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Property

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

Can losses be recovered from a faulty building?

Commercial, Property, Your Own Business
0

Design professionals can rely on limited liability clauses

The High Court recently found that the construction and insurance sectors can rely upon limited liability clauses when defending claims for negligence or breach of contract in commercial projects.

 

Background

In 2018, the Tauranga City Council (TCC) decided to build a nine-storey car parking building with 550 car parks on land it owned in central Tauranga. However, it ended up selling the land with a partially completed car parking building two years later for $1.

The TCC used a consulting engineering firm to design the car parking building; it engaged a second firm of engineers to check the design. Construction of the building began in June 2018.

 

The failed construction process

In March 2019, when the building was 20 metres high, a steel beam twisted while concrete was being poured. A third firm of engineers reviewed the building’s structural design. The firm’s initial conclusion was that the foundations, including the basement walls, were inadequate and that 300 tonnes of reinforcing steel and 140 truckloads of concrete were needed to strengthen them.

Construction was paused while a detailed design was prepared for the required remedial work. In June 2020, the TCC abandoned the project after receiving advice that it would cost: $26.5 million to demolish the building, $55.4 million to strengthen it and $64.4 million to rebuild it completely.

 

The court case

The TCC subsequently sold the land and building for $1 and filed legal proceedings in the High Court against the two engineering firms involved in the original design of the building. The TCC sought to recover losses of more than $20 million.

 

Limitation clauses

The TCC’s contracts with both engineering firms contained limited liability clauses seeking to cap the engineers’ liability to the TCC for any faulty design work at a set figure. A key issue in the case was whether the contractual limitation clauses were legally effective. This precise issue had not been previously considered by the New Zealand courts.

There is no general legal rule that prevents parties from agreeing to limit or exclude liability for a breach of contract. However, the court needed to consider the impact of section 17 of the Building Act 2004. Section 17 states that all building work must comply with the Building Code regardless of whether a building consent is required.

The TCC’s lawyers argued that the clauses limiting the engineers’ liability amounted to an attempt by the engineers to contract out of the duty to do all building work so that it complied with the Building Code.

‘Building work’ includes the design work done by engineers. They claimed this meant that the clauses were unlawful and unenforceable.

The court held, however, that the clauses did not attempt to avoid the duty to comply with the Building Code; they merely limited the consequences of failing to do so.[1] This means that it is possible for anyone involved in the building industry to contractually limit their liability, but not exclude it entirely.

 

Fair Trading Act claim

The TCC also brought a claim against the engineers under the Fair Trading Act 1986 (FTA). The TCC argued that the engineers’ incorrect design advice amounted to misleading or deceptive conduct, breaching the FTA. This type of claim could only be brought against those who provide advice, not those who do physical building work.

Claims under the FTA can be a powerful tool for parties that have suffered losses, as the general rule is that parties cannot contract out of liability under this legislation. However, the court may uphold a clause that seeks to limit or exclude liability for a breach of the FTA between commercial parties under section 5D if it considers that the clause is fair and reasonable.

The court will consider matters such as the contract’s value and the parties’ respective bargaining powers when deciding whether a particular term is fair and reasonable.

In this particular case, the court decided that the clauses in the contracts with the TCC seeking to limit the engineers’ liability were fair and reasonable, and thus enforceable.

Section 5D only applies to contracts between commercial parties. This means that it will not usually be possible for a designer to contract out of liability under the FTA for residential building work.

 

What to do?

Design professionals can limit their liability for defective design work if commissioned for commercial construction work. Your organisation cannot rely on recovering any losses caused by faulty design. This means that you need to be careful to choose a reputable design professional. It also means that it may be worthwhile having design work peer-reviewed for substantial projects.

[1] Tauranga City Council v. Harrison Grierson Holdings Ltd [2024] NZHC 714.

 

 

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

Postscript

Commercial, First Job, House, Property, Rural, Your Own Business
0

Incorporated societies: must reregister by April 2026

The clock is ticking for New Zealand’s 24,000 incorporated societies to reregister by 5 April 2026. Under the Incorporated Societies Act 2022, if your incorporated society does not reregister by this time, it will automatically cease to exist.

During the next two years, every existing incorporated society must decide whether to retain its incorporated status by seeking reregistration. If it opts to reregister, it must check that its constitution (the rules of the society) comply with the requirements of the new Act. This will almost always involve amendments being made to the constitution and, in a significant number of cases, an entirely new constitution being adopted.

There is quite a list of requirements to reregister. To learn more, go to:

www.is-register.companiesoffice.govt.nz If you need advice on any aspect of reregistering, please don’t hesitate to contact us.

Minimum wage increases

 On 1 April the minimum wage increased. This covers:

  • Adult minimum wage increased from $22.70 to $23.15/hour
  • Starting-out and training minimum wage rose from $18.16 to $18.52/hour

Remember that all rates are gross and before any lawful deductions such as PAYE, student loan repayments, child support, etc.

Make sure your payroll people, HR/finance teams and your accountant are all aware of these changes.

Before you dig

Whether you want to replace a fence around your property, are a contractor installing a new cable along a street or a new gas pipe, or are working for the council in resurfacing the road, it is vital that you check there are no cables or pipes below ground.

beforeUdig is an online service which enables anyone undertaking design and excavation works to obtain information on the location of cables, pipes and other utility assets in and around any proposed dig site.

It provides a ‘one stop shop’ for contractors to communicate about their planned activities with utilities and asset owners.

To find out more, go to www.beforeudig.co.nz/home.

 

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

Receiving an inheritance during your relationship

Estate, House, Property, Relationships
0

Relationships can be complicated waters to navigate at the best of times, but it can become even trickier when thought needs to be given to relationship property matters.

One such thorny issue is when one person receives an inheritance or other significant gift from a third party. For a variety of reasons, it may be important for that inheritance to be kept separate from other property of the relationship. This article focuses on the complications of keeping it separate.

Relationship property and intermingling

In most cases, after three years in a relationship, all property acquired during that relationship will be classed as relationship property to be divided equally between the couple if their relationship ends (either by separation or death).

Property that each person owned before the relationship is separate property and does not get divided with the other person. Inheritances or other gifts received during the relationship are, in most situations, also separate property and are not divided.

Separate property can, however, become relationship property in a variety of ways during the relationship. In the case of an inheritance, this happens when that property is ‘intermingled’ with other relationship property with the express or implied consent of the owner. The law says that the intermingling needs to have had the effect of making it too difficult or impractical to continue to identify the portion of separate property.

How this can happen

The most common example of intermingling occurs when money is inherited. If the money is deposited into a joint or other relationship bank account and other money is going in and out of that account, it can be very difficult to identify what part of the funds left in that account are still inheritance funds.

Another example is when inheritance funds are used to buy assets for family use or pay relationship debts.

In both examples, the inheritance could well be regarded to have been intermingled with the express or implied consent of the inheritance recipient. The inheritance would become relationship property.

Another common issue is when a party intends to keep an inheritance separate by putting it into a separate account (in their own name) but also uses that account to receive money that would be classed as relationship property, such as income. The inheritance may be regarded as intermingled with relationship property because income generally is a relationship property asset, despite the income being received into a separate account. Ultimately, however, each case will depend on its own facts.

While inheritances often take the form of cash, the same principles apply to a house or any other type of property that has the potential to be intermingled. In the case of a house, although it is usually easily identifiable as the source of the inheritance, that might change if significant renovations are undertaken by both parties to the relationship, or if the house is sold and the money received from the sale is intermingled with other relationship money.

Protecting inheritance

If you know you are going to receive an inheritance and you wish to protect it, it is important that you get professional advice to discuss how the inheritance might be used and how it can be best protected. The best option for you will depend entirely on your circumstances and plans for the inheritance. Some common protections include:

  • Keeping the inheritance completely separate either in a bank account set up for that purpose or in a separate investment in your sole name
  • Establishing a trust to hold the inheritance and keep it separate from your relationship, or
  • Having a contracting out agreement (prenup) prepared that sets out your separate property and the relationship property, and how all of that property would be divided if you separate or when one of you dies. These agreements can be entered into at any stage of the relationship.

No option is completely foolproof and each option has its own pros and cons.

If you are expecting an inheritance, or have recently received one, it can be a delicate topic to bring up with your spouse or partner. You may of course be perfectly happy to intermingle inherited property. It would, however, be prudent for you to talk first with us to discuss the options above and any implications that may bring to your relationship.

 

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

Do I still need a trust?

Commercial, Estate, House, Property, Retirement, Rural, Trusts, Your Own Business
0

Thousands of Kiwis have, over the years, established family trusts for a variety of reasons. However, it’s well worth considering whether those reasons are still relevant today and evaluating whether your trust may have outlived its usefulness.

You may have established your family trust for:

  1. Avoiding estate duty: before 1992 it was common for high value assets (such as farms) to be transferred to a trust so your personal estate would not have to pay estate duty
  2. Eligibility for the residential care subsidy: trusts were often settled to increase the likelihood of being eligible for the residential care subsidy; the Ministry of Social Development (MSD) only considered assets you owned personally when considering eligibility for the subsidy
  3. Minimising tax: Fluctuating tax rates over the years have sometimes provided a lower tax rate for trusts than the highest rate of personal tax
  4. Creditor protection: Transferring your personal assets to trust ownership means that your personal creditors may have more difficulty accessing those assets to recover personal debts you owe
  5. Estate planning: Children may make claims against their parents’ estates where they believe their parents have made no, or inadequate, provision for them. Transferring assets to a trust during one’s lifetime leaves little or nothing for children to claim against on your death. Trusts also allow assets to be ring-fenced to help with the care of differently abled children
  6. Relationship property: settling a trust, either before your relationship is ‘in contemplation’ or afterwards (provided a contracting out agreement is also signed), is one way to help remove assets from the potential pool of relationship property that would be available for division if your relationship ends.

Things have changed

These days, however, estate (and gift) duty is no more, the top personal tax rates will soon be realigned with trust tax rates, and MSD takes a closer look at trusts when considering residential care subsidy applications. There has also been increasing court action on trusts where it is believed they may have been used to avoid creditors, claims by children and relationship property claims.

In addition, there are further consequences in settling trusts in New Zealand if you are an American citizen, from the UK (even though you may be tax resident in New Zealand), or if you are tax resident in Australia.

Notwithstanding the above, trusts are still very useful vehicles, particularly for creditor protection, estate planning and relationship property purposes.

Trust deeds, however, should be carefully drafted and have the correct documentation in place around them. Excellent legal, accounting and tax advice is needed to ensure that your trust will do the job you want it to.

If you have a family trust that may no longer be fit for purpose, or you think you need an asset protection plan, please talk with us about the options available to you.

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

Why should you refinance your property?

House, Property
0

In today’s economic climate, we are seeing many people struggle with the rising cost of living. A big chunk of the rising costs can be attributed to mortgage repayments, as well as skyrocketing food prices, petrol, and utility bills. People that purchased properties several years ago when mortgage interest rates were relatively low, sitting around the 2.50-3% mark, are finding their mortgage coming off those low fixed rates and increasing to upwards of 6.50-7.50%, increasing their fortnightly or monthly mortgage repayments by hundreds of dollars. Shopping around for better rates has led to an increase in refinances over the last year. Refinancing is commonly known as replacing your current mortgage with a new one, either with your current lender or a new one, to receive better terms or to borrow more money.

 

Refinancing comes with many pros and cons. The biggest pro of refinancing is that it can help people who are cash-strapped to free up some money in their fortnightly or monthly budget as refinancing often gives people a lower or better suited interest rate. Refinancing to a better rate can help alleviate the financial pressures many people face today. The biggest con of refinancing is the cost involved in a refinancing transaction. Many people do not realise that they will need to instruct their lawyer to act on this transaction on their behalf, which attracts legal fees of upwards of $1,500 or more. For people who are already struggling financially, this cost can cause added stress. However, some banks offer cash contributions in refinancing matters and these funds can be used to pay the legal costs incurred.

 

If refinancing is looking like a good option for you, please consult with your mortgage broker or bank manager to explore your refinancing options and instruct your lawyer once you have decided to refinance your property.

Georgia Ellen, Senior Solicitor

“Blue toy car with Refinance text on wooden blocks” by wuestenigel is licensed under CC BY 2.0.

Property briefs

Property
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The new government has brought in significant changes to the property sector; we outline what these could mean for you.

 

 

Bright-line test changes

Under the current framework, the bright-line rules affect properties that were acquired on or after 27 March 2021 and sold within five years for qualifying new builds or within 10 years for all other properties. The bright-line period starts on the date that the transfer took place and ends on the date which you enter into a binding agreement for sale and purchase to sell your property (this is slightly different if you purchased your property off the plans).

There are exclusions where the bright-line rules do not apply such as:

  • For the period which the property has been your main home
  • If the sale of your property is subject to other tax rules, and
  • Where your property is farmland or business premises.

As of 1 July 2024, the bright-line period will be reduced from 10 years (or five years for new builds) to two years. While the new rules have not yet come into effect, the government has announced that properties sold after 1 July 2024 will only be subject to the bright-line rules if they are sold within two years from when your property was purchased.

There are still some details that have not yet been confirmed relating to the bright-line changes such as:

  • Whether the bright-line rules are triggered by the transfer of property in and out of trust ownership
  • What date the bright-line period is calculated on, and
  • The ‘main home’ exemption.

The changes to the bright-line test regime will likely be very welcome to landlords who look to benefit greatly from this change.

 

RMA legislation

In December 2023, the government repealed the Natural and Built Environment Act 2023 and the Spatial Planning Act 2023, that came into force in August 2023, and were intended to replace the Resource Management Act 1991 (RMA). It has, however, retained:

  • The fast-track consenting scheme which is similar to what was available during the Covid period, and
  • The Spatial Planning Boards whose role is monitoring, evaluating and reporting on the effectiveness of the Act to relevant ministers.

The government has confirmed it will ensure Treaty of Waitangi settlements are upheld.

This is the first phase of a three-stage plan which intends to replace the RMA with new resource management laws.

The final goal is to repeal the RMA entirely and replace it with legislation that the government believes is more fit for purpose.

 

 

Rental and tenancy updates

Notice periods: Month-to-month/periodic tenancy rules apply where tenants must give 28 days’ notice to leave the property and landlords must give their tenants 48 days’ notice if they intend to sell, move into the property or carry out major renovations. The government’s new proposed notice periods will change this to 21 days for tenants and 42 days for landlords.

 

Mortgage interest deductibility: This is the ability for landlords to deduct the interest they pay on their mortgage as a business expense thereby reducing their taxable income. The government announced on 10 March 2024 that as of 1 April 2024, landlords may claim back 80% of their interest for this purpose. The announcement also confirmed that from 1 April 2025 mortgage interest deductibility will increase to 100% of interest.

 

Ninety day no-cause evictions: The government’s restoration of no-cause evictions is another major change on the horizon. Landlords will no longer have to provide tenants with an explanation as to why they have been evicted if they give tenants 90 days’ notice to leave their property.

 

Pet bonds: The introduction of pet bonds will allow landlords to require tenants to pay a higher bond, rather than four-weeks’ rent if they intend to have a pet on the property. Damage caused by pets would then be deducted from the bond for the repairs to the property.

 

These changes to the status quo for residential tenancies will have significant impacts for landlords and tenants alike. The government has not, however, indicated when legislation will be introduced on all the above issues.

 

 

If you would like any more information or advice on any of the above topics, please don’t hesitate to contact us.

 

 

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

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