Edmonds Judd

Property

Supreme Court Cooper v Pinney – Clayton distinguished – Mr Pinney’s trust powers not property for purposes of PRA

The Supreme Court’s decision in Cooper v Pinney[1] (Pinney) is an important clarification of the application of the principles established by Clayton v Clayton [Vaughan Road Property Trust][2] (Clayton) that a bundle of rights and powers held by an individual under a discretionary family trust can be so extensive as to amount to “property” under the Property (Relationships) Act 1976 (PRA), and the effect of the Trusts Act 2019 (2019 Act) on trust powers and rights.

The judgment is a compelling and well-reasoned analysis of the principles in Clayton and the importance of fiduciary obligations as constraints on trust powers.  The Court’s careful analysis leads to the clear conclusion that the trust deed in Pinney and the trust deed in Clayton “are not alike” and that Mr Pinney’s bundle of trust powers do not amount to property for the purposes of the PRA[3].  The emphasis on the requirement of unanimous decisions by a minimum of two trustees, the fiduciary nature of trust powers and judicial oversight provides valuable guidance for both trust and relationship property practitioners.

This analysis will begin by showing how the definitions of “property” and “owner” under the PRA have been expanded to encompass rights and powers under a trust deed. It will then provide an overview of the Clayton decision, followed by a summary of the Supreme Court’s decision in Pinney.  Finally, the analysis will conclude with a discussion on the application of the mandatory and default duties in the Trusts Act 2019.

 

Relevant PRA definitions

The starting point is the definition of “property” and “owner” in section 2 of the PRA.  The definition of “property” includes “any other right or interest”, and the definition of “owner” includes “the person who, …is the beneficial owner of the property under any enactment or rule of common law or equity”, together these definitions tie into the meaning of “relationship property” at section 8(1) PRA.

That a discretionary beneficiary does not have a beneficial interest in the income or capital of a discretionary trust is well supported by a long-standing line of authorities.[4]  The principle applied in the PRA context provides that discretionary beneficiaries do not have a beneficial interest amounting to property under the PRA, even where there is evidence of a long-standing intention by the trustees to exercise their discretion to favour a particular beneficiary.[5]

However, case law has broadened the definitions of property and ownership to apply to trust rights and powers through application of the purpose and principles of the PRA, it’s statutory context and the social context in which legislation such as the PRA is interpreted.  This “substance-over-form” approach was endorsed by the Supreme Court in Pinney.[6]

Clayton and the Vaughan Road Property Trust (Clayton Deed)

The Supreme Court agreed with the Court of Appeal[7] that a general power of appointment was tantamount to ownership[8].  Defining a general power of appointment as “a power to appoint property to anyone including themselves without considering the interests of anyone else”[9].

Clayton considered whether the bundle of rights comprised of powers and entitlements vested in Mr Clayton by the Clayton Deed gave him effective control, to such an extent that the bundle of rights was appropriately classified as property under the PRA.  Such an analysis must also consider restrictions on the exercise of powers, including how the rights of remaining beneficiaries can exert practical limitations on the exercise of trust powers.[10]

The relevant provisions of the Clayton Deed meant that Mr Clayton could:[11]

  1. apply all of the capital and income of the trust to himself as a discretionary beneficiary;
  2. bring forward the vesting day and appoint all trust capital to himself as a discretionary beneficiary; and
  3. resettle the trust capital on another trust of which he was a beneficiary.

The Supreme Court in Pinney clarified its findings in Clayton as:

… not whether powers or rights conferred by a trust deed actually amount to a general power of appointment.  That status does not necessarily define those powers constituting donee property.  Nor is that status definitive as to whether a power is property for the purposes of the RPA: in Clayton this Court did not find the trust deed actually created a general power of appointment, but rather recognised something analogous to one (which the Court said was property for the purposes of the PRA).[12]

Central to this finding was the “suite of provisions”[13] modifying or removing fiduciary duties. The Supreme Court found that there was no effective constraint on Mr Clayton’s exercise of powers in favour of himself.[14]

Pinney and the MRW Pinney Family Trust (Pinney Deed)

In Pinney the Supreme Court was asked to apply the principle in Clayton that a bundle of trust rights and powers such as those vested in Mr Clayton and unrestrained by fiduciary obligations, are together so extensive as to amount, in effect, to a general power of appointment, and therefore fall within the definition of property for the purposes of the PRA.[15]

Although the Supreme Court states that a finding that goes as far as saying that trust powers actually amount to a general power of appointment is not determinative of those powers being property for the purposes of the PRA.  It also goes on to say:

But a finding that one is dealing with powers amounting in effect to a general power of appointment may offer a short-cut: it tends to be conclusive as to effective ownership by the donee, and an inference can then be drawn that the power concerned is property for PRA purposes.[16][emphasis added]

Dealing with the law applying before the 2019 Act, the Supreme Court found that judicial oversight of trusts is a constraint that can be inconsistent with a finding that trust powers amount to effective ownership by the donee.  Noting that the more intrusive the scope for judicial oversight, the less likely that power is the property of the donee.[17]

Contrasting the terms of the Clayton Deed with those of the Pinney Deed, the Supreme Court found there were several significant differences that were sufficiently material to distinguish the Pinney Deed from the Clayton Deed.  That the power to appoint and remove trustees does not allow Mr Pinney to take sole control of the trust was found to be sufficient on its own to distinguish the Pinney Deed from the Clayton Deed.  The Supreme Court went on to state that even if unilateral control were possible, the powers to dispose of trust assets in Pinney were still constrained by fiduciary obligations.[18]

The Supreme Court framed its analysis under the following headings:[19]

  1. The deeds distinguished: The main similarity between the Clayton and Pinney deeds are the almost identically framed broad discretionary powers to distribute income and capital to discretionary beneficiaries.  But noting four significant differences:
    1. Appointment and removal of trustees: Both deeds confer a power to appoint and remove trustees, including to self appoint. However, the power contained in the Pinney Deed is subject to the requirement for a minimum of two trustees.  By contrast, the power contained in the Clayton Deed allows Mr Clayton to appoint himself sole trustee.[20]
    2. Unanimity: The Pinney Deed requirement for all trustee decisions to be unanimous, combined with the minimum of two trustees, meant that every decision “must be the product of a meeting of the minds of more than one trustee”.  Whereas the Clayton Deed allowed a sole trustee to act freely, only requiring unanimity where there is more than one trustee appointed.[21]
    3. Exclusion of fiduciary constraints: Both deeds have general clauses purporting to allow trustees to make decisions in their “absolute and uncontrolled discretion”.  The Pinney Deed went no further.  However, the Clayton Deed went on to expressly exclude obligations, such as the core obligation of a trustee to consider the interests of the beneficiaries.[22]
    4. Removal of beneficiaries: The Clayton Deed allowed Mr Clayton to remove all discretionary beneficiaries leaving himself the sole discretionary beneficiary, and to appoint all of the trust assets to himself before the vesting day, leaving nothing for the final beneficiaries.  There are no equivalent powers in the Pinney Deed.[23]
  2. The trustee appointment power remains fiduciary and constrained: Counsel for Ms Cooper argued that Mr Pinney could appoint himself and another trustee who would act on his direction, or a corporate trustee controlled by Mr Pinney, to then appoint all the trust assets to Mr Pinney.

The Supreme Court did not accept that argument.  Finding that exercise of the power of appointment with the intention of taking sole control of the trust would be a breach of the proper purpose rule and inconsistent with the fiduciary nature of the power of appointment and removal of trustees.[24]  By finding that the power as expressed in the Pinney Deed is fiduciary in nature, it follows that it must be exercised in good faith and in the interests of the beneficiaries, and not for any improper purpose.[25]

The Supreme Court felt that was sufficient to dispose of the case, but for completeness, went on to address the powers to dispose of trust capital and income.

  1. The remaining trustee powers likewise are fiduciary and constrained: Counsel for Ms Cooper also relied on provisions of the Pinney Deed allowing Mr Pinney to direct that the trustees appoint all trust assets to himself as a discretionary beneficiary to the exclusion of all others.[26]

In considering the argument for completeness, the Supreme Court noted the substantive difficulty with that argument is that the trust ownership arrangement is still subject to an “irreducible core” of duties owed by a trustee which are a fundamental trust concept: the duty to perform the trust honestly and in good faith for the benefit of the beneficiaries.[27]

  1. Mr Pinney’s powers are not his property for PRA purposes: The Supreme Court said it best, and I for one cannot do better.  So here it is in the words of Winkelmann CJ and Kόs J:[28]

Application of the Trusts Act 2019

Although the 2019 Act came into force on 30 January 2021 and applies to all express trusts whether created before or after commencement, it was accepted that the 2019 Act did not directly apply to Pinney.  Because Pinney was commenced prior to the 2019 Act coming into force the proceedings were governed by the 1956 Act, due to the effect of sch 1 cl 8 of the 2019 Act and s 18 of the Interpretation Act 1999.

Despite this the Supreme Court highlights the intention of the 2019 Act to “restate and reform” the law of trusts in New Zealand by “setting out the core principles of the law relating to express trusts”[29]. Further emphasising that the mandatory duties – to know, and to act in accordance with, the terms of the trust; to act honestly and in good faith; to act for the benefit of the beneficiaries; and to exercise powers for a proper purpose – were “intended to restate and summarise the current legal position”[30].

The fiduciary obligations imposed on trustees and implied in all trust deeds by the mandatory and default duties contained in the 2019 Act, are likely to have a significant effect on the status of a bundle of trust rights and powers for the purposes of the definition of property under the PRA.

It seems that trusts will continue to provide some limited protection for beneficiaries in PRA proceedings, at least where the fiduciary obligations in the mandatory duties are combined with relevant default duties and a requirement for two-trustee unanimous decision making.

Will we ever see the like of Clayton again?  One certainly hopes not.


[1] Cooper v Pinney [2024] NZSC 181

[2] Clayton v Clayton [Vaughan Road Property Trust] [2016] NZSC 29, [2016] 1 NZLR 551.

[3] Cooper vi Pinney, above n 1 at [125]-[126].

[4] Cooper v Pinney, above n 1 at [90], citing Gartside v Inland Revenue Commissioners [1968] AC 553 (HL) at 607 per Lord Reid, Lord Morris of Broth-y-Gest and Lord Guest and 617-618 per Lord Hodson and Lord Wilberforce concurring.

[5] Cooper v Pinney, above n 1 at [91].

[6] Cooper v Pinney, above n 1, at [34]-[36].

[7] Clayton v Clayton [2015] NZCA 30 at [99] and [111].

[8] Clayton v Clayton, above n 2 at [60]-[61].

[9] Cooper v Pinney, above n 1 at [38].

[10] Clayton v Clayton, above n 2 at [50]; Cooper v Pinney, above n 1 at [40].

[11] Clayton v Clayton, above n 2 at [52]-[55]; Cooper v Pinney, above n 1 at [41].

[12] Cooper v Pinney, above n 1 at [93].

[13] Cooper v Pinney, above n 1 at [42].

[14] Clayton v Clayton, above n 2 at [67]; Cooper v Cooper, above n 1 at [42].

[15] Cooper v Pinney, above n 1 at [1] and [92].

[16] Cooper v Pinney, above n 1 at  [94]; See Australian Securities and Investments Commission v Carey (No 6) [2006] FCA 814, (2006) 153 FCR 509 at [19].

[17] Cooper v Pinney, above n 1 at [98].

[18] At [100].

[19] At [101]-[102].

[20] At [102(a)].

[21] At [102(b)].

[22] At [102(c)].

[23] At [102(d)].

[24] At [104]-

[25] At [115].

[26] At [116].

[27] At [116]-[118].

[28] At [125]-[126].

[29] Cooper v Pinney, above n 1 at [67]; Trusts Act 2019, s 3(a).  Among other maters: see paras (b)-(d).

[30] Cooper v Pinney, above n 1 at [67]; Trusts Act 2019, ss 23, 24, 25, 26 and 27; and Law Commission Te Aka Matua o te Ture Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130, 2013) at 107.


Over the fence

Requirements when transporting livestock

The Animal Welfare Act 1999 outlines the standards and guidelines when transporting all live animals.

All animals must be provided with reasonably comfortable and secure accommodation when being transported. Animals must not be transported in a manner that causes unnecessary pain or distress, and regular welfare checks must be completed.

The legislation is supported by the Animal Welfare Regulations 2018 that outline the regulations that must be followed at each stage of transporting an animal, including but not limited to:

  • Requirements for a transportation vehicle
  • Preparing animals for transport
  • Loading and unloading
  • The journey
  • Special requirements depending on the mode of transportation, and
  • Documentation required.

Animals must not be transported where they are unfit for travel unless a veterinary certificate is obtained. This includes where the animal has:

  • Ingrown horns
  • Bleeding horns or antlers
  • Lameness
  • Late-term pregnancy
  • Injured or diseased udders, or
  • Eye cancer.

In such cases, a veterinarian should be consulted. The veterinarian, at their discretion, may certify in writing that they consider the animal to be fit for transportation. The certification is only valid for seven days from the date of examination.

It is important to understand the requirements, as transportation of an unfit animal will constitute an infringement offence to the owner of the animal.

 

Recent NZ-UAE free trade agreement

The United Arab Emirates (UAE) is one of New Zealand’s largest markets in the Middle East, with goods and services exports totaling NZ$1.1 billion for the year ended 30 June 2024. Negotiations for a trade agreement, to be known as the Comprehensive Economic Partnership Agreement (CEPA), between New Zealand and the UAE concluded in Wellington on 26 September 2024.

The agreement will now undergo legal verification to prepare it for signature and public release. Once signed, both New Zealand and UAE will still need to take further steps before it becomes enforceable.

The key outcomes of the CEPA include:

  • A significant expansion of New Zealand’s free trade
  • New Zealand will have the best available access to the UAE market, with New Zealand goods exporters able to access the market duty-free. The CEPA will eliminate tariffs on 98.5% of exports to the UAE. This is planned to increase to 99% after three years. The initial access includes all New Zealand dairy, meat, horticulture and industrial products, and
  • The UAE is a key export destination and hub in the Gulf region. It offers significant opportunities to enhance cooperation across many areas, including agriculture and sustainable energy.

The UAE’s high-value market offers export growth for New Zealand companies, aligning with the government’s ambitious goal of doubling export value to the region within the next decade. Importantly, this also benefits our rural sectors, driving economic benefits across the country.

 

Employment contracts for seasonal workers

In September, important changes were announced to the Recognised Seasonal Employee Scheme (RSE) to support the growth of New Zealand horticulture and viticulture.

A notable change is the increase for the 2024–25 season RSE cap where 1,250 more workers can obtain an RSE Visa, thus increasing the cap to 20,750 workers.

 

Changes for employers

Employers are no longer required to offer their employees an average of 30 hours per week. Instead, they must offer a 30-hour minimum week calculated over a four-week period, for example: 120 hours within a four-week period. This is to account for fluctuation of working hours for weather-dependent roles and to minimise the number of hours having to be paid for unworked hours.

Previously all workers had to be paid at least 10% above the minimum wage. This is now only applicable where the worker is returning for their third or subsequent season, otherwise RSE workers only need to be paid at least minimum wage.

Employers may now impose a temporary increase on accommodation costs of 15% or $15.00, whichever is lesser of the two, for a 12-month period. If, however, the RSE employee was offered an accommodation cost agreement before 2 September 2024, then an increase cannot be imposed.

An employee’s ability to move between employers/regions has now increased from 14 to 21 days either side of the worker’s current move date where it is approved by the Agreement to Recruit (ATR). This is beneficial for employers with multiple worksites.

 

Changes for employees

RSE employees are now eligible for multi-entry visas, allowing them to return home for important events without needing to apply for another visa.

RSE employees may also be able to train, study or develop their skills while living in New Zealand, even if it does not directly relate to their role. They will, however, need to ensure they still meet their employment agreement requirements.

There is also no longer a requirement to be screened for HIV.

In response to these changes, RSE employer/employee actions may differ, depending on where you are in the ATR process.

If you are unsure of your obligations, don’t hesitate to contact us.

 

 

 

 

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, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


The Supreme Court recently issued its much-anticipated ruling in A, B and C v D and E Limited as Trustees of the Z Trust known as the Alphabet case. It concerns the extent of fiduciary duties owed by a parent to an adult child. ⚖️

The case involves a father, who transferred most of his assets to a trust during his lifetime, leaving his adult children without any entitlement to those assets. The children argued that due to past abuse they suffered at their father’s hands, including physical, emotional abuse and sexual abuse, their father owed them fiduciary duties that extended into adulthood. They believed his actions in transferring assets breached those duties, and the assets should revert to his estate to satisfy their Family Protection Act claims to be provided for from his estate.

While the Court agreed that fiduciary duties exist between a parent and minor child, it ruled that those duties generally end once the child reaches adulthood or the caregiving responsibility ends. The Court rejected the notion that such duties continued into adulthood, despite the children’s vulnerability due to the abuse they suffered during childhood. Importantly, the Court noted that imposing fiduciary duties in this case would create legal uncertainty and “reverse engineer” a remedy for past wrongdoing.

The Court also ruled against treating the trust assets as part of the father’s estate. However, it acknowledged the need for legal reform in this area and pointed to the Law Commission’s 2022 proposal to allow courts to unwind property transactions that intentionally defeat claims under succession law.

While the Court was sympathetic to the appellants, it ultimately found that the law could not support their claim in this case. The ruling highlights the need for further reform in this area of law, which the Law Commission’s proposals may address in the future.

Kerry Bowler, Solicitor Kerry Bowler


If you’re buying a beach house and planning to rent it out or Airbnb it when you’re not using it, there are some things you might want to consider:

 

  1. If you are going to rent the property out – make sure that it complies with the healthy homes standards. If not, consider how much it might cost you to make it compliant.
  2. If you are going to rent it out with Airbnb, you don’t have to comply with the health homes standards.
  3. Either way, you might want to consider how difficult it might be to manage the property if you live a couple of hours drive away from the property. Think damage, parties, meth use or production, and cleaning up at the end of each stay.
  4. Consider additional costs for operating an Airbnb. Some councils increase rates for temporary accommodation arrangements like Airbnb.
  5. You will need to make sure that you obtain insurance that covers you if your Airbnb or rental tenant damage the property.
  6. Again, get yourself some tax advice.
  7. Finally, if you are renting, make sure you know your obligations as a landlord and how you can go about legally ending the tenancy.

 

We’re open again from 6th January to help you with your property purchases and conveyancing needs. We can also help you with ownership structures, negotiating property sharing agreements, succession planning, and any disputes that might arise.

 

Joanne Dickson


Our last article discussed claims by a partner on separation or death.

 

Conversely, some blended families want to provide for their new partner on their death and seek to minimise the risk of a claim by their respective children.

 

Under the Family Protection Act (FPA), parents owe a moral obligation to make adequate provision for their children in their Will.

 

To minimise the risk of FPA claims, couples may change the ownership of their assets so that those assets do not form part of their estate and are not open to claims under the FPA.

 

Some common ownership structures include:

 

  1. Transferring property into a discretionary family trust; and/or
  2. Transferring property into joint names so that it passes by survivorship on death.

 

These ownership structures make it more difficult for children to make claims against estates.

 

However, section 88 of the Property Relationships Act (the Act) allows an executor to make an application for division of relationship property against the surviving partner, where refusing them the right to do so would cause a “serious injustice”. If an executor is not willing to make the claim, the deceased’s children may apply to the court to have them removed.

 

If most relationship property is jointly owned or was transferred to a trust during a relationship, then that could meet the threshold for a serious injustice. In these circumstances the court may divide relationship property so that the estate has property available for the children to make an FPA claim.

 

A contracting out agreement is one of the only tools that can help to prevent these types of claims.

Libby McDonnell


A Contracting Out Agreement (COA) is an estate planning necessity for blended families.

 

The relationship property landscape is changing, and some popular protection tools are becoming less effective. Trust busting cases like Clayton v Clayton show the court’s willingness to treat trust property as relationship property in the event of separation, especially where assets are transferred into a trust during a relationship.

 

A COA is the most effective tool to ensure a couple’s assets and liabilities are divided as they intended on separation or death.

 

If there is no COA, then couples in a marriage, de facto relationship or civil union are exposed to claims against potentially all of their assets and liabilities (even if in trust) on a 50/50 basis.

 

On death, the surviving partner can elect to either:

 

  • Apply for division of relationship property in accordance with the Property (Relationships) Act (the Act), the presumption being a 50/50 split; or

 

  • Accept the gift under their partner’s Will and retain any individually and jointly owned property.

 

A COA can prevent a surviving partner (or their children, as discussed in our next article) from making a claim for division of relationship property under the Act on death.

  Libby McDonnell.


Why should I look at my will?

Review at life’s milestones

You should review and update your will regularly. It is not something that, once done, you should just stick in a drawer and forget about. There are many significant milestones in life when you should think about whether your will is still appropriate for your unique circumstances.

 

If you don’t often review your will, particularly after important life milestones, you may discover (or worse, your family may discover after your death) that your will does not leave everything the way you intended. This means that certain people or causes may miss out on an inheritance or a gift in your will. Also, out-of-date wills can cause significant complications for the people involved in the management and distribution of your estate.

 

With the summer holidays coming up and some time away from the treadmill of daily life, this is an ideal time to review your will.

 

Buying a home is a milestone

Many people make a will when buying their first home. Although there is no reason why you cannot make a will before then, this is often the trigger when it feels like you have something significant to leave in your will. If you buy your home with someone else, usually you will want to leave the house to that person when you die. However, this is not always the case, particularly if you are not in a romantic relationship with that person.

 

If you have children from a previous relationship, you may want to ensure your partner can continue living in the house when you die but, ultimately, you want your children to inherit your share of the house. You may have borrowed money from other family members to help with the purchase that you need to repay first. Your will should be carefully drafted to make sure it truly reflects your intentions.

 

Joint ownership vs tenants in common: The ownership structure of your home, or any asset for that matter, is also very important to understand. ‘Jointly owned’ assets pass to the surviving owner/s when one owner dies. Assets which are owned as ‘tenants in common’ remain part of a person’s estate when they die and will be distributed under that person’s will.

 

Many people are not sure, or forget what type of ownership they have, especially if their house was bought many years ago. If you are unsure, or the ownership structure of your asset/s changes, you should review your will to make sure that everything will still be distributed as you want after your death. You should also review the ownership structure at the same time.

 

Marriage, separation and divorce

Getting married, separated or divorced are all events that have a significant effect on how your will might operate when you die. If you have a will and subsequently get married or enter into a civil union, your will is automatically revoked, unless your will is specifically worded as being in contemplation of that marriage or civil union. If it is not, you could effectively be left without a valid will, even though you have made one in the past.

 

In the case of a separation order or divorce, your existing will is not revoked but the law states that your spouse or partner is treated as having died immediately before you. This means any gifts to them will be void and, instead, any backup provisions in your will would come into effect. You should update your will after a separation or divorce to ensure that it will operate as you intend.

 

It is also important to know that the simple act of ‘breaking up’ with someone is not enough to have gifts to that person automatically voided. You should take the additional steps of obtaining a formal separation order or an order dissolving the marriage, and reviewing your will. If not, you could be left in the awkward situation of leaving everything in your will to your ex-spouse or partner – which may be a very unpalatable idea for some!

 

Birth or adoption of children

There’s a lot to think about when welcoming a child into your family and a review of your will may not be high up on the to do list. Your will should, however, assign guardianship of your children and account for their future needs, particularly if your child has special needs requiring a higher level of assistance. If there is a significant age gap between your children or you have children from different relationships, your will may need to be tailored to account for this.

 

Death of an executor, beneficiary or guardian

Executors are the people you name in your will to manage and distribute your estate when you die. A will-maker will often appoint a family member or someone to whom they are very close to carry out this role. It is important to have an executor who you trust who will do a good job.

The death of an executor, beneficiary or a guardian of your young children means your will may not work as intended or could create confusion. Do review your will if this happens or should your executor’s circumstances or health change.

 

Significant changes in financial position

Receiving a large inheritance or a significant capital gain on, say, property or business assets (or perhaps winning Lotto!) can significantly alter how you want your estate to be distributed when you die. You may decide to include additional beneficiaries – perhaps more distant family members or friends, or leave a gift to a charity that you care passionately about.

Although it’s not always the case, estates of relatively higher value are often more complex and require greater planning to ensure that everything runs smoothly when you die.

 

What if I don’t have a will?

If you die without a will (called an ‘intestacy’), your assets will be distributed according to the default rules established by law. Depending on your circumstances and who survives you, your assets would usually go to some combination of your spouse or de facto partner, children, parents and siblings. Even if some family members are estranged from you, they could still receive something from your estate under the default rules.

 

Other milestones

The milestones we have noted above for reviewing your will are not exhaustive. Starting a business, having a KiwiSaver account, moving countries, changes in your health and amendments to the law are all good reasons to look at updating your will.

 

If it’s been a while since you’ve looked at your will, we hope this article gives you the impetus to pull it out of that drawer and dust it off. Better yet, talk with us about it so you can have peace of mind knowing that, when you die, your loved ones will be taken care of as you wish.

 

 

 

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


In this article we look more closely at Step 3 – Advice.

 

Once your lawyer has the details of all property owned by each of you they can assess what your rights would be if that property were divided under the RPA, and provide you with advice on how the agreement affects your property rights and the implications for you if property were divided under the agreement.

 

Why do I need advice on rights under the RPA if it’s just 50/50 and I’m contracting out?

This is where the law jumps in and says “woah there, partner! There’s a lot more to it (131 pages to be precise), so you should definitely get legal advice to check it’s what you want first”.

 

It is important that you fully understand your current property rights under the RPA before agreeing to change or give up those rights.  The starting point for under the RPA is that relationship property will generally be divided equally between partners in a qualifying relationship.  However, this is just a presumption, not a rule set in stone. There are numerous exceptions and adjustments within the RPA that can alter how property is divided based on the specific circumstances of your relationship.  Even the most experienced relationship property lawyers can find the RPA complex. That’s why seeking legal advice is essential before making any decision to contract out of the RPA.

 

Great, now you’ve had advice and know what your actual property rights are under the RPA, let’s compare that to your position under the contracting out agreement.

Even if you’re planning on entering into a contracting out agreement with the intention of maintaining a 50/50 split, it’s important to realise that the implications could be far-reaching.  Property rights, financial arrangements, estate planning, and even third-party property rights (such as those held in trusts or companies) can all be affected.  The agreement might impact more than you expected.  (*Hot tip* now is a good time to consider whether you should create or update your will as it works hand-in-hand with your contracting out agreement)

Your lawyer will be able to assess your specific situation and help you understand how the contracting out agreement compares to your rights under the RPA. They can guide you through the various consequences and ensure you’re fully informed before agreeing to anything.

 

But wait!!! It’s not enough just to receive legal advice—you need to understand it. Ensure your lawyer explains the details and feel free to ask lots of questions, we love to know you are thinking about how this all applies to you.

 

If you’re satisfied with the advice and understand the implications, it’s time to book an appointment with your lawyer to sign that contracting out agreement. This step is crucial to ensure your rights are protected and your intentions are clearly outlined.

Kerry Bowler, SolicitorKerry Bowler, solicitor


Property briefs

Break fees: repaying your mortgage early

If you are in the position to repay your mortgage early to your lender, you can. If you have a fixed interest rate that has not expired, however, you will technically be breaching the loan by repaying early.

As a result, your lender will impose a ‘break fee.’ The break fee is designed to compensate your lender for the interest payments it will miss out on when you repay your loan early. Consult with your lender for an estimated break fee.

How the break fee is calculated will always depend on your lender, the fixed interest rate and the remaining balance on your mortgage.

You should also be mindful that many lenders offer a ‘cash contribution’ payment at the start of a loan. This is a one-off payment, for example $3,000, as an acknowledgement of you choosing them as a lender – think of it as a ‘loyalty payment’ for keeping your mortgage with that lender for a certain period of time, generally three or four years.

If you repay early or refinance your mortgage (or in some cases at least half of your mortgage) this will likely trigger a ‘claw back.’ Your lender will expect you to repay some, or all, of the cash contribution. This will be outlined in your loan documentation.

 

 

Refixing mortgages: changing the interest rate of your mortgage

New Zealand’s Official Cash Rate (OCR) is noticeably dropping. As of 9 October 2024, the OCR stands at 4.75%. Most lenders are responding by lowering their mortgage interest rates.

In light of this, now may be a good time to consider refixing your mortgage interest rate with your lender – if your lender will allow you. Alternatively, you may opt for a floating or variable interest rate that goes up and down depending on the state of the financial markets, including the movement of the OCR.

The benefit of having a fixed interest rate is certainty; you will know how much your regular loan repayments will be. With a floating or variable interest rate, the amount of each repayment may vary as the OCR fluctuates. This may be preferable for some borrowers.

Alternatively, you may want to consider having your mortgage split between a fixed rate and a variable rate.

 

 

Refinancing mortgages – switching to a different lender

When refinancing your mortgage, you are essentially repaying your existing loan with your lender and taking out an entirely new loan with a different lender. Many borrowers do this to secure themselves a better deal, usually at a lower interest rate.

If you do this, it is important to know there are legal costs and potentially break fees involved in refinancing (more on break fees in column one). If you are unsure about the process and whether or not to refinance your mortgage, talk with your lender.

Also note that if the bank paid you a cash contribution at the start of your loan (more on this in column one) and you refinance, then you may be expected to repay at least some of it. This will be outlined in your loan contract.

If you are considering making changes to your mortgage and are unsure how to go about it, please contact us. We are happy to help.

 

 

 

 

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 Property Speaking 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


When your tenant sells their business

A common question that arises for landlords owning commercial premises (or tenants leasing those premises) is what happens to the lease when your tenant sells their business. The answer to this is usually found in the deed of lease itself.

 

Assignment of the lease

When your tenant sells the assets of their business, the lease of their premises will usually be assigned to the purchaser on the settlement date. This is documented by you (as landlord), your tenant (as assignor) and the purchaser (as assignee) entering into a deed of assignment, which will assign the rights and obligations of the lease to the purchaser of their business. Your existing tenant will usually continue to be liable under the lease for the remainder of the current lease term. The assignee will also be liable to meet the lease obligations.

Under The Law Association (previously the ADLS) form of deed of lease, your tenant cannot assign the lease without your prior written consent, which you cannot unreasonably withhold. Your tenant must demonstrate to your (reasonable) satisfaction that the proposed assignee is respectable and has the financial resources to meet the obligations under the lease. Your tenant must also be up to date with rent and not be in breach of the lease. You can also require your tenant and the proposed assignee to sign a deed of assignment, and you may also be able to request a bank guarantee or a personal guarantee from the proposed assignee.

Your reasonable legal fees relating to the assignment of the lease will usually be paid by your tenant.

 

Deemed assignment

If your tenant is a company, the shareholding in that company may change. Existing shareholders may be selling some (or all) of their company shares to a third party, or transferring some (or all) of their company shares to other existing shareholders.

Where shares in your tenant’s company are being sold, you will not need a deed of assignment as the tenant will remain the same. However, if those shareholding changes result in a change in control of the company, which is a deemed assignment under the lease, your tenant is required to obtain your written consent before transferring the shares.

You will have the opportunity to assess the financial resources and experience of the incoming shareholder and propose reasonable conditions to your consent as part of the process. You, the exiting shareholders and the new shareholders will need to negotiate in relation to the release or replacement of any existing guarantees as part of your consent.

 

Agreement to lease

You may not have a deed of lease with your tenant, with the terms of your lease instead documented in an agreement to lease, which is a basic document setting out the broad material terms without going into detail about the day-to-day workings of the lease (which is contained in the deed of lease). A tenant’s rights and obligations under an agreement to lease cannot be assigned, so if your tenant is selling their business and wishes to assign its lease which is documented in an agreement to lease, they will first need to enter into a deed of lease with you, which can be assigned to the purchaser of the business (with your consent).

While agreements to lease can be helpful for the parties to initially agree material terms, they still technically require both parties to enter into a deed of lease reflecting those terms. We recommend that you promptly enter into a deed of lease after signing any agreement to lease so that both parties are aware of their full rights and obligations under all the terms of the lease.

 

We can help

Whether you are a landlord or a tenant negotiating through an assignment of the lease, we recommend early contact with us.

If you are a landlord, we can advise on what information you should request from any proposed assignee to allow you to make an informed decision on whether you consent to the assignment of the lease.

We can help both landlords and tenants in navigating what is and isn’t reasonable from each party in the circumstances.

 

 

 

 

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 Property Speaking 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