Edmonds Judd

First Home Partner Scheme

Property briefs

Property
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First Home Partner scheme: on pause

The coverage of the First Home Partner scheme has been extended, but its availability is currently on pause.

The scheme appears to be a victim of its own success. In late September, Kāinga Ora announced that it is no longer accepting applications as the scheme is now full.

As part of government assistance for first home buyers, the First Home Partner scheme was established to bridge the gap if you are struggling to save a full deposit. As long as you meet eligibility criteria, including being financially able to make the mortgage repayments, Kāinga Ora can pay additional deposit funds up to the lesser of 25% of your home’s equity or $200,000. In return, Kāinga Ora becomes a co-owner until you repay its contribution.

Since August, the scheme has covered purchases of existing homes instead of being limited to new builds. The eligibility criteria were also extended to allow households with a total income up to $150,000 to apply (the previous limit was $130,000) and joint purchases by whānau groups of up to six people who normally live together.

The scheme may reopen in time as Kāinga Ora works through existing applications; we recommend you ask us or Kāinga Ora about the scheme’s availability if you are interested in applying.

 

Council delays for property developers

Subdividing off the back section or otherwise developing your property may seem like a way to ‘get rich quick’; but be prepared for a long process.

Resource and building consents have never been an overnight job. The last few years particularly have seen developers face significant delays for reasons varying from staffing shortages to larger numbers of consent applications. In some areas, councils have struggled to meet mandatory timeframes for processing applications, with some taking many months longer than expected. The extent of ongoing delays differs from council to council, depending on current resources and the number of other developments underway in the area.

Regardless of your local situation, preparation remains key. A detailed application can help avoid additional information requests from the council that may cause delays. If you are undertaking any land development, do talk with us about the process involved and, particularly, the current timeframes so you can get a clearer measure on how your proposed development might progress.

 

Short-term accommodation – take care

As the summer holidays approach, the lure of offering a spare bedroom or sleepout on websites such as Airbnb or Bookabach to earn extra money is tempting. You should take care, however, to ensure you are aware of the rules around offering short-term accommodation.

Some of the constraints include:

  • Resource consent: The extent of council restrictions will depend on the rules applying where your property is located. Some councils require a resource consent where your property is let out for more than a certain number of days or for a certain number of guests per year.
  • Other restrictions: Properties with a body corporate, title covenants or a mortgage all may be subject to restrictions around letting the property for short-term accommodation. Likewise, if you are a tenant, both commercial and residential tenancies are usually subject to limits on how the property can be used or sublet.
  • Tax: Depending on your situation you may need to pay both income tax and GST on the revenue. Further information can be found here.
  • Insurance policy limits: Check with your insurer that your policy will cover you letting the property.

In addition, you should ensure the booking site’s terms and conditions suit your individual circumstances; their T’s and C’s are not all the same. You should also check they include all obligations you might expect of a guest as they will form the main part of your agreement with these visitors.

To help avoid penalties or other legal disputes, we strongly recommend that you consider these points well before listing your property. If necessary, talk with us and your accountant to ensure you are not inadvertently breaking the law and to ensure your guests have a good experience.

 

Election impact on property issues

The election’s outcome is set to determine the future of many property issues, such as the fate of the recently passed Natural and Built Environment Act 2023 and the Spatial Planning Act 2023 as well as policy around foreign buyers, property tax rules and public housing.

At the time of writing, the election results have yet to be formally confirmed, but we will keep track of any developments and provide a fuller update in later editions. In the meantime, if you have any questions regarding the effect of government policy on your property plans, please do contact us.

 

 

 

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

Kāinga Ora First Home Partner scheme

House, Property
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A co-ownership option

In the Winter 2022 edition of Property Speaking we discussed what to consider when co-owning a property with friends or family. Another co-ownership option to consider is the Kāinga Ora First Home Partner scheme (FHP).

The scheme supports first home buyers, who do not have a sufficient deposit, or who may struggle to service a low-equity mortgage, to buy a property partnering alongside the government. Kāinga Ora (KO) can contribute up to the lesser of $200,000 or 25% of the purchase price.

 

How does it work?

It’s easiest to explain by using an example. You want to buy a property costing $800,000. You have a 10% deposit ($80,000) but your lender will only offer a mortgage of $600,000. This leaves a 15% shortfall of $120,000. KO will help you buy the property by contributing the additional $120,000 in exchange for being the registered owner of that 15% share.

You must live in the property and will be responsible for meeting all the mortgage payments and outgoings. You must gain KO’s consent before making any improvements, alterations or renovations to the property. KO requires you to live in the property for a minimum of three years and you must gain KO’s consent before you sell the property.

You agree with KO to use your best endeavours to buy out their share within 15 years from settlement (it can be  extended up to 25 years). You will meet annually with KO to review your financial circumstances and make sure you will meet the goal. KO owns a share of the property and the price you need to pay for their share will change as the value of the property changes.

To secure both your and KO’s interests:

  • You both enter into a shared ownership agreement that incorporates the points in the paragraphs above. In addition, the agreement includes enforcement and dispute resolution procedures
  • A covenant is registered against the property title in favour of KO; a second covenant is registered against the property title in your favour, and
  • Under the covenants you each agree to comply with the terms of the shared ownership agreement. The covenant also serves as notice to the public. For example, a prospective buyer would look at the title to your property, note KO’s covenant, and would know that you need KO’s consent to the sale.

 

Eligibility criteria

KO has criteria you must meet to be eligible for the FHP scheme. These include:

  • Being over 18 and eligible to buy residential land in New Zealand
  • Having a total household income of $130,000 or less with a good credit rating
  • Being a first home buyer. If you have previously owned a property but no longer do so, you may still be eligible
  • Not having previously received shared ownership support from KO
  • Having a minimum deposit of 5% of the purchase price, and
  • The home you want to buy must be:

– A new build: a completed home with a code of compliance certificate issued within the previous 12 months that has not previously been lived in, or

– An off-the-plan purchase: a home still to be built, the sale and purchase agreement must cover both the land purchase and the build.

In each of the above cases, the home must be habitable from the settlement date/the date that title and code of compliance issue, and

  • You must also meet the lending criteria of a participating bank. At the time of writing the participating banks are Westpac, BNZ, Kiwibank and SBS.

 

Where to start

Check your eligibility and apply for the FHP here. Gather these documents before applying: photo ID, proof of income and evidence of your deposit.

Once confirmation of eligibility has been received, you need pre-approval from one of the participating banks. A mortgage broker can be an asset in navigating this.

It is important to note that you cannot enter into a sale and purchase agreement for a property under the FHP scheme until both requirements above have been satisfied.

The FHP scheme can be a great way for first home buyers to get on the property ladder. It is essential, however, that you understand how this ownership structure will affect you, and you are aware of your rights and obligations.

If you are considering applying for the FHP scheme, we can guide you through the process.

 

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