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Rural

Land Covenants

Property, Rural, Trusts
0

Now commonplace in residential developments

With all the property development over the last 20 years or so, land covenants have become commonplace in new build residential developments.

If you are buying a property in a newly or recently built residential subdivision, the odds are that the title will come with various covenants registered against it. These covenants are likely to place restrictions on the ways in which the owners can use and enjoy their properties.

What are land covenants?

Land covenants are usually put in place to ensure that the aesthetics and maintenance of the subdivision are built and kept up to a certain standard. In other instances, a landowner may subdivide part of their property and wish to restrict what can be done on the subdivided land to protect their use and enjoyment of their remaining land, for example, by restricting the location and size of any buildings to protect their view.

Whilst life in a subdivision is not for everyone, urban development in New Zealand is now usually done through a subdivision with land covenants.

Land covenants broadly fall into two categories:

1. Positive covenants that impose an obligation on a property owner to do something, or
2. Restrictive covenants that prevent an owner from doing something.

Positive covenants usually include an obligation to make a financial contribution or assist with maintenance of something in common with neighbouring landowners, such as the repair and maintenance of a fence or driveway.

Restrictive covenants are the most common covenants in residential subdivisions. The restrictions could include:

  • The construction materials that can, or cannot, be used for building on the land (including a possible prohibition on the use of second-hand materials)
  • The height/design of your house, garage or even a fence
  • Restrictions on whether you can leave caravans, boats and trailers parked in the driveway
  • Ensuring clotheslines, heat pump infrastructure, solar panels or satellite dishes are not visible from the street
  • Limitation on the number of dwellings and/or outbuildings you can have on the property
  • Whether certain types of animals are not allowed on your property, and/or
  • A reverse sensitivity covenant, that prevents the owners of the land burdened by the covenant from complaining about noise, smell or substances produced by an activity (such as an airport, farm, etc) being conducted on the property having the benefit of the covenant.

What to look out for

This depends on your intended use of the property. If you are considering buying a section to build a home from scratch, you must ensure your builder and/or architect have a copy of the land covenants, and that the build complies with all restrictions.

If you are making any alterations to an existing property, or even installing a solar panel/heat pump, you should first read all land covenants and establish whether it is allowed and, if so, whether there are any restrictions.

When buying a property that is subject to land covenants, you should ensure that the current owner has adhered to the rules and restrictions of the covenant, obtained the necessary developer’s consents and not committed any breach to date by, for example, building a granny flat on the property where that is prohibited.

Once the subdivision is completed, developers will often wind up their development company. If the landowners have not obtained any necessary developer consent before the company is wound up, this can hinder or prevent a sale later. Prospective purchasers are likely to be advised by their lawyers to seek a copy of any developer’s consent and this can prove to be difficult where the development company no longer exists.

How long does a covenant last?

Many land covenants ‘run with the land’ which means they bind every new owner and run indefinitely.

A well-designed land covenant could have various provisions that expire – such as any requirement for obtaining consent from the developer to avoid the issue of a developer company being wound up. If this is the case, the expiry date will be stipulated in the land covenant.

Breaching a covenant?

The rules contained within the land covenant can be enforced by you and your neighbours (if they hold the benefit of the land covenant) against anyone who has breached the restrictions.

To enforce a breach, written notice should be given to the owner that specifies what the owner must do or pay to fix the breach. If the owner receiving this notice does not agree that there has been a breach, they should give notice in return stating this.

If there has been a breach, most land covenants provide for damages, often in the range of $100–$250 per day and per property owner who has been affected by the breach. These damages will normally accrue until the breach is remedied. Sometimes the covenant provides for payment of a lump sum when there is a breach.

Often it is an immediate neighbour who raises any potential breach of the land covenants as they are the most likely to be impacted.

We encourage compliance with land covenants to avoid any liability to pay damages or a breakdown in relationships between neighbours.

Can a land covenant be removed or varied?

Land covenants can be removed from the title or varied. The easiest and most common mechanism for a removal or variation is when all parties affected by the land covenants agree to the removal or variation, and sign the necessary documentation. Getting all affected parties to agree to a removal or variation can be a lengthy, expensive and difficult process. In some subdivisions, the sheer number of affected parties will make this option an unattractive proposition and the possibility of complete agreement unlikely.

If you cannot get all parties to agree, there are possible remedies available by an application to the courts. The courts are, however, often reluctant to vary or remove land covenants, even those which may seem no longer to be relevant.

Conclusion

With modern urban housing density in subdivisions, the prevalence of land covenants is likely to continue to increase. Land covenants usually impact land indefinitely. This makes it more important than ever to understand the land covenants registered against a property before you buy it.

If you are unsure whether any covenants apply, or their effect, please be in touch with us. You should not presume that the other owners, including previous owners, have complied with their obligations to date.

 

 

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

Over the fence

Rural
0

Obligations of working dog owners

There are a range of legal obligations and responsibilities associated with owning working dogs. ‘Working dogs’ are specifically defined under the Dog Control Act 1996 and include dogs used solely or principally for the purpose of herding or driving stock.

Registration and microchipping: Working dogs do not have to be microchipped unless they are kept on the farm as a family pet or used for recreational hunting. While working dogs may not need microchipping, they must be registered and wear a collar with a council-provided disc or label.

When registering a working dog, you must specify that they are a working dog. If you don’t register or micro-chip (where required) working dogs, you can be fined up to $3,000.

Dangerous dogs: If your working dog attacks a person, another animal or protected wildlife, you may be fined up to $3,000 and your dog may be destroyed. If your dog causes serious injury (or death) to a person, animal or to protected wildlife you may be imprisoned for up to three years and/or fined up to $20,000.

If your dog attacks a person or animal and no destruction order is made, your local council can still classify your dog as dangerous, meaning it must be kept within a fenced area, neutered, muzzled and kept on a leash in public places. You will also be liable for higher registration fees and cannot dispose of the dog to another person without the written consent of your local council.

Protection of working dogs: You must ensure your dogs receive proper care and attention, including sufficient food, water and adequate exercise. Failing to care for your dogs is considered an offence and you could be imprisoned for up to three months or fined up to $5,000.

Local councils also have the power to impose certain obligations regarding dog controls. Therefore, it is crucial to check your local council’s policies regarding working dogs to ensure you are compliant.

MPI: Animal welfare checks

The Ministry for Primary Industries (MPI) regulates animal welfare and ensures the safe treatment of animals in New Zealand. Since 1 July 2023, MPI is responsible for delivering inspectorate services for all animal species in New Zealand.

The Animal Welfare Act 1999 provides the legislative framework for the care, treatment and obligations relating to animals, including when using animals for the purposes of research, testing and teaching. MPI inspectors have wide-reaching authority under the Act. This allows them to enforce the rules under the legislation and to ensure that animals are being treated and cared for properly.

In particular, section 127 of the Act authorises an inspector to enter onto private land, premises, vehicles, aircraft or ships (without a warrant) to carry out a routine inspection on an animal. The power of entry does not require an inspector to hold a belief that any offence has been committed. However, inspectors may only enter onto private land at a reasonable time and evidence must be provided to the animal’s owner of the inspector’s identity. No force must be used; entry into private dwellings or a marae can only be undertaken with a search warrant.

If nobody is present at the time of entry, the inspector must leave in a prominent place a written statement of the time and date of entry, the purpose of entry, the condition of the animals inspected, the animals removed (if any), and the address of the police station or other office to which enquiries can be made.

If an inspector has reasonable grounds to believe an animal has been mistreated, they can move that animal to a place chosen by them. Inspectors may also remove an animal if they believe it requires veterinary care or the owner is disqualified from owning animals. The animal will be kept at the chosen location until a judge orders the animal be returned to the owner, or the owner is charged and the animal is forfeited to the Crown.

Firearms Registry opened 24 June 2023

After the Christchurch terrorist attacks, the government introduced laws strengthening the management of firearm use, including establishing a Firearms Register. The Register opened on 24 June 2023.

All New Zealand firearms licence holders must now register all non-prohibited firearms, restricted weapons, pistols, major parts, prohibited firearms/magazines and pistol carbine conversion kits. Do note that firearms that do not work must still be registered.

Licence holders have until 24 June 2028 to register the items listed on the previous page. However, there are a number of activating circumstances that will require someone to register the items sooner. Examples of the activating circumstances are where a firearm is being purchased or sold, where a firearm has been lost or stolen, or where a person is applying for a new (or renewing an existing) firearms licence/endorsement.

Individual firearms licence holders do not need to register antique firearms or airguns (excluding specifically dangerous airguns). Individuals are also not required to register  ammunition in their possession, nor to record sales or purchases of ammunition to or from other firearms licence holders.

To find out more about the Firearms Registry, click here.

 

 

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

Emissions Trading Scheme

Rural
0

Two discussion papers invite submissions

 

The Emissions Trading Scheme (ETS) is the primary regime used by the government to achieve its long-term commitment to reduce New Zealand’s greenhouse gas emissions so that our international obligations are met.

Through the ETS, a price is set on emissions by charging certain sectors for the greenhouse gases they emit. Emitters must acquire and surrender New Zealand Units (NZUs) to account for their direct emissions or emissions associated with their products. Emission units (often called ‘carbon credits’) are traded between participants in the scheme. One emission unit can either represent one metric tonne of carbon dioxide, or the equivalent of any other greenhouse gas.

The government has acknowledged that the current framework is not perfect and the ETS must adapt.  In June, the government released two discussion papers as part of its consultation process on proposed changes.

Document 1: Encouraging greater gross emissions reductions

The first document provides four options to encourage greater gross emissions reduction in the ETS while, at the same time, continuing to support forestry removals. It highlights the role that forests have in New Zealand’s response to climate change as well as the associated challenges with widespread exotic forest.

The four options proposed are:

  1. Using existing ETS levers to strengthen incentives for net emissions reductions. The government could reduce the supply of NZUs and therefore reduce net emissions through existing levers such as auction volumes, price controls or industrial allocation. In short, if fewer NZUs are available then fewer emissions would be offset resulting in reduced emissions being produced.
  2. Creating increased demand for removal activities to increase net emissions reductions. Additional entities (such as the government or offshore buyers) could purchase NZUs. This would help to attain the Nationally Determined Contribution (NDC); offshore buyers might purchase them to meet voluntary emissions targets or support voluntary market claims. As the discussion paper notes, there is no evidence of significant demand from offshore buyers and the effectiveness of this options is expected to be limited.
  3. Strengthening incentives for gross emissions reductions by changing incentives for removals. This option would create two prices: one for emissions reduction activities and another for removal activities. A lower price would apply to removal activities, making them less financially attractive. The prices for reduction and removals would still be linked, because an increase to the price for units sold at auction would likely increase the price paid for removal activities.
  4. Creating separate incentives for gross emissions reductions and emissions removals. The fourth option would create two markets with two separate prices: one for gross emissions reduction activities and another for removal activities. Emitters would only be permitted to use units sold at auction, or allocated for emissions-intensive and trade-exposed activities, to meet their surrender obligations, while removal activities would be incentivised through a separate market.

 

Document 2: Redesign of permanent forest category

The second discussion paper outlines the government’s proposal to take a cautious approach to the redesign of the permanent forest category in the ETS.

It acknowledges both the potential environmental and economic risks associated with large-scale transition of land to permanent forestry. The paper notes that the current ETS settings incentivise increasing levels of permanent exotic afforestation, in particular Pinus radiata, as it provides a much higher return on investment relative to other competing land uses including indigenous forests and some pastoral systems.

Three design choices are presented in the paper and, within these design choices, options are presented.

  1. Which forests should be allowed in the permanent forest category?
  2. Only transition forests and indigenous forests can enter the permanent forest category, or
  3. Exotic forests allowed to enter under limited circumstances. This could, for example, include long-lived species, Māori-owned land or small-scale exotic forests planted on farms.
  4. How should transition forests be managed to ensure they transition from exotic to indigenous forest and reduce the financial risks to participants?
  5. Retain the status quo – no new specific carbon accounting method for transition forests or
  6. New mandatory specific carbon accounting methods for transition forests in the permanent forest category.
  7. How should permanent forests be managed?
  8. Retain the status quo – no additional forest management requirements introduced for forests in the permanent forest category
  9. New minimum forest management requirements, specific to the permanent forest category, are introduced for all registered permanent forests (exotic, indigenous and transition forests), or
  10. New forest management requirements are needed for transition forests.

The consultation for both discussion papers ends on Friday, 11 August 2023. A summary will be published once submissions close. Individual submissions on the discussion papers may also be made publicly available online. It is noted that late submissions may be accepted however they may not be considered in time to inform the next steps for the ETS review.

If you would like to make a submission on the ETS before Friday, 11 August, click here.

The ETS is complex and the two discussion papers contain considerable jargon that can be difficult to interpret. If you are interested in how these proposed changes may impact you, please don’t hesitate to discuss this with 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

Freshwater farm plans

Property, Rural
0

Roll out by regions starting 1 August

Freshwater farm plans are part of the Essential Freshwater package introduced in 2020. Its purpose is to:

  • Stop further degradation of New Zealand’s freshwater resources and improve water quality
  • Reverse past damage, and
  • Bring New Zealand’s freshwater resources, waterways and ecosystems to a healthy state within a generation.

To that end[1], freshwater farm plans are now beginning to be required by all farms that have:

  • 20 hectares or more in arable or pastoral use
  • Five hectares or more in horticultural use, or
  • 20 hectares or more in combined use.

Southland and Waikato roll out first

The order sets out[2] which of New Zealand’s regions must have their plans underway.

The first regions to prepare their plans from 1 August 2023 are Southland and Waikato. The remaining regions must start the process at various times up to 1 July 2025. Due to the effects of Cyclones Hale and Gabrielle earlier this year, the timing of the implementation of these plans in Hawke’s Bay and Tairawhiti is yet to be decided.

Within 18 months of the order coming into effect for a particular region, plans must be ‘certified’ by a certifier who will be appointed by the local regional council. Plans must be audited within 12 months of the date of certification, with the timing of further audits dependent on the results of the initial audit.  Auditors will be appointed by the local regional council. Plans must be recertified every five years.

The process

The freshwater farm process requires farm operators to identify on-farm risks to freshwater and to determine actions to manage those risks based on the:

  • Farm’s landscape features and natural environment
  • Farming activities, and
  • Environmental health, and cultural and community values of the local catchment.

The intent of the legislation is to ensure that the on-farm actions are practical and effective in relation to a specific farm, rather than having a one-size-fits-all approach to the issue.

It is the responsibility of the ‘farm operator’ who is the person with ‘ultimate responsibility for the operation of the farm’ to prepare the freshwater plan.

Under Section 217E of the Act, the main duties of the farm operator are to:

  • Prepare a freshwater farm plan in accordance with Part 9A of the Resource Management Act 1991 (RMA) and Regulations
  • Submit the plan to a certifier for certification
  • Ensure that the farm operates in compliance with the certified freshwater farm plan, and
  • Arrange for the farm to be audited in accordance with Part 9A of the RMA and any regulations for compliance with the certified freshwater farm plan.

Keep the plan current

The farm operator must also keep the certified freshwater farm plan fit for purpose by amending  the plan as necessary to reflect the Act and Regulations.

Section 217F sets out what the freshwater farm plan must contain. Basically, it must:

  • Identify any adverse effects of activities carried out on the farm on freshwater and freshwater ecosystems
  • Specify requirements that are:
  • Appropriate for the purpose of avoiding, remedying, or mitigating the adverse effects of those activities on freshwater and freshwater ecosystems, and
  • Be clear and measurable
  • Demonstrate how any outcomes prescribed in any Regulations are to be achieved
  • Comply with any other requirements in the Regulations, and
  • Comply with section 217L.[3]

There are a variety of templates and guidance tools made available by MPI here and other resources are available to farmers to help them complete their freshwater farm plans.

If you need some help in navigating the freshwater farm plan regime, please don’t hesitate to be in touch. We are here to help.

[1] Under part 9A of the Resource Management Act 1991 and the Resource Management (Application of Part 9A –Freshwater Farm Plans) Registrations 2023.

[2] Resource Management (Application of Part 9A – Freshwater Farm Plans) Order 2023.

[3] Section 217L states that a freshwater farm plan may contain a requirement that relates to an activity on the farm that is subject to a ‘specified instrument’ (a resource consent, conservation order or similar requirement). This section is intended to ensure that compliance with the freshwater plan does not supersede any obligation to comply with any such specified instruments.

 

 

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

Subdivision consents

Commercial, House, Property, Rural
0

Recent changes to planning rules

In the Autumn 2022 edition of Property Speaking we discussed different types of resource consents. Since then, the government has released a new National Policy Statement for Highly Productive Land (NPS-HPL), which you can read here. The purpose of the NPS-HPL is to ensure that highly productive land is protected for use in land-based primary production, both now and for future generations. Councils are now required to consider the need to preserve highly productive land when determining any application for a subdivision consent.

Subdivision consent

If you want to change the size of your section by purchasing some of your neighbour’s property and merging it with your own (a boundary adjustment) or you want to split your property into additional property titles, then you will need subdivision consent from your local council.

Requirements

Your region’s district plan sets out the requirements that you must meet in order to subdivide your property. In addition to the requirements being different between regions, the requirements are also different depending on the zone in which your property is located. Properties are divided into zones that consider the standard characteristics expected in that area. The zones are:

  • Residential
  • Commercial/retail/town
  • Industrial
  • Rural lifestyle
  • Rural production, and
  • Special purpose.

The names of the zones may differ between regions but there will be a zone for each of those standard characteristics.

Conditions

Consent for your subdivision is likely to come with conditions.  Your local council may also ask that part of your property is transferred to the council; this is known as ‘vesting.’ Sometimes the council will pay you for that land but other times it will form part of your development contribution.

Areas around waterways may be taken for an esplanade reserve or esplanade strip, whereas areas of land that will become roads may be taken for road reserves.

The council can also require that new subdivisions have certain design specifications which are dictated through the district plan; these are recorded on the property title in a consent notice.

Affected parties

Where your subdivision is not a permitted activity, or it does not fit within the standard requirements for a subdivision in that area, the council may still grant you consent on a ‘notified basis.’ This means that it provides notice to affected people who can then raise any concerns with your proposed subdivision within a specified time.

The council may add further conditions to the development or even refuse the consent depending on any concerns raised.

Highly productive land (HPL)

In addition to the prior considerations that councils had to consider, since 17 October 2022, they now must map the land within their region to determine if it is HPL. In general, land will be mapped as HPL if it is:

  1. In a general rural zone or a rural production zone
  2. Predominantly within an area with a Land Use Capability class of between 1–3. A helpful map shows the current class of land within New Zealand here
  3. Not identified for future development within the relevant district’s district plan as at 17 October 2022, and
  4. Forms a large and geographically cohesive area.

Councils have the next three years to remap all the land within their region. Until that mapping is completed, all land will be treated as HPL if it falls within categories 1–3 above.

Most of the Land Use Capability class 1–3 land is within Northland, Auckland, Waikato, Bay of Plenty (between Tauranga and Whakatāne), Taranaki, Manawatu, Canterbury, Otago and Southland, although there are smaller areas of class 1–3 land throughout New Zealand.

If you are applying for a subdivision consent, your local council will consider whether the land is HPL and, where it is, it will be much more difficult for you to obtain a subdivision consent.

Since the NPS-HPL came into force on17 October 2022, it has caused problems for landowners who had subdivision consent applications for land within class 1–3 areas pending on that date. Councils had to reassess applications taking HPL into account. This, in some cases, resulted in consent being refused.

If you are thinking about subdividing your property, especially in a rural zone, do talk with us and your surveyor early on. We can discuss the specific planning requirements that now apply to your property and help assess whether your subdivision is likely to receive consent before you proceed any further on the development.

 

 

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

Storm damage to properties

House, Property, Rural
0

For landlords, tenants and buyers

With historic amounts of rain and flooding in many regions, this year has so far been challenging for many communities in the North Island. It is anticipated that these extreme weather events are likely to become more frequent in the future.

Many properties have been damaged by flooding, landslides and silt. Some of these may be under sales agreements or leased under residential tenancy agreements. We give some advice on what landlords, tenants and buyers (who have not yet settled) can do.

Residential tenancies

The responsibility for repairing damage to a property caused by a weather event or natural disaster, including drying a property that has been damaged by flood water (and paying for the electricity to do so), lies with the landlord.

If the landlord and tenant cannot come to an agreement on the next steps, either party may apply to the Tenancy Tribunal for a way forward.

Is the property completely destroyed? If the property is no longer habitable, rent will reduce accordingly and either party may give notice to the other terminating the tenancy. A landlord must give seven days’ notice and a tenant must give two days’ notice. We recommend taking photos of the damage in case there is a dispute about whether the property is destroyed. Notices from emergency services or council officials (such as red stickers) can also be used as evidence that the property is no longer habitable.

Partially destroyed? If the property is partially destroyed, or part of the property is so seriously damaged that it is no longer habitable, rent will reduce accordingly and either party may apply to the Tenancy Tribunal for an order to end the tenancy. The tribunal may make an order terminating the tenancy if it is satisfied it will be unreasonable to require the landlord to repair the property or the tenant to continue with the tenancy at a reduced rent.

Damaged but can be repaired? The damage should be repaired at the landlord’s cost as soon as practicable. The landlord should ask a building professional whether it is safe for tenants to remain in the property in the meantime. If the tenant can remain in the property while the work is completed, the landlord and/or tenant should consider agreeing to a rent reduction to compensate the tenant for any inconvenience while the work is being carried out.

If the tenant needs to move out, the landlord and tenant should negotiate to reach an agreement. The landlord should let the tenant know how long the repairs are expected to take and when the tenant can move back in.

Bought a property but not settled?

Under the ADLS Agreement for Sale and Purchase of Real Estate, the property and chattels remain at the risk of the seller until possession is given and taken (usually on settlement day). If you have bought a property but not yet settled, the cost of repairing the damage usually lies with the seller.

Property is destroyed? If the property is destroyed or damaged so it is no longer habitable, and is not repaired prior to the settlement date, the buyer must decide to either:

  1. Complete the purchase at the purchase price, less an amount equal to the insurance payment received or receivable by the seller (unless the insurance company agrees to reinstate the property up to the insurance cover for the benefit of the buyer prior to the settlement date), or
  2. Cancel the agreement: the deposit is refunded in full and neither party can make any further claims against the other.

Damaged but can be repaired? If the property is damaged, but is still habitable, settlement takes place on settlement date at the purchase price less an amount equal to the reduction in value of the property.

The reduction in value is deemed to be equivalent to the reasonable cost of reinstatement or repair. If the seller and buyer cannot agree on a reasonable cost of repair, the dispute will follow the compensation dispute procedures under the agreement.

We can help

Insurance companies will be very busy over the coming months assessing properties and processing claims. Given the scale and timing of the extreme weather events this year, this will take some time. There are also likely to be delays in the timeframes for repairs. Both landlords and tenants, and sellers and buyers, will need to be patient, flexible and practical to resolve any issues that may arise. Any agreement made between parties should be recorded in writing.

If you need any help to work through these issues, please don’t hesitate to talk with 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

Over the fence

Property, Rural
0

Resource Management (National Environmental Standards for Freshwater) Regulations 2020 now amended

Wetlands have many environmental benefits; they can significantly reduce nutrient and sediment losses on farms, improve water quality, and provide a habitat for birds and fish.

In 2020, Resource Management (National Environmental Standards for Freshwater) Regulations were introduced. These regulations protected wetlands to preserve their environmental benefits. The initial regulations had limited consenting pathways and resource consents were not obtainable for the construction of any water storage facility that could adversely impact the extent or values of the wetland.

In January 2023, these regulations were amended to introduce new consenting pathways for the purposes of:

  • Urban development
  • Quarrying activities
  • The extraction of minerals and ancillary activities (with additional controls on coal mining)
  • Landfill and cleanfill areas, and
  • Water storage, ski area infrastructure and New Zealand Defence Force activities, that are included in the definition, and the existing National Environmental Standards for Freshwater provision for ‘specified infrastructure.’

There are certain ‘gateway tests’ under the new consent pathways that must be satisfied before consent is granted.

The effects of the activity must also be managed using the ‘effects management hierarchy.’ This addresses any adverse effects the activities may have on the extent or value of the wetland. There are also certain conditions imposed on the new consenting pathways, including the requirement that water storage infrastructures must provide significant national or regional benefits.

 

Affordable Water Reform replaces Three Waters Reform Programme

On 13 April 2023, the government announced changes to its Three Waters Reform Programme. Three Waters was introduced in 2022 to change the delivery of drinking water, wastewater and stormwater to ensure all New Zealanders have safe and reliable water infrastructure.

After a significant negative public response to the Three Waters proposal, the government has made key changes to what is now called Affordable Water Reform. These are:

  • Ten publicly owned specialised service entities rather than four
  • The entities will be based around the existing regions and will be connected to the communities that they serve
  • The entities will be owned by local councils and will be operationally and financially independent
  • Each entity will be governed by a professional board and local input will be enhanced through the regional representative group for each entity. There will be an equal number of mana whenua and council representatives on each entity’s regional representative group, and
  • The introduction of the entities will occur through a staged approach between early 2025 and 1 July 2026 at the latest.

The original Better-Off funding model was designed to support councils through the transition period and to manage the financial impacts of the reforms. The Crown will still provide Better-Off funding for the first phase ($500 million) but not for the second phase ($1.5 billion). The first phase of funding has been implemented to try to negate the financial implications that the councils face during the transition.

The latest amendments do not largely impact the Water Services Legislation Bill and the Water Services Economic Efficiency and Consumer Protection Bill currently before Parliament. The government intends to pass legislation to implement these new changes before the election in mid-October.

Reaction to the changes to the government’s revised water reform programme has, it is fair to say, been mixed. It will be interesting to see how these reforms progress over the next six months before the election.

 

Cyclone Gabrielle – animal welfare management

Cyclone Gabrielle had a significant impact on farms in the North Island and left many animals stranded and in danger. This has highlighted the importance of having a disaster management plan in place which sets out what is required to keep your stock and pets safe.

When preparing for a disaster there are a range of factors to consider including:

  • What items should be included in an emergency kit, such as necessary food, medicine and water
  • Where the emergency kit will be stored so that it is accessible in the event of a disaster
  • Evacuation routes
  • Where animals can be safely stored in the event of a disaster including high points and well sheltered areas
  • What will happen with the animals while your property is restored, and
  • How will your animals be cared for if your property is damaged?

When a disaster occurs it can greatly impact the health of your animals. They are often stressed from the disaster which weakens their immune systems and increases their risk of becoming sick. As medical supplies are usually difficult to obtain following a disaster, it is important to ensure that you always have sufficient supplies on hand to keep your animals healthy.

There is also the possibility that stock feed could be damaged as a result of the disaster. Following Cyclone Gabrielle, the floodwaters caused some feed to become contaminated with sewage, bacteria, chemicals and other toxins. Moisture also increases the risk of mould.

As a part of your disaster response planning you need to consider what will happen where there is limited feed, including what animals take priority such as animals that are pregnant or newly born animals that will be at the highest risk.

 

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

Leased land impacted by Cyclones Hale and Gabrielle

House, Property, Rural
0

Some options for lessees

The damage caused to land by the recent weather events across New Zealand has raised concerns about the ongoing viability of leased land that has been impacted by these storms. Depending on a lessee’s particular circumstances, there are options in terms of relief from rental payments or, in the more extreme circumstances, termination of the lease.

If you are a lessee, the Property Law Act 2007 (PLA) and the law of frustration of leases may provide you with options when the land subject to the lease has been damaged or destroyed. ‘Frustration’ in the legal context means a contract that, subsequent to its formation and without fault of either party, is incapable of being performed.

Property Law Act 2007 implied terms

Section 218 of the PLA implies a list of covenants, conditions and powers in all leases. An ‘implied term’ is what is included in a lease by statute. These terms allow a lessee to seek relief from rent payments or to cancel the lease.

If the land you lease has been destroyed or damaged, the PLA[1] may provide you with rent relief in proportion to the destruction or damage caused. Events that may lead to rent relief include floods and storms. If you are at fault for the event that caused the destruction or damage, such as being responsible for the cause of flooding, you will not be entitled to a rent reduction until the damage is repaired.

If your lease states that the land may be used for one or more specified purposes such as cropping, and during the term of the lease that land can no longer be lawfully used for cropping, you may be able to terminate the lease. An example would be if land was ‘red zoned’ so couldn’t be legally used for cropping any more[2]. As with rent relief, if you are at fault for the land not being able to be lawfully used for the specified purpose, you will not be able to cancel the lease.

Under the terms implied in all leases found in the PLA, you must keep the leased property in the same condition that it was in when the lease term began. However, this does not apply to reasonable wear and tear and events such as floods and storms, unless you are at fault. This means that if the land you lease has been damaged by flood and your lease is due to expire soon, on termination you are under no obligation to restore the land to the condition it was in at the beginning of the lease.

Your lease may include a clause that states any implied terms found in the PLA that are inconsistent with a specific term of the lease will not apply. Before signing a lease, you should review these specific terms to check for any inconsistency with the implied terms set out at schedule 3 of the PLA.

Force majeure

Some leases may include a ‘force majeure’ clause that covers what is colloquially referred to as ‘Acts of God.’ These include events such as floods, earthquakes or, more recently, pandemics. These clauses typically provide for the lease to be terminated, or provide that the parties’ obligations, such as payment of rent, under the lease are to be suspended for a period of time.

‘Frustration’ and rural leases

Recently, leases have been recognised for their contractual nature not just as an interest in land. ‘Frustration’, which is a remedy to cancel contracts, can now be used to cancel a lease.

When there is a radical change in circumstances outside of your control, such as a cyclone damaging the leased land, you may use the remedy of frustration to cancel the lease. Your lease will be cancelled effective from the date of the event. An example of this situation would be if a river changed its course (which did happen in Gabrielle), making it impossible to farm the land, you could claim the lease was ‘frustrated’ so should end from the date the river changed course.

When deciding if a lease could be cancelled via frustration it is important to look at the purpose of the lease and the length of the remaining term. To be successful in using frustration to end a lease, the purpose of the lease will need to be unable to be carried out during the remainder of the lease term. If your lease has a lengthy term remaining, it is less likely it will be frustrated by an event such as a storm that renders the land unusable for a short period of time.

So far in 2023 there have been a handful of severe weather events that have caused significant damage to leased land. As these climate change-related events become more common, we are likely to see frustration being more commonly used to attempt to cancel leases.

 

If you are unsure about the terms of your lease after Hale and/or Gabrielle, or any other the other significant weather events that have recently occurred in New Zealand, please don’t hesitate to contact us. We are here to help.

[1] Property Law Act 2007, s4 of schedule 3.

[2] Ibid, s10 of schedule 3.

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

Severe Weather Emergency Legislation Act 2023

Rural, Your Own Business
0

Assisting recovery and improving resilience

The severe weather events this year, in particular Cyclones Hale and Gabrielle, highlighted the need to amend some legislation to assist recovery and improve resilience for areas that have been impacted.

The Severe Weather Emergency Legislation Act 2023 is the government’s response to legislation that can be amended to improve emergency response and reduce regulation. Having come into force on 21 March, the Act amends these four statutes:

  • Civil Defence Emergency Management Act 2002 (CDEM)
  • Resource Management Act 1991 (RMA)
  • Food Act 2014 (FA) and the Food Regulations 2015 (FR), and
  • Local Government Act 2022 (LGA).

 

Civil Defence Emergency Management Act 2002

Amendments to the CDEM address issues relating to concurrent declarations of states of emergency and notices of transition periods, and how resources dedicated to emergency response are used.

Group recovery managers appointed under the CDEM are responsible for coordinating the recovery activity within the region they are appointed. The Act clarifies that they must not use their powers, in respect of resources, for the benefit of a current emergency response if it is contrary to the priorities of an ongoing transition period in the region.

Resource Management Act 1991

Changes to the RMA slightly reduce the level of red tape following significant weather events. These changes lower the level of notice required by an authority to enter land in response to an emergency, and increase the ability for owners or occupiers of land to conduct emergency work and preventative remedial actions. Cyclones Hale and Gabrielle, as well as the heavy rainfall in Northland, Auckland, Waikato and the Bay of Plenty, are listed as ‘severe weather events’ with areas impacted by these events being ‘affected areas.’

Formerly a local authority or consent authority entering any place to take an action to remove the cause of, or mitigate any actual or likely adverse effect, of an emergency, had to give notice to the occupier. This has now been modified so that the authority only needs to display a prominent notice on the land and, as soon as practicable, a notice containing the same details is to be served on the ratepayer.

Under the old legislation, the notice required a person who had undertaken emergency works, or preventive or remedial action, to give notice of that activity within seven days and apply for any appropriate resource consents within 20 working days (if the activity contravened sections 9, 12, 13, 14 and 15 of the RMA). These times are now extended to 100 working days and 160 working days respectively. The same extension has been applied where emergency work is undertaken under the CDEM via section 330C.These extensions will revert back to the previous timeframes on 1 April 2025.

Immediate preventive or remedial measures to avoid, remedy or mitigate loss, injury, detriment or damage caused by a severe weather event undertaken by an owner or occupier of rural land is now a permitted activity under the RMA.

However, any activity classified as a prohibited activity in a relevant plan, any applicable regulations or national environmental standards will not be a permitted activity. Written notice must be provided to the relevant consent authority within 60 working days after starting the activity and, if the requisite notice is not given, the permitted activity status is revoked from the date on which the notice period ends. This will end on 1 October 2023 and the previously listed activities will no longer be permitted by default.

These sections aim to provide short-term relief for rural owners and occupiers to begin remedial work after the recent severe weather events without having the requisite resource consent as long as they are not listed as prohibited activities elsewhere.

Food Act 2014 and the Food Regulations 2015

Under the FA and FR, a food business is a business, activity, or undertaking that trades in food, whether in whole or in part. The FA and FR apply to food for sale as well as food-related accessories.

The Act acknowledges that compliance with the FA and FR registration and verification requirements may not have been possible for some food business owners during recent severe weather events in Northland, Auckland, Waikato, Bay of Plenty, Gisborne and Hawke’s Bay and the districts of Tararua, Masterton, Carterton and South Wairarapa (collectively referred to as ‘affected areas’).

If a food business in an affected area had their registration expire, or their registration is due to expire, between 8 January and 16 May 2023, they are provided with an extension for registration until 16 May 2023. A food business owner may continue to operate beyond this period provided they have paid the required fee for renewal of their registration.

Under the amended FR, food business owners in an affected area that were due to comply with regulations 87(1), 88(1) or 90 between 8 January 2023 and 16 May 2023 and regulations 91(1), 92(1), 93(1) or 94 between 8 January 2023 and 16 August 2023 are now exempt from doing so. However, if an operator of a food business benefits from an exemption they must resume compliance when they are next required to so in accordance with the FR.

Local Government Act 2002

Local authorities may amend existing long-term plans (being plans for the period 1 July 2021 to 30 June 2024) to include matters relating to water services so that they may respond to the damage that has been caused to water infrastructure as a result of Cyclone Gabrielle.

Local authorities and Civil Defence Emergency Management Groups now may also meet by audio or audiovisual link.

 

There is a great deal to digest with these changes; if you have any queries or need some help, please don’t hesitate to contact us.

 

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

Trusts and succession

Estate, Property, Rural, Trusts
0

Trustee duties in farm succession planning

In a previous edition[1] of Rural eSpeaking, we covered certain aspects of the changes to trust law brought about by the Trusts Act 2019, particularly in relation to succession. That article focused primarily on the duties imposed by the Act on trustees to provide information to beneficiaries and some of the implications of that.

The Act also codified trustees’ duties to beneficiaries, with the guiding principle set out in section 21:

‘In performing the mandatory duties set out in sections 23 to 27 and (except to the extent modified or excluded by the terms of the trust) the default duties set out in sections 29 to 38, a trustee must have regard to the context and objectives [our emphasis] of the trust.’

The mandatory duties are pretty self-explanatory. These are a duty to:

  • Know the terms of the trust
  • Act in accordance with the terms of the trust
  • Act honestly and in good faith, and
  • Act for the benefit of beneficiaries or to further permitted purpose of the trust.

Those duties would all seem self-evident, but practice suggests that many trustees have difficulty in knowing the terms of the trust or acting in accordance with the terms of the trust, particularly without advice.

In that situation, a trustee’s duty is to ensure that they are appropriately advised so that they can carry out their duties properly.

Default duties bring the most angst

It is the default duties that are likely to cause trustees more difficulty. These duties can be modified by the trust deed and virtually all new trust deeds since the Act has come into force modify these to the maximum extent permissible. Older trust deeds may impliedly modify some or all of these, but not by specific reference to the Act (for obvious reasons).

There are 11 default duties but the ones most likely to cause trustees difficulty in terms of succession or future planning are the duties to:

  • Not exercise power for their own benefit
  • Not bind or commit trustees to future exercise of discretion
  • Avoid conflict of interest, and
  • Act impartially.

Affecting farm succession planning

If trustees are considering a succession plan for a trust-owned farm property that may not result in an equality of treatment between beneficiaries, the first step is to have a thorough review of the trust deed. The review will ascertain exactly who the beneficiaries are; in the case of the older trusts this could be a wide group. From this, trustees can establish what restrictions there are on their power to act, particularly where there is some element of favouring one beneficiary over another (common in a farm succession scenario), or acting in the favour of one or more beneficiaries who may also be trustees.

Many trust deeds have been reviewed, or are under review, since the Act came into effect on 30 January 2021. Where possible, trust deeds are being modified to ensure that, as far as possible, these default duties are excluded. Some older trust deeds, however, don’t have a power to vary the terms of the trust. In this situation, trustees are faced with having to act within the terms of the existing trust or, where there is a power of resettlement, exercising their power to resettle the entire trust capital on a new trust, although this can be an expensive exercise and have tax implications. Another option is court orders.

Who are the beneficiaries?

The other area that trustees are looking at is the definition of beneficiaries. Older trust deeds tend to have an extremely wide beneficiary pool.

One way to limit the exposure of trustees to challenges from disaffected beneficiaries is to reduce that beneficiary pool to core family members, and to exclude the wider family such as spouses, stepchildren, etc.

Why is this all important?

In the context of farm succession, families often have the difficulty of having significant capital assets but insufficient cash or borrowing capability to enable absolute equality between children if one child is going to have the farm.

Often the other children are asked to accept a lesser share of the trust to enable  the farming operation to be carried on by one sibling. By reducing the beneficiary pool, and by excluding the trustees’ default duties as far as possible, there is greater protection for the trustees when making decisions about which some beneficiaries may be unhappy.

 

Risks

There is, however, always a risk in amending a trust deed by excluding certain beneficiaries and excluding trustees’ default duties. The risk is that by making those decisions, the trustees can leave their actions open to challenge – on the basis that they weren’t exercising their power to exclude beneficiaries or vary the trust for a proper purpose; this is one of the mandatory duties that cannot be excluded. If, for example, a group of trustees exclude all the settlor’s children except for one and then remove all their default duties in order to leave the trustees free to benefit that beneficiary solely, the previous decision (to exclude beneficiaries, and varying the trust) would be open to challenge.

 

Have a plan all can live with

As always for succession matters, the best answer is to come up with a plan that all of the core beneficiaries can live with and buy into. This would ordinarily take some time to plan so that the farming operation is in a position to enable the desired succession to take place and also to accommodate siblings who are not involved in the farming operation.

Sometimes, however, this isn’t possible. If the trustees are faced with making difficult decisions that may be unpopular with some beneficiaries, they must be very careful to understand what they can and cannot do and to seek (and take) professional advice.

[1] Rural eSpeaking, Autumn 2021, No 35.

 

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

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