwiSaver for at least three years) a ‘single use’ key to unlock those contributions which can assist towards 5% of a house deposit.  If you have 5% of a deposit, you can use the co-owner’s contribution to top up the deposit required for regular retail lending — without having to resort to a second-tier lender.

If the worst happens – what next?

As well as the upsides of owning property, what happens if the property market dips, your personal financial situation doesn’t improve or if your relationship breaks up?

If things really go belly-up, the house can be sold, the mortgage repaid and your co-owner shares in the loss (or the gain) in the percentage ratio that they contributed at the outset. Or there may be other options; always talk with your co-owner as they may be able to offer alternatives.

Some co-ownership options

New Zealand Housing Foundation: Help from this charity is limited to people buying new houses that are located only in New Zealand Housing Foundation developments. The income cap is $95,000. You can find out more here.

Kāinga Ora: The government’s First Home Partner programme is also for new houses only. You must be able to contribute a minimum 5% deposit and the total household income cap is $130,000. It will contribute a maximum of 25% of the house value or $200,000. For more information on this, you can find our more here.

YouOwn: This privately funded company operates nationwide: it manages investment from not-for-profit entities to support co-ownership in the community. It allows co-owners to buy existing properties, as well as new ones. There is no income cap or house value limit. Eligibility criteria includes a 5% deposit, minimum household income of $110,000, and no or low debt. You pay 4.95% per annum on YouOwn’s share and can buy them out after five years. Go here to find out more information.

And there are other organisations and private co-ownership schemes and arrangements that you  could investigate.

Conclusion

In high-price areas such as Auckland (actually, almost anywhere in New Zealand now) and without access to a ‘bank of Mum and Dad’ to solve the deposit gap, a co-ownership arrangement may be the best opportunity for prospective buyers wanting to escape private rentals and have a place to call their own.

Each scheme has different terms, eligibility criteria, restrictions and limitations. Come and talk to us to ensure a full understanding of the co-ownership journey.

So, check out the co-ownership possibilities and keep the dream alive. It may be you, or someone you know, who could use a helping hand onto the property ladder right now. +

 

 

 

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 Rural 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


Regularly review the sum insured

Recent sharp increases in building materials costs due to Covid shortages have affected the cost of a possible rebuild, or repair, of your home. It is, therefore, wise to have your home properly insured. Although most commercial property owners must obtain an insurance valuation at least every three years, there is seldom any requirement on homeowners to do this.

With most house insurance policies, it’s up to the homeowner to set the sum insured. If your sum insured is too low, you may not be able to repair or rebuild your home to the same size and quality in the event of damage or loss. If your sum insured is too high, you are paying too much for your insurance as most insurers will only reimburse policyholders for the actual cost of the loss they have suffered.

Tips for determining the sum insured

Professional valuation: If you want accurate and up-to-date rebuild figures, obtain an insurance valuation from a property valuer or quantity surveyor. The sum should be based on current building costs, not market value.

Online calculator: Using an online calculator (Cordell Sum Sure, for example) can be useful but this comes with a word of warning.  It’s an estimate; it is not as accurate as a professional valuation. We heard a recent example where a professional valuation produced a figure almost 30% higher than using an online calculator.

Whichever method you use, the valuation should:

  • Not include the cost of the land, just the property/structures built on it
  • Allow for current building standards to be implemented
  • Factor in structural improvements such as sheds, pergolas and fencing
  • Include the cost of removing debris, and
  • Include GST.

It’s up to you to check your sum insured is accurate and kept current. You should review the sum insured each year to make sure it’s still appropriate for your home.

In the unfortunate event that you experience any loss and have difficulty reaching agreement with your insurer over the value of the loss, please contact us for advice on your legal options. +

 

 

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 Rural 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


Resource consents

What are they and when do you need one?

The Resource Management Act 1991 places restrictions on how your land can be used; this is done by the issuing of consents. Their purpose is to limit any adverse effects that your intended use of your property may cause to neighbours’ properties or the environment. If you are a property owner, or you lease premises to operate your business, we explain below the various types of consent that you may come across from time to time.

Types of consent

Discharge consents: The Act restricts the discharge of contaminants into the air, water or land. It is important that the way you use your property doesn’t adversely affect it for future generations or damage your neighbour’s property. If your business manufactures goods or you are farming, rules restricting the use of pesticides, limiting dust and controls around dairy effluent will be familiar to you.

Consent to take water: If your farm has a spring or river flowing through it, you may use that to water your crops or herd. What you may not know is that your council may restrict how much water you can draw from that source over a particular period. Although there is plenty of water in the sea, clean fresh water is a limited resource and it needs to be controlled appropriately.

Subdivision consents: If you want to change the size of your section (a boundary adjustment) or to split your property into additional property titles, you will usually need subdivision consent. This type of consent is likely to come with some conditions.

Your local council may also ask that part of your property, normally around waterways, is transferred to the council as an esplanade reserve or esplanade strip. This is known as ‘vesting’. The council can also require that future development (for example, if you’re building a new subdivision) meets certain council-dictated design specifications.

Change of use consents: If your property is used for a particular purpose and you want to change that use, you may need to apply to the council. A common example of this is converting a commercial building or garage into a residential dwelling.

Do I need resource consent?

If your proposed activity is not listed in the district plan as either permitted or prohibited, then you will need a consent.

The district plan for each region is publicly accessible through the local council’s website; it varies for each region depending on the needs and focus of that community. For example, somewhere dry like the Wairarapa is likely to have stricter water restrictions in place than Fiordland.

The zoning of your property will impact on your consent. Councils zone certain areas based on the expected characteristics of that area. Different zones, residential, commercial, industrial and rural (the names of zones also differ from region to region) have different rules that apply based on their proximity to other zones, amenities and natural hazards. It is useful to know that when subdividing your urban residential property, you will be permitted to have smaller section sizes than if you were subdividing your rural property into lifestyle blocks.

If you are looking at doing something different with your property it always pays to check the region’s district plan first. If you’re not sure whether you need consent, get in touch with the local or regional council; council staff are experts and are generally friendly and happy to help.

What if I carry on my activity without consent?

If you ignore your responsibilities under the Act, penalties can range from $1,500 to $300,000 or you could be sentenced to up to two years in prison. If you are operating through another entity (a company, for example) you could be fined up to $600,000.

It is important that the council balances your rights as a property owner with the rights of your neighbours, future landowners and the environment. The council, however, doesn’t always get this balance right. If you believe that your consent application has been unfairly rejected, please don’t hesitate to talk with us.

Building consents

In addition to requiring resource consent, if you are building a new structure or doing structural alterations on your property, you may also require building consent. Your building work is governed by the Building Act 2004 and must be built to the standards contained in that legislation. Once the consented building work is completed, it is vital that the council approves that work so a code compliance certificate (CCC) can be issued. When you want to sell your property, any prospective purchaser will want to see the CCC. +

 

 

DISCLAIMER: All the information published in Property Speaking 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 Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Remedies if there is an encroachment

All property owners, whether commercial or residential, must ensure that any structure on their property is located within its legal boundaries. These boundaries cannot be moved without the property’s title also being changed. Sometimes, however, the legal boundaries do not match up with structures (such as a fence or a building) on that property. What happens when the title does not match what is literally ‘on the ground’?

Confirm the legal boundary first

The first step when a query about a boundary arises is to determine where your boundary legally lies. Online aerial maps (like those available on some council websites) give you a starting point. However, the definitive description of your boundary is on the legal title for your property. There is usually at least one diagram on your title which will have the set measurements of all of your boundaries’ locations.

On the ground, there should be markers along your boundary. You can use these boundary markers together with the title to figure out where the relevant boundary lies. Sometimes, however, the boundary markers are well hidden or missing entirely, particularly on older properties. If boundary markers cannot be found, you should engage a surveyor to establish where your boundary is and to replace missing markers.

The other situation where you may need help in establishing your boundary is where your title is marked that it is ‘limited as to parcels’. This means that when the title was issued, there may have been insufficient survey information available about your boundaries’ locations. To be sure about your boundaries and to remove this classification, you must arrange a professional survey and work through a process with Land Information New Zealand to get the boundaries confirmed.

Encroachment

Once your boundary is confirmed, you may find a structure sits over the boundary; this is called an ‘encroachment.’ The current owner of the property and the structure is legally responsible for any encroachment regardless of when the structure was erected.

How you address an encroachment issue differs depending on whether you are a prospective buyer or you already own the property.

Before purchasing a property

The best time to check any boundary issue is before you buy the property.

It is essential that you use your own judgement and get professional survey advice where necessary, rather than relying on advice from the vendor. There have been legal cases[1] where the vendor has assured the buyer that everything was fine, only for it to be discovered that buildings included in the purchase were over a boundary. This can have significant consequences for you as the buyer; under many agreements for the purchase of property, it is the buyer’s responsibility to check and raise any issues with the boundaries. The vendor is usually not required to show you where the boundaries are nor to check the boundary markers are in place unless a bare section is being sold.

If you discover an encroachment, talk with us and we can raise this with the vendor. There is usually a limited time for raising title issues – either under the standard ‘requisition’ procedure or any due diligence condition. If raised within the proper time and the vendor cannot fix the issue, you may be able to cancel the agreement and not buy the property.

Issues when you own a property

If you already own a property and discover that a structure or fence is over your boundary, different processes apply. If you discover an encroachment, you may want to talk with your neighbour first and see if you can figure out a solution together. If this does not work, there are some legal remedies to assist:

  • For fences, the Fencing Act 1974 requires that any fence is usually built with the fence or its posts as close to the boundary line as possible – unless agreed or a court has ordered otherwise. If your neighbour has unlawfully erected a fence over your boundary, you can ask the Disputes Tribunal or District Court to order the removal of the fence.
  • For a building or other structure, you can ask the District Court or High Court under the Property Law Act 2007 for help around the ‘wrongly placed structure’. Depending on the circumstances and what is ‘just and equitable’, the court can allow your neighbour rights to use the land and structure, give you the right to use the structure, require removal of the structure and/or require payment of compensation.

Navigating boundary and encroachment issues can be tricky, particularly when you have a friendly relationship with your neighbours. If you think you might have a boundary issue, please do talk to us about your options. +

[1] For example, Armstrong v Mitchell [2018] NZHC 2353.

 

DISCLAIMER: All the information published in Property Speaking 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 Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Property briefs

Updates to the ADLS Agreement – important for buyers and sellers

On 8 February 2022 the Auckland District Law Society (ADLS) released an updated version of the Agreement for Sale and Purchase of Real Estate. This is the most- used agreement when buying or selling property. The new version incorporates several changes that are important for people buying and selling property, along with some superficial amendments to accommodate the nuts and bolts for lawyers handling the transaction.

The process for claiming compensation for a breach of the contract by one party or for a defect in the property has been clarified in clauses 10 and 11 of the agreement. One fundamental difference is that the new agreement limits parties to only one claim for compensation under clause 10. A party might use this clause to claim compensation for services in the property that don’t work or for loss suffered by that party as a result of a misrepresentation by the other party or their real estate agent. Despite parties being limited to one claim, the claim can include more than one element set out in clause 10.2 so vendors and purchasers can still be fully compensated where multiple breaches occur.

Another change to note is where parties are transferring residential property for a purchase price exceeding $7.5 million or commercial property for a purchase price of more than $1 million. In each of these two situations, for tax purposes, parties will need to agree on the value of land and buildings that make up the purchase price as well as the value of any other assets, fixtures, fittings or chattels sold with the property. These should be included as an addendum to the agreement.

Getting legal advice regarding the full terms and conditions of the agreement is always essential, particularly in light of these changes to the ADLS agreement. If you’re buying and/or selling property, talking with us early on should be your first step.

Building in the Covid landscape

The steady rise of house prices in recent years has prompted many people to consider building a house as a much more viable and affordable option than it has been in the past. Covid and its pervasive disruption of everyday life, however, has brought up a range of new issues that prospective home builders should be aware of before considering a build.

Fixed-price contracts have become a thing of the past with builders now being unable to guarantee the price of materials due to their scarcity and long delivery times. Buyers should look out for clauses in building contracts that allow the builder to increase the price where materials, labour or services become more expensive than at the time the contract was signed.

Similarly, due to the difficulty builders have getting materials and labour, completion dates are often much further out than people have come to expect. Like the price escalation-type clauses referred to above, builders will often now include an ability to extend the contract completion date due to delays in obtaining materials or labour to complete the build in the time prescribed in the contract.

With these issues in mind, it is important that you get advice regarding your building contract before you sign it. Make sure you have a good handle on your budget and there is room for a potential increase in the contract price.

Harsh CCCFA provisions relaxed

The amendments to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) that were introduced on 1 December 2021 have resulted in many borrowers struggling to gain lending approval for a property purchase.

The amendments include regulations requiring lenders to look more closely at the affordability of loans for lending applicants and the suitability of particular loan structures based on the financial position of their customers. This has prompted banks to delve into applicants’ spending habits and has resulted in an increase in rejected applications.

Other restrictions imposed on lenders include regulating the way banks and other lenders can advertise their products. Lenders are required to adhere to minimum standards that require lending advertisements to be clear to customers and not confusing. This places a higher threshold on lenders than the requirements not to mislead or deceive customers as required under the Fair Trading Act 1986.

Finally, greater restrictions have been placed on low equity lending meaning that banks are more limited in approving applications from borrowers with less than a 20% deposit.

The effect of these legislative changes has been detrimental to the ability of first home buyers to obtain lending to enter the property market; mortgage and business advisors have openly opposed or criticised these changes since their introduction.

This opposition, combined with the perhaps unintended difficulties that the changes have created for first home buyers, has prompted the government to review the changes on the basis that lenders’ enquiries under the legislation were too intrusive for customers.

The proposed amendments will no longer require lenders to take a deep dive into the spending habits of potential borrowers in order to assess future spending for applicants. A more comprehensive list of the changes to ease the December amendments can be read here.

Despite the challenges caused by the December amendments to the CCCFA, it appears that they are only temporary and that following the finalisation and enactment of the proposed easing measures, potential borrowers will be able to proceed without the invasive or unreasonable inquest that many have recently experienced. +

 

DISCLAIMER: All the information published in Property Speaking 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 Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Gift or loan?

The importance of properly documenting advances between family members

The trusty Kiwi “She’ll be right” approach is often manifested in a reluctance to formally document intra-family lending arrangements. Catch cries of “I trust the kids to sort things out between themselves after I’m gone” and “My new partner says she will never make a claim and I believe her” are common, but all too often lead to disputes down the track.

In this article, we look at three different scenarios that are based on Maddy’s story.

Maddy’s parents help out

In 2016, Maddy’s parents decide to help her buy her first home. The bank will not lend to Maddy without a 20% deposit; her parents offer to lend her $250,000 to make up the 20%. The bank’s rules also require her parents to sign a gifting certificate, confirming that they will not require repayment of the money. Despite that, Maddy and her parents agree verbally that the money is a loan, not a gift, and Maddy will pay them back when she can. This is important to Maddy’s parents, as they also want to help their younger daughter, Sarah, into her first home in a few years’ time once Maddy has enough equity in her home to repay them. Maddy takes out a bank loan, secured by a first ranking all obligations mortgage in favour of the bank and buys her first home. Exciting times.

Let’s look at three different ways in which the failure to document that loan could play out.

Scenario 1: Insolvency

Maddy also owns a hospitality business, which she operates as a sole trader. Maddy doesn’t really understand how it all works, but is pleased that having a mortgage means she gets better lending rates for the business, which improves her caé’s cash flow no end.

Unfortunately, in 2020 Covid hits. While the business manages to hang in there for some time thanks to the Covid business loan and the wage subsidy, the recent removal of all government financial assistance and the move to red level in the traffic light system tip the business over the edge. It owes more than $500,000 to the bank, as well as the debt to the government and various suppliers. Maddy’s creditors file bankruptcy proceedings.

Maddy receive a demand from the bank to pay the $500,000-plus it is owed, which means she must sell her house. There is just enough money left after doing that to repay the bank and all the unsecured creditors.

In an attempt to salvage something from the situation, Maddy argues that the amount her parents contributed to the equity was a loan and not a gift. Unfortunately, there is no documentation to support that; the only documentation is the signed gifting certificate. The creditors rightly say that there is no evidence the money was a loan, and therefore they require repayment of their debts in full.

Scenario 2: Succession

Maddy’s parents died shortly after lending her the $250,000 house deposit. Younger sister, Sarah, is shocked when the estate lawyer says that there is only a house property to divide; Sarah says that she knows her parents had more than $250,000 in the bank which they had lent to Maddy to help buy her house.

Sarah appeals to Maddy, saying that they both know their parents lent Maddy the money. Maddy disagrees, pointing to the bank gifting certificate: she says that it was clearly a gift and she refuses to pay anything back. Lacking any evidence of the arrangements between her parents and Maddy, Sarah is forced to reluctantly accept a lesser inheritance than she believes she was entitled to.

Scenario 3: Relationship property

Maddy’s boyfriend Tom moved into her new home shortly after she bought it. Their relationship broke down four years later in 2020 and Tom claims half the equity in the home under the Property (Relationships) Act 1976.

Maddy accepts that the home is their ‘family home’ and that the equity must be divided equally. She argues, however, that in addition to the bank loan they need to take into account the $250,000 owed to her parents.

Tom says that is the first he heard of any loan from Maddy’s parents, and points to the gifting certificate that he found when he was cleaning out some drawers. Maddy is unable to produce any evidence to support her argument that money is owed to her parents, and has to divide the equity without factoring that in.

The lesson

In every scenario outlined above, a dispute could have been avoided, or minimised, had Maddy and her parents entered into a simple agreement recording the existence of the loan. A deed of acknowledgment of debt, prepared at the time that Maddy bought her house, could have been produced for a minimal fee, thus preventing a multitude of unintended consequences later on.

If you are lending money within your family, do contact us to ensure the loan is documented in a way that protects everyone — both now and in the future.

 

 

DISCLAIMER: All the information published in Rural 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 Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Not that straightforward when it comes to property

You may have heard that ‘Marriage is betting someone half your stuff that you’ll love them forever’. But what happens about the ‘stuff’ you own before you formally say “I do”?

The law providing equal sharing of relationship property automatically begins after three years in a de facto relationship. However, what a de facto relationship looks like, and when it starts, isn’t always obvious and is often the subject of a dispute.

We take a closer look at de facto relationships as defined in the Property (Relationships) Act 1976 (PRA for short). This is key if you and your partner separate and have a dispute over property.

Harry and Kahurangi

If Harry and Kahurangi had been dating casually for a while before moving in together, we’d all agree their relationship evolved into a de facto relationship when they set up home as a couple. But what if Harry and Kahu were flatmates first? Would we assume they were in a de facto relationship from their first kiss?

The landscape changes again if Harry and Kahu each own their own home and want to keep their independence, or if Harry lives in Auckland away from Kahu in Tauranga? Does it matter that Harry hasn’t told Kahu about his significant credit card debt? Or that Kahu’s children think Harry is a ‘friend’?

Partners in relationships come with their unique experiences and backgrounds, forming bonds in any number of ways. Determining when a relationship becomes de facto requires an analysis of many factors.

The easy parts

A de facto relationship is a romantic relationship between two adults, who are not married or in a civil union, who live together as a couple. Many de facto relationships start when couples begin living together, as the legal term suggests. However, when couples have other commitments such as children or jobs in different cities requiring them to live apart, the science of determining when two people start living together as a couple becomes harder.

Living together as a couple

The PRA sets out nine factors to consider when determining whether two people are living together as a couple. The simplest factors are whether the couple lives together, the duration of the relationship and if a sexual relationship exists. Exclusivity is not a requirement of a de facto relationship: partners may be in more than one relationship or be having a sexual relationship with other people.

The nature and extent of the relationship must be taken into account. You should think about whether you would rely on your partner in an emergency and the level of dependency you have on your partner. A couple may date for many months or years before considering themselves to be serious or update their social media relationship status. It is also relevant whether the relationship is public or known to family and social circles of the couple when looking at whether a de facto relationship exists.

There are practical considerations: do the partners care for and support their partner’s family or children? Do they look after their partner’s home, including performing household chores and cooking? Entering a relationship with children from a previous relationship provides layers of complexity — deciding when to introduce partners to children, and navigating living arrangements, further complicates things.

The analysis of whether a de facto relationship exists also looks at whether there are financial commitments together such as owning joint property or bank accounts, and any support provided from one partner to the other. Some de facto partners retain separate accounts for their independence or security, but this alone will not stop a relationship from becoming de facto.

Ultimately, it is the degree of commitment and investment that each partner has to their shared life that is the tipping point of whether they are living together as a couple. They do not need to own property together and, on the other side of the coin, they can live in the same property without living together as a couple.

Why the fuss?

Many couples do not consider it relevant to define their relationship; and for many this is perfectly fine.

If, however, a couple is living in a property that was owned by one partner before the relationship began it will be classified as relationship property after the couple reaches its three-year anniversary, or earlier in some situations. If they separate, the property will be divided equally, rather than remaining the property of the original owner.

Protecting personal assets from a relationship property division is best done before reaching the three-year threshold, but can be done at any time. This is called ‘contracting out’. Independent legal advice for both parties is essential and should be obtained before entering into any formal agreement.

Conclusion

It is never too late to define your relationship with your partner. Whether you are introducing your partner to your family or buying some furniture together (or a house!), take a moment to consider whether you think you may have crossed into de facto, and potentially equal sharing, territory.

Whatever the stage of your relationship, it is wise to think about the longer-term impact this could have for both your futures.

 

NB: The Property (Relationships) Act 1976 has been reviewed by the Law Commission which recommended significant changes to this piece of legislation. However, in late November 2019, the government responded by stating it would not implement nearly all of those recommendations until the Commission has carried out a review of succession law.

 

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, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Property briefs

Impacts on property dealings during Covid

The country is now out of its second lockdown with Auckland and parts of the Waikato in Level 3 with the rest of the country sitting at Level 2. Given the current uncertainty with how we can get on top of the Delta strain outbreak, let’s have a look at where this leaves us and our property dealings across differing alert levels.

The following information is correct at the time of publication. However, the government could change the rules at any time and we strongly suggest you seek up-to-date and tailored legal advice for your circumstances.

Moving, buying and selling

Under the current Level 3 restrictions you are allowed to change addresses. This means that you can settle your property transactions and move in to and out of your homes. If you are relocating from a region in a different alert level to the region you are moving to that move must be on a permanent basis, such as starting new employment, attending tertiary education, or purchasing or renting a new principal home. It also means that you can’t travel for a holiday.

You will need to take evidence that you are crossing the border for a permitted purpose. You may need to take a copy of your sale and purchase agreement or tenancy agreement for your new home, and even a copy of your employment agreement or letter of acceptance, if applicable.

Under Level 3 you can have a moving company assist you with packing and the heavy lifting, although the movers will need to socially distance from you. Your family and friends who are not a part of your bubble can’t assist you with the move.

At level 2 you are able to have your friends and family help you in your move. Your moving company will still need to comply with social distancing rules and contact tracing.

Property inspections

Under Level 3 you may complete your pre-settlement purchase inspection. You can also arrange to view a prospective property, to rent or buy, provided that the viewing is on a one-on-one basis. It is recommended that you do these viewings via video from the property’s online listing. If that is not an option, you will need to socially distance, wear a mask and sign in using your tracer app.

At level 2 your open homes will be restricted to 100 people, your real estate agent may decide to limit numbers further. You need to make sure you are contact tracing and maintaining a 2-metre distance.

Landlords can inspect their rental properties during the revised Level 3 restrictions, but only with their tenant’s consent. As a tenant you should only withhold your consent if you have genuine concerns about your safety.

Under level 2 you still need your tenants’ consent before carrying out inspections or maintenance. Masks must be worn, and you should contact trace.

Rent relief for commercial tenancies

The government is also proposing an amendment to the Property Law Act 2007 which will make it compulsory for parties to negotiate and agree on a fair rent reduction where a tenant doesn’t have access to their business premises. The amendment is currently going through its second reading, you can read the Bill here.

The proposed amendment is similar to clause 27.5 of the ADLS lease which we discussed during the first lockdown in the Winter 2020 edition of Property Speaking.

Dispute resolution

Landlords and tenants, buyers and sellers are encouraged to talk to each other to reach an agreement on any issues that arise. Where this is not possible, your commercial lease is likely to detail a dispute resolution procedure which you will be able to do so online via Skype, Zoom or by teleconference. For your residential tenancies, the Tenancy Tribunal and the courts are still operating via teleconference.

More information on the Covid restrictions can be found here.

 

Using your property as an Airbnb

Coming into summer you may be thinking about letting out your holiday home or bach through Airbnb. This can be a great way to cover your property expenses over the summer months or to fund your own holiday — if you know what you’re getting into.

Before you go down the Airbnb route, you need to make sure that you understand the differences between a residential tenancy and an Airbnb arrangement. Otherwise, you may need to comply with the Residential Tenancies Act 1986.

This legislation applies to all tenancies for a person’s occupation, except in the limited circumstances set out at section 5 of the Act. These include where the property is used for temporary or transient accommodation of up to 28 days, or where the property is let for the tenant’s holiday purposes.

If the arrangement between you and your tenant falls outside the exception at section 5 then it will be a residential tenancy and you must comply with the legislative requirements. These include the healthy homes standards, having a valid tenancy agreement and restrictions on terminating the tenancy.

Come and talk to us before you fly into it to ensure that you don’t get any nasty surprises.

 

 

 


Caveats

Protecting your interest in land

The Latin word ‘caveat’ literally translates to ‘let him beware’. In a legal sense, caveats are generally used to protect the proprietary rights of the person registering the caveat by stopping the registered owner of the property from transferring, mortgaging or otherwise dealing with the property.

Why use a caveat?

There are a number of scenarios in which you may want to register a caveat. Some examples are:

  • When there’s a significant time lag between a purchaser signing an agreement and settlement, or where (after the agreement is signed) the vendor may try to cancel the agreement. A caveat should prevent the vendor from dealing with the property in any way that will interfere with your interest.
  • A beneficiary of a trust may need to register a caveat to prevent the land to which their beneficial interest relates being transferred. Again, a caveat registered in this instance will protect the beneficial interest being claimed on the land.
  • There is also a provision under section 42 of the Property (Relationships) Act 1976 available if you wish to prevent land that is the subject of a relationship property claim being dealt with by your ex-partner in a way that defeats your interest or estate in the land. Registering a caveat in this instance is a good way to protect your interest until any relationship property dispute involving the land has been resolved.

As you are likely to already be dealing with us (or another lawyer) in any of the above-type matters, we will work with you on the registration of a caveat.

When to register a caveat?

The Land Transfer Act 2017 sets the framework for the registration of caveats. One of the most important things to consider before deciding to register a caveat is whether the interest that you want to protect meets the criteria in section 138(1). A ‘caveatable interest’ should only be registered where it meets the relevant criteria.

If you register a caveat against the land without a caveatable interest, you are liable for any loss or damage suffered by the registered owner of the land as a result of the caveat. Therefore, it is important to get clear legal advice regarding the interest you want to protect, because a mistake as to whether your interest is sufficient to support a caveat could result in a costly damages claim.

Registering a caveat

Having determined that your interest or estate is a caveatable interest, we will help you ensure that the formative requirements of the caveat are met, and will prepare an authority and instruction form to register the caveat.

How do I remove a caveat from my land?

A caveat is generally removed in one of three ways. It is withdrawn by the person registering it, it lapses or it is removed by an order from the court.

Often a caveat is withdrawn – usually at the registered owner’s request – on the basis that they have or will fulfil any outstanding obligation to the person who has registered the caveat.

A caveat may lapse if it is not followed by the requisite order being made by the Registrar-General of Land pursuant to section 143 of the Act. The timeframes prescribed are either 10 or 20 working days unless the court makes an order that the caveat has lapsed at an earlier date.

Finally, the person whose estate or interest in the land is affected by a caveat may apply to the court for an order that the caveat is removed.

Caveats are very useful and effective in protecting your interests in land during disputes. However, it is important to talk with us early on to avoid the risk of incurring significant liability if they are registered incorrectly.

 

 

 


Disputes in contracts

Help is at hand if things go wrong with your build

Building your own home or doing renovations can be a way to get exactly what you want in your residential property. Even with the best preparation and planning, however, there are things that can go wrong in a build: the work may not be completed in the agreed timeframe, the quality may be poor or there may be surprise costs. One current common issue is unexpected delays or costs due to Covid-related supply disruptions.

If you find yourself in one of these situations, there are a few things to keep in mind.

Your contract may have the answer

The first step in any build dispute is to look at your contract with the builder. Often your contract will provide an answer about who is responsible for things like unexpected costs.

By law, for any residential building work over $30,000 (including GST) in value, your builder must provide you with a written contract setting out things such as the scope of the work, expected start and end dates, how changes are negotiated and how problems with the work will be fixed.[1]

Your contract also may set out timeframes for raising issues with your builder and how you need to do this. This is why it is particularly important to talk with us about your contract before signing and as soon as any issue arises.

Other laws may protect you

If things go wrong, you also might find help in the other legal obligations your builder has under the Building Act 2004, Fair Trading Act 1986 and Consumer Guarantees Act 1993 even if you do not have a contract.

For example, regardless of what your contract says, section 362I of the Building Act 2004 requires your builder to carry out the work in a competent manner, follow all laws around the work including the Building Code and complete the work within a reasonable time. If your builder fails to do any of these, you can require your builder to repair the work or replace materials or, in some situations, pay you compensation instead.

In addition, your builder has obligations under laws, such as the Fair Trading Act 1986, to not mislead you about the quality of the work, the qualifications of the people completing the work or the price involved. If these obligations are not met, your builder could face criminal prosecution.

Don’t withhold payment without following the correct process

When something goes wrong, it can be tempting to refuse to pay any invoices until the problem is fixed, but this can cause more headaches for you. Under the Construction Contracts Act 2002, after your builder has issued an invoice, you must pay within the time required by your contract (or otherwise 20 working days) or your builder can take legal action to recover this debt. Some build contracts also will include the ability for your builder to mortgage your home if invoices are unpaid.

If you dispute the amount owing — for example, you disagree that your builder has completed all of the relevant work — then you must issue what is known as a ‘payment schedule’. This sets out the amount you will pay on the due date and the reasons you dispute the remaining amount. You then must pay the agreed amount and try to resolve the dispute about the remaining portion of the invoice.

If negotiation doesn’t work, there are other options

If you have tried unsuccessfully to resolve a dispute directly with your builder, there are other options open to you. For example:

  • For claims of a value up to $30,000, you can apply to the Disputes Tribunal. Lawyers cannot attend this Tribunal and the process is less formal and costly than court.
  • For higher value claims, you can apply to the District Court for a judge to make a decision about your dispute.
  • For claims relating to weathertightness issues, you can apply to the Weathertight Homes Tribunal.
  • You could ask a private dispute resolution service to help with mediation or adjudication, such as the Building Disputes Tribunal.
  • If your builder has failed to provide you with a written contract and other documents where required by law, you can complain to the Ministry of Business, Innovation & Employment.
  • If your builder has been negligent or incompetent, you can complain to the Building Practitioners Board. This board does not deal with payment disputes.

If you have a building dispute, do contact us early on so we can help you assess your options and the next steps.

[1] Section 362F Building Act 2004; Building (Residential Consumer Rights and Remedies) Regulations 2014.