Edmonds Judd

Property

Will-making when you have overseas assets

Estate, Property
0

Some key considerations

For New Zealanders with overseas assets, ensuring your estate planning arrangements are in order requires careful thought and consultation with us and a tax expert here in New Zealand, as well as in the countries in which those assets are located. We outline some of the key legal considerations, highlighting potential issues that may arise if these factors are not properly addressed.

 

 

Succession in different countries

New Zealanders enjoy a reasonable degree of freedom in how their wills are drafted and to whom they leave their assets. This is, however, not always the case in countries (such as France and The Netherlands) that have ‘forced heirship’ rules. This commonly means that an estate is divided into two parts. One part is distributed to family according to specific rules, and the other part can be dealt with in a will.

Different countries often have different rules for property which is immovable (such as land) and property which is moveable (such as shares or bank accounts). This principle is known as ‘scission.’ It means that succession to land and immovable property is governed by the law in the country where your property is situated, whereas succession to movable property is governed by the law of your last place of domicile.

For people who are, for example, domiciled in New Zealand but own property in France, if your house in France is left to a friend, French succession law will apply as the house is immovable property. Whether such a gift can be validly made will be determined under French law.

 

 

Multiple wills

Not only are there differences in succession laws in different countries, but there can be different taxes applying to property and estates in those countries. For people with immovable assets in multiple countries, there should be consultation with experts to determine whether separate wills are required for each country.

Back to the above French example: there should be one will for New Zealand assets, and a French will should be drafted by a French lawyer that applies to the French assets.

There are, however, traps when multiple wills are signed. The wording is critical and, most importantly, it is essential multiple wills do not inadvertently revoke each other.

A case in 2021[1] illustrates what can happen if proper care is not taken. Beverly McLean signed two wills: an earlier one applying to her New Zealand assets, and a later one applying to her South African assets.  Despite her instructions emailed to her lawyer that the two wills were to deal only with the assets in each respective country, the court confirmed that the later South African will inadvertently revoked the earlier New Zealand will as it stated, ‘I, [name] revoke all previous testamentary dispositions and declare the following to be my Last Will.’ As a result, all of the assets in the estate passed under the South African will.

The clause which featured in the above case is a common clause in a will. However, where a will-maker has multiple wills dealing with assets in different countries, the clause is not appropriate and should not be used.

 

 

Tax implications

Wills can have surprising tax consequences. The choice of executor can be important, and overseas beneficiaries may need to pay tax on their share of an estate.

The situation is straightforward when an executor of a New Zealand estate is a New Zealand resident.

If a will appoints an overseas-based executor, or a person who later moves overseas, this can lead to the New Zealand estate being caught by an overseas tax regime, or the New Zealand estate being treated differently by Inland Revenue. This can be a particular problem between Australia and New Zealand as in Australia, an estate is treated as any other trust for tax purposes. One way to address this in a will is to specify that an executor’s appointment is only valid if they remain in New Zealand.

Beneficiaries can also be liable for tax on their share of an estate. This usually occurs when they live overseas. If they live in a country with inheritance taxes, they may receive a much smaller share of the estate than other beneficiaries who live in a country with no inheritance tax.

If some of the beneficiaries live overseas,  the estate can pay these taxes so that each beneficiary receives the same amount. A will needs to state this clearly, otherwise the default position is for the beneficiary to pay tax on their share of the estate.

Some overseas countries have deadlines for inheritance tax payments. Payment is sometimes required before the beneficiary has received their inheritance. A will can provide for an executor to advance funds in that case, so that the beneficiary is not out of pocket while waiting for their inheritance.

 

 

Be proactive

Preparing wills in New Zealand is becoming complicated as more of us live and travel overseas, and acquire international assets. When considering the provisions in your will, or when reviewing your current will, it’s essential to list your overseas assets, where they are located, and whether overseas lawyers and accountants will be needed.

If you need advice about your will and where your assets are located, please don’t hesitate to contact us. We are happy to help.

[1] Re McLean [2021] NZHC 1463.

 

 

DISCLAIMER: All the information published in Trust 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 Trust 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

Contracting out agreements for relationships late in life

Estate, Property, Relationships, Trusts
0

A wise move as financial affairs are more complex

You may think that a ‘pre nup’ is most commonly used when a young couple begins a relationship and there is a significant difference in their financial position. However, these agreements, formally known as contracting out agreements (COAs), can be entered into at any time during a relationship. They are particularly useful for couples entering into a de facto relationship, or marrying later in life, as both parties are more likely to come to the relationship with more complex financial affairs.

 

 

Why have a COA?

One of the couple may have been through a previous separation or the loss of a spouse. They may have children – dependent or adult. They may also have trust or company structures that make their overall asset profile less straightforward from a relationship property perspective than younger couples who are just getting started with their lives together.

In these cases, a COA can give both parties (and their families) clarity about what will happen to their assets if one of them dies, or if they decide to separate.

A COA is a way of opting out of the default rules as to how the division of property is dealt with under the Property (Relationships) Act 1976 (PRA). Without a COA, the default approach would apply; this generally means that relationship property assets are divided 50:50. An equal split, however, is not always appropriate. In complex cases, parties can end up in protracted court cases trying to figure out how the PRA applies to their particular situation.

While the default rules are a helpful fallback position where people cannot agree how property will be divided, the PRA does not necessarily reflect what all couples would regard as ‘fairness.’ The legislation also does not take account of fact-specific or unusual cases. COAs allow couples to set in place clear and bespoke rules that apply to their particular circumstances, and their specific assets, in the event their relationship or marriage breaks down.

 

 

Opens up discussion

One of the benefits of considering a COA is that it opens up the discussion between a couple as to what they would like to happen to their property, or what they might consider fair, in the event that one of them dies or they separate. Often we find that couples have never had this conversation, but have made assumptions about what will happen or what their partner thinks should happen.

In particular, these assumptions can be harshly tested and shown to be wrong when a partner dies unexpectedly. The surviving partner may find that they have radically different expectations about what will happen compared with the deceased partner’s children and any other parties involved in such an estate.

The same issue can arise if a couple separates. Efforts to resolve relationship property issues may be made in circumstances where the partners’ perceptions of fairness have changed over time. There may have been unequal financial contributions made during the relationship or owing to events, such as infidelity, that have occurred during or which ended the relationship.

 

 

Complex finances

Where a couple has a complex financial situation, including trust and company structures, a COA should be supported by documents between the parties and the trusts or companies, so that no assets fall through the cracks or fail to be taken into consideration. It is important for couples to seek independent advice about the types of documents required, and their effect.

 

 

Review a COA regularly

It is also critical that couples review their COA as life changes. When properties are bought and sold, home improvements funded or other big changes happen, the COA may become out of date and difficult to apply. A new agreement, or an amendment to an existing agreement, can ensure that everyone has clarity about what the changes mean and what their effect will be if there is a death or separation.

A COA can only be enforced if both parties have received independent legal advice and both lawyers certify the agreement. This requirement ensures that both parties are fully informed about the effect of the agreement.

 

 

DISCLAIMER: All the information published in Trust 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 Trust 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

Over the fence

House, Property, Rural
0

Service tenancies on the farm

Arrangements where an employer provides housing accommodation to their employees, such as where a farm worker who lives on the farm, are known as ‘service tenancies.’

A service tenancy is governed by the Residential Tenancies Act 1986; it must be recorded with a written agreement. Regardless of whether your tenant pays rent for the property, it is still considered a service tenancy. A tenancy agreement may be incorporated into an employment agreement, however it is beneficial if they are two separate documents.

The Act sets out the rights and responsibilities for service tenancies – for both landlords and tenants. As a landlord you must provide the property in a reasonable state of cleanliness, comply with healthy homes standards, smoke alarm requirements, and any health and safety obligations. Your tenants must pay the rent when due, keep the property reasonably clean and have the right of quiet enjoyment.

A notable difference between service tenancy agreements and other tenancy arrangements is the notice period required to end the service tenancy. If you are terminating a worker’s employment, or your employee has decided to leave, both parties must give each other at least 14 days’ notice of the intention to end the tenancy.

In situations where the employment has ended you may give your tenant less than 14 days’ notice if you believe substantial damage will be done to the property if they continue living in the property, or you need the accommodation for a new employee starting in less than 14 days and no other accommodation is available.

 

Checking terms of engagement regarding liability

In farming there are often multiple parties involved in the overall enterprise. In the seed industry, for example, there is often the supplier, grower and cleaner.

The terms of engagement is a legally binding agreement that sets out the rights and obligations of each party in the overall structure. It is important to understand the terms you have agreed to particularly regarding liability so that you know if/when you could be liable for the seed and any damage caused to it.

The terms of engagement can differ depending on the structure of the arrangement. Whether your land is leased by a business to grow seed or whether you buy and grow the seed yourself can alter the rights and obligations. Different parties are liable for the seed from the time it is planted, through to harvesting and cleaning. For example, if the seed is damaged during the cleaning process it is important to know whether you are still liable or whether the seed cleaning company, if outsourced, has assumed liability for the damage.

Understanding your liability under the terms of engagement and ensuring that you have the appropriate cover in place is important. Who is liable, and what rights and obligations are owed differ depending on what process is followed.

 

 

Farm lease coming to an end – what’s required?

Under a farm lease the lessee commonly pays the farm owner (lessor) to run an independent farming operation on the leased land. Such a lease often gives the lessee access to the land, building and other infrastructure on the property or portion of the property.

Although this arrangement is mutually beneficial to both parties, it is not a shared responsibility. Your lessee is responsible for maintaining the land in accordance with the terms and conditions of the lease.

The duration of the farm lease should be included in the lease document. There are also prescribed obligations to comply with when the lease expires. Your lessee often has to ensure that, at the end of the lease, the land is returned in an acceptable state as agreed to in the lease terms, and is also required to remove alterations or additional fixtures they may have installed, and to destock the land.

If your lessee does not comply with these lease terms, they may have to pay the costs and expenses associated with removing fixtures.

 

If you would like some guidance on any of these topics in Over the fence, please contact us. We are here to help.

 

 

 

 

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

Over the fence

Property, Relationships, Rural, Your Own Business
0

Contract grazing

Contract grazing is one of the ways you can farm that does not require land ownership. It is an arrangement where land ownership, livestock ownership and organising the grazing can all be managed separately.

Any species of livestock that are bred for meat or dairy (for example: cattle, sheep, goats or deer) can be the subject of contract grazing arrangements.

When involved in contract grazing, it’s imperative that you have a written contract that ensures a mutual understanding and definition of the obligations and responsibilities amongst the parties.

It is also important to include an animal health programme ensuring the animals’ welfare is protected and maintained, including the day-to-day management, health management, animal arrival obligations and reproduction requirements. The contract should include how and when payments should be made, and how any conflicts could be resolved.

The arrangement can involve up to a maximum of three separate entities each carrying out a specific role – the landowner, the livestock owner and the grazier (grazing manager). The grazier oversees the grazing activities and provides management expertise to the land and livestock owners.

If you are involved in contract grazing, don’t hesitate to contact us when you need to organise the contract.

90-day trial periods available again for all employers

As it had indicated pre-election, the government reinstated the 90-day trial periods for all employers. The 90-day trial period has had something of a flip-flop history.

First introduced in 2008, trial periods were initially applicable for employers with 19 or fewer employees; the overarching idea was that it would reduce the risks that employers face when hiring a potential employee. In 2010, the 90-day trial period was extended to all organisations – whatever their size. In 2018, the Labour coalition amended the law back to being applicable to only employers who had fewer than 20 employees. However, since December 2023, the 90-day trial periods have been reinstated for organisations of all sizes. There is ongoing debate that the 90-day trials diminish the risks for employers and increases the uncertainty for employees.

A 90-day trial period can be used for your employees if they have not previously worked for you. For you to include a trial period when hiring a new employee, you and your prospective employee must agree to the trial period before they start work. The trial provision must be included in their employment agreement to be able to terminate within that trial period. If you want to dismiss your ‘trialled’ employee, it’s essential the correct steps are taken during the process.

You should note that your dismissed employee is not entitled to bring a personal grievance in respect of the dismissal if it is within the trial period. It’s important to be aware, however, this does not prevent your employee raising a personal grievance on other potential qualifying grounds such as discrimination or bullying.

We strongly recommend you talk with us early if you intend including a trial period or using a trial period to dismiss your employee. Getting it wrong can cause much distress for them, and a great deal of money and time for you.

Minimising phosphorus in waterways

Most farmers work hard to manage the water quality on their properties. They change grazing arrangements, manage their fertiliser applications, fence riverbanks and wetlands, plant trees and place sediment traps.

Dairy farm fertiliser effluent contains phosphorus that may enter freshwater from run off or leaching from paddocks. Although phosphorus is essential for plant growth and crucial for food security, it leaves a devastating footprint on the environment. A key ingredient in synthetic fertilisers, the damaging impacts are seen when phosphorus contaminates lakes, rivers and (ultimately) the ocean. Phosphorus can encourage the growth of algae in fresh water that pollute and degrade the health, mauri and wairau of our water. It means our waters may not be suitable for swimming, fishing and drinking, and affects its biodiversity.

The good news is, however, that in many areas the amount of phosphorus in our waterways is declining. All farmers should minimise the impact of phosphorous leaching by stock exclusion, creating riparian buffers, undertaking planting and preventing runoff from critical source areas.

The National Policy Statement for Freshwater Management (NPS-FM 2020) provides guidelines for monitoring and managing dissolved reactive phosphorus in rivers and how freshwater should be managed. Farmers are recommended to apply phosphorus to paddocks only if necessary. An increase in plant productivity could lead to a decrease in run off and less erosion. Using a phosphorus index ensures you can find paddocks that have high potential for phosphorus loss and therefore avoid using that fertiliser.

 

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

Live animal exports

Latest news, News, Property, Rural, Your Own Business
0

Government intends to lift the ban

In April 2023, following intense pressure from animal welfare organisations, the Labour government banned live animal exports. The basis of the ban was centred on an independent review that New Zealand’s international reputation was being damaged by its live animal export programme because of animal welfare standards being breached.

The government’s plan

With the ongoing pressure from SAFE (Save Animals From Exploitation) and other animal welfare organisations, the government is proceeding with caution. It intends to introduce amendments to the Animal Welfare Act 1999 that will impose strict regulations and ensure a ‘gold standard’ of care. This includes fit-for-purpose live export ships and certification regimes for the livestock and their destination country. The government believes these regulations will protect animal welfare and safety.

The government has not indicated the timing for these proposed legislative changes.

 

The good . . .

The answer is obvious – revenue. In 2022, before the ban on live animal exports, revenue of $524 million was generated for the farming sector. Reports say the ban resulted in a loss of between $50,000– $116,000/year per farm[1] that, in the current economic climate, is significant to those who have lost this source of revenue. The return of live animal exports may bring some financial relief to farmers. With the level of red tape involved, the actual benefit of live animal exports is unclear.

 

The bad . . .

No animal, except of course those of the aquatic variety, is designed to sustain long journeys by sea. Exporting live animals to China, for example, can take anywhere between 15–40 days and, during that time, the animals have endured rough seas, long periods of standing in their own excrement, heat stress and injuries. The conditions during the journey are aggravated further because once the ship docks, there are no assurances of continuing animal welfare and safety on land. Many importing countries lack the minimum welfare standards that New Zealand enforces.

And the ugly

While petitions have been submitted and lobbyists are in full force in New Zealand, elsewhere in the world live animal exporting continues to be practised. Earlier this year, 2,000 cattle and 14,000 sheep spent two weeks enroute from Perth to the Middle East, only to be turned around and returned to port at Fremantle where they remained on the ship for almost six weeks while the exporter attempted to obtain a new export permit. The Australian government is now under immense pressure to follow through with its own election promise to ban live animal exports.

Will our government follow through on lifting the ban?

That remains unknown. Each side of the argument will continue to pressure the government to make what that side believes is the right decision.

There remains a strong belief that live animal export represents such a small share of agricultural revenue (0.2%)[2] since 2015 that the damage to New Zealand’s ‘clean’ reputation is far worse than the benefit of the export receipts.

What farmers can certainly expect is that if the live animal export ban is overturned, there will be stricter regulation and more red tape, and the costs associated with those increased regulations may be onerous. Farmers can expect an update to this process this year.

[1] Livestock Export New Zealand.

[2] Ibid.

 

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

Significant Natural Areas

Latest news, News, Property, Rural
0

Suspended while government overhauls RMA

Associate Minister for the Environment, Andrew Hoggard, announced on 14 March 2024 that the government will suspend the Significant Natural Areas (SNAs) requirements while it overhauls the Resource Management Act 1991 (RMA). It comes as a timely announcement after the Greater Wellington Regional Council’s (GWRC) unsuccessful prosecutions[1] of two rural landowners due to the council having wrongly identified wetlands on private farmland.

So what are SNAs, how do they currently affect our rural landowners and how will they be addressed in the future?

Defining an SNA

SNAs are areas containing ‘significant indigenous vegetation’ and ‘significant habitats of indigenous fauna’ that must be protected to ensure ongoing biodiversity. The basis for defining and identifying SNAs is in section 6 of the RMA:

‘6 Matters of national importance

In achieving the purpose of this Act, all persons exercising functions and powers under it, in relation to managing the use, development, and protection of natural and physical resources, shall recognise and provide [our emphasis] for the following matters of national importance:

. . .

(c) the protection of areas of significant indigenous vegetation and significant habitats of indigenous fauna: . . . ’

 

While the RMA is nearly 33 years old, it was only in August 2023, when the National Policy Statement for Indigenous Biodiversity came into force, that a mandatory standardised approach and criteria were introduced to protect SNAs under s6. In practical terms, the Policy Statement required regional councils to identify and map SNAs within their territory (including on private land) and include them in their district plans by August 2028.

 

Implications for rural landowners

Once an SNA has been identified, it means that the area is noted on the council’s records. The use to which that land can then be put is more controlled. That doesn’t necessarily mean that existing uses of that land will be stopped – although it could. It does mean, however, that generally speaking existing activities are unlikely to be able to be intensified and new activities are likely to be subject to tighter controls – if permitted at all.

There is no direct government compensation for a landowner who has an SNA identified on their land. The SNA identification process has been somewhat controversial. This is partly because the RMA does not define ‘significant’ and, as a result, it has been left to each council to interpret this, largely using case law and ecological guidance.

Regional councils’ interpretation and identification of areas to protect under the RMA has recently been highlighted by the GWRC’s two unsuccessful prosecutions of rural landowners, one of which has been labeled by the Court of Appeal as a ‘miscarriage of justice.’

In both cases, the GWRC was found to have incorrectly identified wetlands on private farmland. Although the GWRC’s prosecutions were unsuccessful in both cases, they illustrate how severe the penalties can be under the RMA. In one case, Mrs Crosbie was fined $118,742 as the owner of the property, and Mr Page was sentenced to three months’ imprisonment (which he had already served prior to the Court of Appeal hearing).

The future of SNAs

The message from this government has been very clear – stop mapping and imposing SNAs for three years while it reviews the RMA. Mr Hoggard has said that quickly suspending the SNA requirements was to ensure councils did not waste resources and efforts on requirements that were likely to change. He has also asked officials to review existing SNAs.

The suspension, however, will not change the need for councils to protect areas of national importance under s6 of the RMA. Arguably, regional councils could still identify areas on private land to protect, and they may impose restrictions on private landowners on the use of such land. Nevertheless, with the clear message from the government to not waste resources in this area, it is unlikely that we will see regional councils identifying new areas to protect until the government provides further guidance to those councils or new resource management laws are passed.

[1] Page v Greater Wellington Regional Council [2024] NZCA 51 and Greater Wellington Regional Council v Adams [2022] NZEnvc 025.

 

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

Providing for your family in your will

Estate, Kids, Property, Relationships, Retirement
0

You have some legal obligations

We all want to look after our families – both during our lives and after we die. One way you can make sure that your family is looked after when you die is by leaving behind a clear, well-drafted will.

 

In New Zealand, we have considerable ‘testamentary freedom,’ meaning we can generally choose how we want to distribute our personal assets after our deaths. Testamentary freedom has been a fundamental feature of New Zealand law for many years. There are, however, limits to testamentary freedom. We see these limits in action when claims are made against a family member’s estate.

 

Claims against an estate

Claims against estates can be made under the Family Protection Act 1955 which provides that you have  a moral duty to provide adequate maintenance and support for certain family members after your death. They include your spouse, children and sometimes grandchildren. Even if you have family members with whom you have had a poor relationship during your lifetime, if you do not adequately provide for their maintenance and support in your will, there is a risk they could make a claim against your estate.

 

If you want to leave unequal shares of your estate to your family members, or leave a close family member out of your will entirely, it is important to state this expressly in your will and to provide your reasons for doing so. This can reduce the likelihood of a successful claim being made against your estate.

 

Protecting beneficiaries from their own folly

If you are concerned about how a particular family member (a beneficiary) may use (or misuse) their share of your estate, you should discuss this with us before your will is drafted. Leaving your family members with a significant lump-sum of cash is not the only way to provide them with their share of your estate. There are options such as establishing a protective trust for their share or appointing trustees to manage money on their behalf. These options may ease your concerns.

 

Family members having different needs

If your family members have different needs, you may want to consider adjusting their share of your estate. With family members who have significant health issues or support needs, your obligation to provide for them may be greater.

 

Earlier this year, the High Court made a decision in a case,[1] upholding an earlier decision of the Family Court. That decision increased the proportion of a father’s estate that was awarded to his unwell son by a small amount. His son had been unable to work for several years due to his illness, and incurred costs associated with managing his illness. When his father awarded him a smaller share of his estate than his sister, the court decided this had breached his father’s duty to him. The duty to provide adequately for maintenance and support applied, even though the relationship with his father had been strained and dysfunctional over several years before his father’s death.

 

Repercussions of not providing for your family

If any of your family members have been left out of your will or have not been adequately provided for, they could make a claim against your estate.

 

When such a claim is made, the court can review the circumstances and make an award from the estate to remedy failure to provide adequate maintenance and support. This is why it’s important to talk with us about the drafting of your will. We can help you adjust your will to minimise the possibility of a successful claim against your estate.

 

Estate claims can cause increased distress, conflict and delays during an already challenging time for your family. The legal costs associated with defending such a claim can also significantly reduce the value of your estate.

 

Important to think this through

If you’re tempted to write your wayward son, estranged daughter or irresponsible spouse out of your will, it’s well worth getting advice first. This may spare your family a claim against your estate, and the stress and expense that goes along with such claims.

 

 

[1] Emeny v Mattsen [2024] NZHC 291.

 

 

 

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

Property briefs

House, Property
0

The finance condition in the agreement

The finance condition is the most common condition included in an Agreement for Sale and Purchase for a buyer’s benefit.

As a buyer you are likely to have sufficient funds for a deposit but lack the necessary funds to buy your dream home in full. A loan (mortgage) is needed to make up the difference.

Like all conditions, if the condition is contained on the front page of the agreement, you have a certain number of working days to satisfy it (and any other conditions). Once the conditions are fulfilled, the agreement becomes ‘unconditional’ and both parties eagerly anticipate settlement.

As with all required conditions, you must do all things reasonably necessary to satisfy the condition/s by the due date. You will need a formal loan offer and approval letter from your lender. Once obtained, we will notify the seller’s lawyer that the condition is satisfied.

If not satisfied by the due date, the parties can cancel the agreement by giving each other notice. If you cannot satisfy the condition, the seller may request a satisfactory explanation as to why not. In other words, you must show all reasonably necessary steps were taken to obtain finance. In this situation, you could provide communications with your mortgage broker and lender, and provide evidence of having approached different lenders if your first lender declines finance.

 

LIM condition

The Land Information Memorandum (LIM) ‘report’ condition is another condition often included in the agreement for the buyer’s benefit.

A LIM is prepared by the local council and is obtained at the buyer’s cost. The LIM has information on the positioning of stormwater and sewerage pipes, whether there has been flooding in the area, drinking water quality, council rates, building certificates, consents and compliance, and special land features such as historical sites and sites which are significant to Māori. All this is worth knowing before buying a property.

If you are happy with the LIM, you can satisfy the condition by approving the report by the due date in the agreement. We will notify the seller’s lawyer that the condition is satisfied.

If you do not approve the LIM (on reasonable grounds), you may have to give notice to the seller stating your reasons. The seller may agree to undertake remedial works to correct these concerns. If so, this condition will be satisfied. However, the seller can respond that they are unable, or unwilling, to do so. In this case, the agreement can be cancelled.

 

Building report condition

The building report condition is yet another condition commonly found in the agreement for a buyer’s benefit.

A building report is carried out by a qualified building inspector; it is obtained at your cost. It can outline structural and weathertightness aspects (amongst other things) relating to the property. These could be, for example, moisture levels throughout the property, whether there are any loose wires, power sockets or other electrical issues, plumbing problems, whether the roof and exterior walls of the house are in good shape and so forth. The report must be in writing.

The seller must allow the building inspector reasonable access to the property. It is usual for you to arrange the inspection through the real estate agent.

If you are happy with the building report, the condition can be satisfied by approving the report by the due date. You can ask the seller to do any remedial work (at the seller’s cost) for any problems raised in the report, or even use those problems as a means to negotiate a lower purchase price for the property. The seller does not have to agree.

If you cancel the agreement because you are dissatisfied with the building report, you may have to provide the seller with the report if the seller asks for it.

 

 

 

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

Pre-settlement property inspection

House, Property
0

The week before settlement

When buying a property, you are usually entitled to one pre-settlement inspection. This inspection is typically done during the week before settlement, although it can be completed at any time.

Any claims for compensation that may arise from a pre-settlement inspection must be raised with the seller no later than 5pm the working day before settlement; we recommend the inspection is completed two to three days before settlement. The inspection is arranged with the real estate agent, who is usually present during the inspection.

 

Why an inspection?

The purpose of the inspection before settlement day is to ensure that the property is in the same condition as it was when you signed the agreement, and that all chattels included in the agreement are in good working order.

The pre-settlement inspection is not to raise issues with the property that existed at the time the agreement was entered into. If there were repairs or maintenance problems that were present before the agreement was signed, they should have been negotiated as part of the agreement in the first place.

 

What to look for?

Key items to check as part of the pre-settlement inspection include:

  • Electrical items, such as lights and power plugs, all work
  • The plumbing is in good working order, for example, all the taps turn on and the sinks drain
  • Testing the oven and hob turn on and heat up
  • Ensuring the dishwasher will turn on and run
  • Checking kitchen extractor and bathroom ventilation fans operate
  • Confirming that heat pumps’ heating and cooling settings function, and
  • Ensuring the garage door opener works.

If the seller has agreed to complete any maintenance or repairs to the property as part of the agreement, both parties should confirm that this has been completed. You should also check for any new damage to the property, such as damage from the seller moving out of the property.

 

What to do if something is wrong?

The buyer should not notify the seller directly; this should be managed by the real estate agent and us. You should also notify us as soon as possible that there is a problem. We will advise the best approach to resolve the issue and will discuss this with the seller’s lawyer within the time frame required by the agreement – usually no later than the working day before settlement.

If the seller agrees to remedy the issue before settlement, you are entitled to re-enter the property no later than the day before settlement to confirm that the work is completed.

Sometimes, due to the nature of the problem or the time required to remedy the issue, it is not possible for the seller to rectify it before settlement day. In that case, you may both agree to either:

  1. Reduce the purchase price by an agreed amount and you will complete the necessary repair work yourself, or
  2. We may retain funds in our trust account while the seller completes the work, with the funds paid to the seller once the work is completed (or returned to you should the seller not complete the work in the agreed time frame).

If the parties cannot agree on a negotiated resolution to the issue, we may be able to make a compensation claim on your behalf as per clause 10 of the agreement. These claims must be handled carefully and made the working day before the settlement date. The claim process can hold up settlement so it is important to consider if this is appropriate in your situation. We can advise you on the process of making a compensation claim and whether making such a claim is in your best interests.

 

Issues post-settlement

Even if the time period to raise a claim for compensation pre-settlement has passed, this does not negate the seller’s warranties under the agreement.

If the seller has provided a warranty in respect of a chattel and you discover (after settlement) that the chattel is not in good working order, you may still be able to claim compensation from the seller. Any claim for compensation, however, will be outside the process set out in the agreement and any dispute relating to this compensation will usually be heard by the Disputes Tribunal (depending on the amount of the claim).

If you discover an issue post-settlement or outside of the timeframe for raising compensation claims pre-settlement, you should contact us for guidance on the next steps.

 

 

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

Commercial leases

Commercial, Property, Your Own Business
0

Reinstatement obligations for tenants

There are many rights and obligations that affect both tenants and landlords at the beginning, during and at the expiry or earlier termination of a commercial property lease.

 

The obligations on a tenant to reinstate the premises are usually set out in clause 20.1 of the ADLS Deed of Lease[1] and are important terms for both tenants and landlords to understand. Essentially the tenant is obligated to return the premises to the landlord in the same condition and state that it was at the beginning of the lease.

 

 

Tenants be careful before undertaking work

It is crucial that tenants understand their obligations before undertaking any work, and that your landlord must approve any alterations in writing. Having written approval does not mean that you won’t be required to remove any fixtures or alterations that have been made to suit your business needs or use of the space.

 

However, it is not an automatic requirement for you to reinstate the premises. Only where your landlord requires it to be reinstated does this obligation apply to you.

 

If your landlord does require reinstatement of the premises, you have a number of things to consider when deciding whether to make any alterations to complete a customised or business-specific fitout. These include the cost of potentially having to remove fixtures or reverse alterations, the benefit that any such alterations or fitout will have for your business, the length of your lease and/or how many rights of renewal there may be. These aspects of the lease are essential for you to consider before you complete any works given that you may be required to reinstate the premises.

 

As a tenant, you also need to understand that any reinstatement is entirely at your cost, and any fixtures or fittings you do not remove by the expiry or termination of the lease may become your landlord’s property without any need for them to compensate you.

 

Further to this, any cost that your landlord incurs in removing your fixtures or fittings or carrying out reinstatement work you have not completed can be recovered from you by your landlord.

 

Finally, you must also repair any damage caused in the process of removing your fixtures and fittings from the premises. This can be problematic if you have completed significant structural alterations where reinstatement may be difficult or even impossible to complete without causing some damage to the building or premises you are vacating.

 

Disputes

Where a dispute arises about the cost or compensation claimed by either party to the lease for reinstatement or damage caused in the process, the default position in the lease is that the parties submit the dispute for arbitration.[2]

 

Arbitration can be a costly and drawn-out process so having a firm grasp on obligations around reinstatement either at the beginning of the lease or before undertaking any fitout works or alterations is absolutely essential. This is particularly important if you are considering significant alterations that could be costly to remove to reinstate the premises.

 

Take care

The proposed lease should be carefully reviewed. This includes the standard terms of the deed of lease[3] as they relate to reinstatement and the dispute resolution process and any specific terms or variations to the default terms which may reduce liability or impose stricter obligations on both parties.

 

Commercial leases can be tricky things and it’s essential to get advice to avoid costly mistakes.

 

If you are a prospective tenant or landlord, we will work with you through this process.

[1] ADLS Deed of Lease Sixth Edition 2012 (5).

[2] Clause 43.

[3] Clauses 20 and 43.

 

 

 

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