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Property

Easements

Property
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Rights of way, draining sewage

An easement is an instrument registered on the title to your property that allows another party, usually your neighbour, to use the part of your property specified in the easement. In this article we explain the types of easements, their maintenance and repair, and your obligations, and what can happen if there are issues around costs and who pays.

 

Types of easements

The most common form of easement is a right of way; these are often used where two neighbours share a common area such as a driveway. Other easements include rights to drain sewage and water, and to convey gas or electricity. These last two rights are common where different utilities need to cross through (under the ground) another person’s property to get to yours.

These easements are registered on your record of title for the benefit of one or more other neighbouring landowners. Landowners who have the benefit of an easement will also have an interest registered on their title noting that their land has the benefit of an easement.

Some easements, called ‘easements in gross,’ are registered against a record of title for the benefit of a local or territorial authority such as your local council or for utility companies. Easements in gross are commonly used to facilitate local councils’ installation of water and sewage, and connecting the drain and sewage systems from roads to each individual property. In respect of a utility provider, an easement in gross allows the provision of electricity to a number of properties from the main grid.

 

Who is responsible for maintenance and repairs?

Disputes most commonly arise when it comes time to repair a shared driveway, or when a pipe bursts and a water easement is disrupted and one or more properties find they are without water. Often the first question for parties involved in this situation is – who is responsible for the cost?

 

The Land Transfer Regulations 2018[1] set out the rights, powers and obligations of parties in respect of easements. Where more than one party has use of the easement, each party is responsible for an equal share of the costs of repair or maintenance of that easement. This applies across all types of easements except for easements in gross where the grantee (the council or other body getting the benefit of the easement) is responsible for the full cost of repairs and maintenance.

 

There are a couple of exceptions to the equal sharing of maintenance and repair costs that we have set out above. The first exception is where one user of the easement causes the damage to the easement area. This may occur where one party engages contractors who cart heavy machinery up and down a shared driveway over a period and damage the drive. In that instance, it would be for the owner using the easement who engaged the contractors to bear the cost.

 

The other exception is where the parties using the easement agree to different proportions of liability for an easement. An example is where a number of properties access a long shared driveway but one access is near the beginning, close to the road and the other is, say, 800 metres further up. It is common for these parties to agree to share the costs equally to the shortest user’s gate and then for the back property to be solely responsible for maintenance and repairs to their driveway past that point. The basis for departing from these rules is that one user of the easement is using much more of the total area than the others and so the parties can agree that they will contribute in unequal shares.

 

In some circumstances, disproportionate shares are recorded in the easement instrument registered on the title.

 

Paying or completing the repairs?

If repairs are required to enable the users of an easement to continue to benefit from it and the landowner whose land is subject to the easement won’t cooperate, the Regulations provide a right of access for any person or their contractors in order to complete works for repairs. Before going onto the property, however, you must give the owner reasonable notice that you intend to access the property to complete the works and cause as little disturbance to the land or the owner as possible.

 

If the owner who caused the damage still won’t pay for the easement area to be fixed, the Land Transfer Regulations set out the dispute resolution process to be followed in order to resolve an ongoing issue.[2]  This involves engaging an arbitrator to determine the appropriate outcome; this should only be considered as a last resort.

 

Understand your obligations

It is important to understand your rights and obligations relating to easements whether you own the land ‘burdened’ by the easement or are simply a neighbour who takes benefit from it. The Regulations are a great starting point but, before you take any steps to enforce your rights or before you buy a property that grants or gains a benefit from an easement, you should talk with us to ensure you are acting within the law.

 

[1] Schedule 5.

[2] R14 Schedule 5, Land Transfer Regulations 2018.

 

 

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 leasing and landlord consent

Commercial, Property, Your Own Business
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Tenants wanting to alter the premises or their use

If you are a landlord owning commercial property, you may want to know how your tenant can make changes to the premises, or its use of the premises, without speaking to you about it first. If you are a tenant, you may want to know what you can do without being in contact with your landlord.

Tenants under commercial leases generally have fairly broad rights for the use and enjoyment of the property under the lease, but there are some limitations to what tenants can do without your consent. These include changing the business use of the property, assigning the lease or altering the premises. When considering any tenant’s request for consents under the lease, you must act reasonably.

 

Change of business use of the property

The deed of lease usually records the business use of your tenant in the first schedule. Your tenant cannot use the premises for anything other than the business use without your prior written consent. Provided the proposed use is not in substantial competition with the business of any other occupant of the property, reasonably suitable for the premises and compliant with any applicable statutory provision relating to resource management, you cannot unreasonably withhold consent to your tenant’s request to change the business use of the premises.

 

Alterations or additions

Your tenant cannot make any alterations or additions to the premises, or alter the external appearance of the premises, including affixing signs or advertising on the exterior of the building, without your prior written consent. In the case of signs, you cannot unreasonably withhold consent if the sign is to describe your tenant’s business.

If your tenant wants to make alterations or additions to the premises, or alter the premises’ external appearance, they must provide you with plans and specifications for the proposed works. They will also need to comply with all statutory requirements when completing the works, including obtaining any necessary building consents and/or compliance certificates. You cannot unreasonably withhold or delay your consent to these additions or alterations.

If you require it, your tenant (at their own cost) must reinstate the premises and repair any damage caused by the alterations or signs by the end of the lease. If the additions or alterations are not removed by the end of the lease, you may elect to retain ownership of these without any compensation payable to your tenant.

 

Assignment of the lease

Your tenant cannot assign the lease or sublet any part of the premises or carparks without your prior written consent. Again, you cannot unreasonably withhold consent. There are certain conditions which your tenant must meet, otherwise it will be considered reasonable for you to withhold consent. These include:

  • Your tenant can demonstrate to your satisfaction that the proposed assignee or subtenant is respectable, responsible and has the financial resources to meet their own commitments under the lease
  • All rent has been paid by your tenant and they are not in breach of the lease
  • Your tenant and assignee have (or will) signed and delivered to you a deed of assignment of lease
  • If the assignee is a company, you are entitled to request a deed of guarantee to be executed by the principal shareholders of that company, or a bank guarantee from a registered bank to be delivered to you as a condition of your consent, and
  • Your tenant agrees to pay your reasonable costs and disbursements in respect of the approval and the preparation of any documentation you require. These costs are generally payable whether or not the assignment or sublease ultimately proceeds.

 

Under the more recent versions of the ADLS standard lease, any change in the legal or beneficial ownership of a tenant company which results in the effective management or control of the company changing, such as the majority shareholder selling its shares, is treated as a deemed assignment and also requires landlord consent.

While landlords and tenants can generally work through issues of landlord consent at a commercial level by themselves, occasionally there can be problems, particularly if a landlord does not want to consent to the request or the request results in substantial changes to the lease.

 

It is a requirement of the lease that any landlord consent granted is recorded in writing, and we recommend for both landlords and tenants that you comply with this requirement. Any conditions to the consent, or changes to the lease which may result from the consent, should also be recorded in writing.

Whether you are a landlord or a tenant negotiating through a consent request, we recommend early contact with us. We can assist with advising what is and isn’t reasonable from each party in the circumstances, and can help to ensure that what you have agreed is correctly recorded, to reduce the chances of disputes in the future.

 

 

 

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

Who is responsible for managing someone’s affairs?

Estate, Health Issues, House, Kids, Property, Relationships, Retirement
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Enduring powers of attorney and the transition from attorney to executor upon death

Enduring powers of attorney are legal documents that allow individuals to appoint someone to make decisions on their behalf in case they become incapacitated.

 

There are two types of enduring powers of attorney that someone can put in place:

 

  1. Property: this grants authority over financial and property matters including managing assets, paying bills, and making financial decisions. A person could appoint more than one attorney to act jointly and/or severally and direct that the powers of attorney can immediately come into effect so that the attorney can manage their property while they have mental capacity and continue to act once they become incapacitated. They can appoint a successor attorney to act in the event the first attorney is unable or unwilling to act.

 

  1. Personal care and welfare: this delegates authority over personal matters like health care and consent to treatments. A person can only appoint one attorney at a time, and it can only come into effect when they have lost their mental capacity. A successor attorney can also be appointed.

 

Specific requirements and restrictions can be put on the attorney such as a requirement to consult with or provide information to another person or to only act in relation to specific property matters. The attorney can only act in accordance with the powers given by the enduring power of attorney document. These powers are only to be used when the person who appointed the attorney is still alive.

 

When a person dies, their enduring power of attorney comes to an end, shifting the responsibility of managing their estate to the appointed executors named in their will.

 

Although an attorney may have been appointed to manage the deceased’s affairs when they were alive, the same person may not be appointed as the executor of the deceased’s estate upon their death. It is essential for individuals to understand the transition of responsibilities from enduring powers of attorney to executors upon their death. The attorney will cease to act, and the executors named in the will or appointed by the court step in to manage the deceased person’s estate. This includes handling the distribution of assets, paying off any debts, and ensuring that the deceased’s wishes are carried out according to their will.

 

You should speak to your lawyer to ensure that your affairs are managed how you intend in the event you die or become incapacitated.

New Year – New Will

Estate, Health Issues, House, Kids, Property, Relationships, Retirement
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The new year is an opportunity to reflect on your life and your wishes for the future, including how you want to provide for your loved ones when you pass away.

 

The most important aspects of your will include the people in charge of your estate (your executors), what happens to your assets, the guardian of your children and your funeral/burial wishes. If you do not have a will or a valid will, then you do not get to decide these aspects for yourself.

 

Having a will is particularly important for parents and those with assets worth $15,000 or more (including Kiwisaver).

 

If you have a will, you should review it regularly to ensure your will is practical, up to date and valid.

 

Is my will valid? Common traps

 

Marriage or Civil Union

Ordinarily, a will is automatically revoked when you marry or enter into a civil union. If you have a will but have since married or entered into a civil union (or intend to in the near future), then you should review or update your will to ensure it is still valid.

 

Divorce or Separation

A separation does not automatically revoke your will. If you have separated and your ex-partner is still in your will, any gifts to them will remain valid unless you have a separation order or a court order dissolving the marriage or civil union.

 

For this reason, your will should be updated as soon as possible post-separation.

 

Witnessing Requirements

There are strict requirements for a will, one of which is having two adult independent witnesses. To be independent, the witnesses cannot benefit under the will or be a spouse, civil union or de facto partner of a person who will benefit under the will.

 

For example, Jane has a will that leaves everything to her son and daughter. Jane prepares her will at home and has her friend and her son’s wife witness her will. Unfortunately, her son’s wife is not independent and therefore the gift to Jane’s son will be void.

 

Circumstances that should trigger a will review

 

If one or more of the following apply to you, it’s time to review your will:

 

  • Family births or deaths;
  • Aging – contemplating the possibility of residential care;
  • Family members moving overseas (especially if they are your executor, as this can add cost and complication to your estate administration);
  • Creation of a family trust;
  • Winding up of a family trust;
  • Buying a property;
  • Change in assets or financial status;
  • Change in relationship status;
  • Change in family dynamics (e.g. estrangement); and/or
  • Simply a change of wishes.

 

Most people will have multiple wills during their lifetime, simply because life is full of change. If you don’t have a will, it’s been a while since you’ve reviewed your will or you’ve had a change in circumstance, we encourage you to speak with your lawyer about your will.

Can your ex-spouse claim your property when you die?

Property, Relationships, Trusts
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Agreeing on a division of relationship property after you and your spouse separate can be fraught. Usually, emotions are highly charged.

When de facto couples separate, they can resolve their relationship property division immediately, and have no further financial involvement with each other. When married couples separate, however, they cannot divorce for two years and often divide their relationship property while still married. When a divorce does not take place immediately, this can mean the separated spouses still have rights – for example, to inherit if one of them dies. If the separated spouses do not intend this, their relationship property division must specifically address inheritance in order to prevent unintended consequences.

 

Relationship property agreement

A recent High Court decision[1] illustrates the type of problems that can arise. Alan O’Donoghue and Marc Comia married in 2016 and separated in 2019. The couple entered into a 2020 agreement about the division of their relationship property which was stated to be ‘in full and final settlement of all property claims each party has against the other, under any statutory enactment, in equity or in common law.’ The marriage was never formally dissolved. Alan died in 2021 without a will, so was ‘intestate.’

 

Separated spouse to benefit from intestacy?

Alan and Marc had no children. Alan was survived by his mother, but she gave up any interest in his estate. In those circumstances, unless the 2020 agreement was effective to resolve inheritance as well as relationship property matters, then Marc, as Alan’s husband (despite the separation) was entitled to the whole of Alan’s estate by virtue of section 77 of the Administration Act 1969, the legislation that sets out the shares in which surviving relatives are entitled to an intestate deceased’s estate.

Usually, unless there are special circumstances, the person with the highest beneficial interest in an estate will also be appointed administrator. Marc applied for letters of administration in Alan’s estate without disclosing the existence of the agreement. Marc knew that Alan’s brother, Russell, took the view that the agreement meant Marc was no longer entitled to inherit any of Alan’s property. If Marc had contracted out of any entitlements under s77 then Russell, rather than Marc, was entitled to his late brother’s estate and therefore entitled to letters of administration.

 

Contracting out of succession rights

The High Court had to grapple with the question of whether it was possible to contract out of a statutory entitlement to inherit on intestacy under s77. Cases considering this issue are rare because it is usual for a person who has separated and entered a relationship property settlement to make a new will.

Further, the issue only arises where a marriage has not been formally dissolved after a separation; de facto relationships come to an end when the relationship finishes. It is only a marriage which can subsist after separation, and until the parties formally divorce.

The High Court determined, following a 2013 case,[2] that, as a matter of policy, contracting out of an interest under s77 was possible. However, for the ‘contracting out’ to be effective, the agreement in which it is undertaken must comply with the safe-guarding conditions set out in the Property Relationships Act 1976 (PRA). These conditions include that each party to the agreement receives independent legal advice before signing and that a lawyer who witnesses a party’s signature must certify that the implications of the agreement have been explained to that party.

In Donoghue the agreement did not comply with these requirements. However, there is a procedure whereby a non-complying agreement can be declared to have effect anyway. Therefore, the court recalled the grant of letters of administration to Marc, appointed Russell as administrator of his brother’s estate and directed Russell to apply to the Family Court for a determination on the effectiveness of the agreement.

All these extra steps could have been avoided.

 

Lessons to be learned

It is very welcome that the High Court has confirmed that it is possible for separating spouses to contract out of their entitlements under the Administration Act 1969. Naturally for any such agreement to be effective, it must comply with requirements of the PRA. The situation in which Alan left his brother Russell could have been avoided entirely if Alan had made a new will at the same time the agreement was entered into in 2020, which should be usual practice, or if Alan and Marc had divorced after their separation.

If you are going through a separation, we strongly recommend you both make a new will immediately after the separation documentation is completed and/or you divorce as soon as practicable. It could save you and your family a great deal of time, money and emotion.

[1] O’Donoghue v Comia [2023] NZHC 2735.

[2] Warrender v Warrender [2013] NZHC 787.

 

 

 

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

Whakaari/White Island eruption

Commercial, Latest news, Property, Your Own Business
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Health and safety lessons

The eruption of Whakaari/White Island on 9 December 2019 was a tragedy. Of the 47 people on the island when it erupted, 22 people were killed. The other 25 people were severely injured, many with life-changing injuries. The last of the prosecutions brought by WorkSafe due to the eruption concluded on 31 October 2023. We look at the lessons landowners and company directors can learn from these prosecutions.

 

After the eruption, WorkSafe brought charges against 13 parties under the Health and Safety at Work Act 2015. These included charges against tourism operators, two government agencies responsible for advising on volcanic risks and the landowners. The charges against the landowners are the most legally significant.

 

Whakaari Management Limited

Whakaari/White Island has been in the Buttle family since 1936. The family currently owns it through the Whakaari Trust; the trust leased the land to Whakaari Management Ltd (WML). The directors of WML are three members of the Buttle family. WML used to contract with tourism operators to allow them to conduct tours on the island. WML had no presence on the island and its staff did not work there.

 

Charges brought against WML and its directors

WorkSafe charged WML under sections 36 and 37 of the Act. Section 36 requires employers to ensure that, as far as is reasonably practicable, the health and safety of their employees. Section 37 requires an employer to take all reasonably practicable steps to ensure the safety of anyone who enters a workplace controlled by the employer, whether they work for the employer or not.

 

WorkSafe also charged WML’s directors under section 44. Where an employer is a company, section 44 requires directors to take reasonable steps to ensure that their company complies with its obligations under the Act.

 

The court’s decisions[1]

The charge against WML under section 36 was dismissed. The court held that section 36 only applied to the employer’s business activities, and WML did not carry out its business on the island. Section 36 will generally only apply to an employer’s premises or anywhere else its staff are working.

 

WML was convicted[2] under section 37 because Whakaari was a workplace that it controlled, and it had failed to obtain expert advice on the risk posed to visitors by a volcanic eruption. The court found that WML could exercise control over the activities of tour operators on the island and that it had been involved in managing their activities in the past as it had actively engaged with the tour operators regarding their operations. WML could also control the workplace by terminating, or threatening to terminate, its agreements with tourism operators that allowed them to access the island.

 

Implications for landowners

If you are a landowner and allow other parties access to your property for commercial purposes, you may have health and safety obligations as WML did on Whakaari. Section 37 will not usually apply if you operate solely as a landlord because a landlord will not usually have sufficient control to meet the section 37 requirements. Section 37 also contains a specific exemption to prevent the section from applying to farmers who allow people onto their farms for purely recreational purposes such as walking or hunting.

 

The charges against the directors of WML under section 44 were dismissed, despite WML being convicted under section 37. The court held that it could not conclude that any directors had breached their personal duty under section 44 based on the company’s failure to meet its obligations as it had no information about how the directors had made their decisions. For example, one director could have argued that WML should have sought expert advice on the risk of volcanic eruption but was outvoted by the remaining two directors.

 

What directors need to do

Following the Whakaari/White Island decision, WorkSafe will likely seek full disclosure of all board documents before bringing similar future prosecutions.  To avoid any potential criminal liability, any company director who is uncomfortable with their fellow directors’ stance on a health and safety matter should ensure that their dissenting view is recorded.

 

As a company director, if you are concerned about any decisions that your board proposes to make, or has made, about a health and safety matter, it would be useful to talk with us to clarify your position.

[1] WorkSafe New Zealand v. Whakaari Management Ltd [2023] NZDC 23224.

[2] Sentencing will take place in late February.

 

 

 

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

Over the fence

Property, Relationships, Rural, Your Own Business
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Family home v homestead: implications for relationship property

When a relationship breaks down, it is always difficult dividing up your joint assets.  It is important when deciding the division of relationship property under the Property (Relationships) Act 1976 (PRA) following a separation, or when forming a contracting out agreement, to accurately classify the home in which you and your partner/spouse live. The overall structure of the property will define whether your home is classified as the ‘family home’ or a ‘homestead.’

Family home: The PRA defines the family home as a property, including all land, buildings and improvements, which a couple generally, or primarily, reside in as their family residence. The property within the whole title must be used for the benefit of the relationship to be classified as the family home. In this case, all land under that title must be shared equally in a separation situation unless you as a couple have a contracting out agreement specifying the division of the property.

Homestead: Where only part of the property within the whole title is used for the benefit of the relationship, the portion attributable to the relationship may be considered the ‘homestead’ instead of the ‘family home.’ In this case, the remainder of the property may not be subject to the PRA principles of equal sharing, particularly if it is owned by a third party such as parents of one of the parties.

A family home will be considered a homestead if a portion of the property within the title is used by a couple as their general, or primary, family residence but the remainder of the title is used for the overall economic gain of another entity. This is more common in the rural context where couples reside on the farm but only a portion of the overall title contains the family home and the remainder is used for the economic gain of their rural business.

In this case, only the portion of the title considered to be the homestead would be considered in the division of relationship property, with the remaining property possibly not subject to the equal sharing principles of the PRA.

 

Road user charges and when to pay them?

The government imposes taxes on fuel through a road user charge (RUC) to collect funds for the maintenance and development of our roads. For most people, this tax is included in the petrol price.

Some vehicle owners, however, must pay the RUC and their fuel separately. If you own a vehicle weighing more than 3.5 tonnes, or a vehicle weighing less than 3.5 tonnes that runs on untaxed diesel, you must pay the RUC.

Your RUC licence is paid in advance to allow you to travel the distance purchased – usually in blocks of 1,000 kilometres.

You must always display the appropriate RUC licence on the inside of the passenger’s side of the front windscreen of your vehicle. Once your vehicle has travelled the distance covered by the RUC licence, you must renew your licence.

Owners must keep records of their vehicle use and have a hub odometer installed to accurately measure the distance it travels. Most vehicles that are subject to RUCs are sold with a hub odometer pre-installed.

Electric cars (EVs) do not currently incur RUCs. The new government, however, has indicated that EVs will pay the RUC from 1 April 2024 onwards.

 

Casual employees v seasonal workers

Seasonal workers are employed in certain sectors (particularly agricultural and horticultural areas) with the exclusive purpose of doing seasonal work, usually to assist with an increase in seasonal production requirements. Although seasonal work is temporary by nature, employers must be aware of the minimum entitlements for seasonal workers. There is a distinction between ‘casual’ workers and ‘seasonal workers’ in general. The Employment Relations Act 2000 requires specific clauses in employment agreements for these workers.

Casual employment: a casual worker is employed to work on shifts that are offered and accepted. There is no requirement for them to accept work you offer. In between periods of work, this worker is not considered to be employed by you.

Seasonal work: generally speaking, a seasonal worker is employed to work the entire season. These people are permanent employees on a fixed-term basis who are likely to be employed under a fixed-term agreement[1]. It is important that your seasonal worker’s employment agreement is drafted according to the specifics of the job.

If you need help with employing this summer’s casual and seasonal workers, please don’t hesitate to contact us. It’s vital to get these employment agreements correct – both for you and your employees.

[1] Section 66, Employment Relations Act 2000.

 

 

 

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

Three Waters and Resource Management Act 1991 replacement legislation

Property, Rural
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To be repealed by new government

The 2023 election has resulted in a National Party-led coalition, that campaigned on a commitment to repeal the Labour government’s Three Waters legislation and the Resource Management Act 1991 (RMA) replacement legislation. It has confirmed that these statutes will be repealed within its first 100 days in office.

 

Three Waters to be Local Water Done Well

The previous government introduced Three Waters to reform water management by shifting it away from New Zealand’s 67 councils, and handing it to four large co-governed regional entities. It was entitled ‘Three Waters’ as the legislation related to three main types of water infrastructure: storm water, drinking water and wastewater. In April this year, after much criticism, Three Waters was renamed Affordable Water with 10 publicly owned water services entities to be established.

The new government intends to introduce its Local Water Done Well plan that will:

  • Repeal Three Waters and scrap the co-governed mega-entities
  • Restore council ownership and control
  • Set water quality and infrastructure investment rules, and
  • Ensure water services are financially sustainable.

Within one year of repealing Three Waters, councils will be required to deliver a plan detailing how they will transition their water services to the new model that meets water quality and infrastructure investments rules, while being financially sustainable in the long-term. Communities, via their local council, will retain ownership of their assets.

Under Local Water Done Well, a Water Services Regulator will be introduced; its role will be to set and enforce water quality standards across New Zealand. It will also be responsible for developing and enforcing rules around the management of stormwater and wastewater that will include setting standards for acceptable discharge and mitigating environmental risks to rivers and beaches.

Local councils will have to present a model for the delivery of water services that is financially sustainable and meets the strict rules for water quality and water infrastructure. If a council cannot achieve financial sustainability by, for example, gaining access to long-term borrowing, the government will provide limited one-off funding to bridge the gap. Support will be decided on a case-by-case basis; Crown funding can only be used for projects needed to transition to a sustainable footing, not for day-to-day delivery of water services.

 

Resource Management Act 1991

In February 2021, the Labour government announced that the RMA would be repealed and replaced with three new statutes: the Spatial Planning Act, the Natural and Built Environment Act and the Climate Adaption Act. The first two statutes were passed in August; the Climate Adaption Bill did not pass before October’s general election. Early in its election campaign, the National Party labelled the RMA-replacement legislation as complex and pledged to repeal them within its first 100 days of office.

The National Party had agreed that the RMA needed fixing but instead campaigned on its own changes.

The National Party’s coalition agreement with ACT and New Zealand First reflects all parties’ commitment to reduce red tape. In particular, the government wants to make it easier to obtain consents for infrastructure (including renewable energy), building houses, and aquaculture and other primary industries. The coalition agreement also presents a desire for ‘allowing farmers to farm’ which suggests the red tape cut from the RMA will lead to a reduction in bureaucracy and more time spent actually farming.

The new government has stated that it will begin to work on a longer-term programme to repeal the RMA, however the detail of this plan is yet to be announced. We will keep you informed during that process.

 

 

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

Postscript

Commercial, Property, Your Own Business
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Mainzeal case

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

 

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

 

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

 

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

 

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

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

 

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

Receivership, voluntary administration and liquidation

Commercial, Property, Your Own Business
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What are the differences?

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

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

 

Receivership

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

 

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

 

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

 

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

 

Voluntary administration

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

 

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

 

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

 

Liquidation

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

 

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

 

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

 

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

 

Ask for guidance

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

 

 

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

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