Edmonds Judd

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Over the fence

House, Property, Rural
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Service tenancies on the farm

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

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

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

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

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

 

Checking terms of engagement regarding liability

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

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

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

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

 

 

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

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

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

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

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

 

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

 

 

 

 

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

Significant Natural Areas

Rural
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What are they? Should I be concerned?

The identification of ‘Significant Natural Areas’ has been in the news lately. How are these areas defined and what are the implications for rural landowners?

The legislative basis identifying significant natural areas is in section 6 of the Resource Management Act 1991 (RMA):

‘6   Matters of national importance

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

…

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

…’

The RMA is nearly 30 years old, but it is only fairly recently that the people exercising the functions and powers under it (in respect of this section, mainly being regional councils) have stepped up the process of identifying the areas of ‘. This is the first step in complying with their obligations under section 6(c) of the Act.

In practical terms, regional councils are identifying and recording these areas within their territory – some of which are on private land. This process has, however, been somewhat controversial partly because what is ‘significant’ is not defined by the Act and, as a result, it has been left to each council to interpret this individually, largely using case law and ecological guidance. This has led to inconsistencies between local authorities recording these areas.

Implications for rural landowners

What does it mean for a landowner once a significant natural area has been identified on their land?

First, it means is that the area will be identified on the council’s records.

Second, the use to which that land can be put is likely to be more controlled. That doesn’t necessarily mean that its existing use will be stopped — although it could. It does mean, generally speaking, that existing activities are unlikely to be able to be intensified and new activities are likely to be subject to tighter controls, if permitted at all.

The concern for a private landowner having such an area on their land is that it potentially reduces the value of that land by limiting the use to which it is put; it also reduces the ability to change or vary the current farming practices in relation to the land. It is seen as a fetter to an individual’s private property rights.

Is there any compensation for a landowner who has such an area identified on their land? The answer is no. Direct government compensation has been ruled out. There have, however, been instances where the Native Heritage Fund has purchased land where large significant natural areas have been identified. There may be some financial assistance in the form of rates rebates, or funding for fencing of the areas and for pest control.

More certainty with NPSIB?

Some greater certainty might be achieved when the proposed National Policy Statement for Indigenous Biodiversity (NPSIB) is finalised. A draft NPSIB was released in 2018 and recently the Associate Minister for the Environment, the Hon Phil Twyford, agreed to extend the timeframe for the delivery of the final version of the NPSIB to the end of this year.

The intention of the NPSIB is to provide ‘clear direction to Councils on their responsibilities for identifying, protecting, managing and restoring indigenous biodiversity under the Resource Management Act 1991’. Therefore, at the very least, the NPSIB should provide some consistency between councils and certainty for landowners as to what the effect of having a significant natural area on their land might mean.

Given that the entire RMA is being reviewed and is likely to be repealed and replaced by two separate statutes, one has to presume that the current uncertainty and inconsistency may continue for some time. Whatever the form of the new laws relating to the use and development of land takes, it is certain that rules relating to the protection of indigenous flora and fauna will be an important part of that reform. Given the work that has already gone into the draft NPSIB, we presume it will be captured by the new legislation in one way or another.

Buying or leasing Māori land

Rural
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What does ‘alienation’ mean in this context?

There are significant amounts of Māori land in New Zealand in productive rural areas. Much of this land is farmed by way of lease, at times in conjunction with adjoining general freehold land. Sometimes these ’joint’ farms have been farmed in this way for generations.

For Maori land to be leased or sold, however, specific rules apply. The Te Ture Whenua Maori Act 1993 governs the ‘alienation’ of Māori land.

Why Māori land is so tightly controlled

The preamble to the legislation tells us why alienation of Māori land is so tightly controlled as it states:

‘Whereas it is desirable to recognise that land is a taonga tuku iho of special significance to Maori people and, for that reason, to promote the retention of that land in the hands of its owners [our emphasis], their whanau and their hapu, and to protect wahi tapu: and to facilitate the occupation, development and utilisation of that land for the benefit of its owners, their whanau, and their hapu: And whereas it is desirable to maintain a court and to establish mechanisms to assist the Maori people to achieve the implementation of these principles.’

‘Alienation’ under the Act is a very wide term and includes:

  • Every form of disposition of Māori land or of any legal or equitable interest in Māori land, whether divided or undivided
  • The making or grant of any lease, licence, easement, profit, mortgage, charge, encumbrance, or trust over or in respect of Māori land
  • Any contract or arrangement to dispose of Māori land or of any interest in Māori land
  • The transfer or variation of a lease or licence, and the variation of the terms of any other disposition of Māori land or of any interest in Māori land
  • An agreement to the taking under the Public Works Act 1981 of Māori land or any interest in Māori land, and
  • The granting, renewal, variation, transfer, assignment, or mortgage of a forestry right over Māori land.

However, alienation does not include:

  • A disposition by will of Māori land
  • A disposition of a kind above effected by order of the court
  • A surrender of a lease or licence in respect of Māori land
  • The granting, for a term of not more than three years (including any term or terms of renewal), of a lease or licence over or in respect of Māori land, or
  • A disposition by way of sale by a mortgagee pursuant to a power expressed or implied in any instrument of mortgage.

Many different rules apply

Different rules apply regarding the alienation of Māori land; all are dependent on the status of the land and how it is owned.

Māori customary land is defined in the Act as ‘land that is held by Maori in accordance with tikanga Maori and shall have the status of customary land’.

Under section 145 of the Act, Māori customary land cannot be alienated or disposed of by will or vested or acquired under an Act. However, this doesn’t prevent a change in the owners in accordance with tikanga Māori. Nor can it stop a change in status of Māori customary land to Māori freehold land (there is a process for this) or the creation, cancellation, or variation of an easement, or laying out of a roadway, over Māori customary land.

Section 146 of the Act states that no person can alienate Māori freehold land otherwise than in accordance with the Act. ‘Māori freehold land’ is land which has been determined as such by the Māori Land Court by freehold order. Māori freehold land can be owned by individuals, through Māori incorporations or through trusts; this land can be alienated but there is a formal process under the legislation:

  • Section 150A sets out the requirements for alienation by a trust
  • Section 150B sets out the requirements for alienation by a Māori incorporation, and
  • Section 150C sets out the requirements for alienation by individuals or land owned jointly or in common by individuals.

Māori land that is owned by Māori incorporations tend to be larger blocks that are economic in their own right. This contrasts with Māori land owned by trusts and (particularly) owned by groups of individuals in common that are often smaller and not economic in their own right. Often several blocks can be found adjacent to each other, but with similar, but not the same common ownership. Agglomerating these blocks into an economic unit can be challenging and an understanding of what are fairly complex rules and procedures is necessary. However, as we can see from the preamble referred to above, the aim of the Te Ture Whenua Maori Act 1993 is not only to retain land in Māori ownership, but to ‘facilitate the … development and utilisation of that land for the benefit of its owners…’. To that end, alienation, particularly by way of lease, to an appropriate lessee is a useful mechanism for achieving some of the Act’s aims.

If you have an interest in Māori land that could be leased or sold, or if you are looking to lease Māori land to use as part of your farming operation, getting advice from a lawyer who is experienced in Māori land law and wāhi tapu is vital. Please get in touch with us if you are in this situation.

Buying off the plans

House
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Becoming a more popular option in this tight housing market

It’s no secret that the housing market in New Zealand is incredibly competitive at the moment. Already on a trajectory pre-Covid, demand has shot up since New Zealand came out of lockdown. Many people are choosing to ‘nest’ rather than spend on overseas holidays and thousands of expats are returning home earlier than planned.

Open homes often have queues out the door, many vendors choose to sell at auction where they can expect to make top-dollar and the supply of existing homes for sale is starting to run low.

As a result of this tight market, many people are deciding to buy off the plans. Buying off the plans has become popular with increasing numbers of land developments both in central cities and the suburbs. It has become increasingly popular in Christchurch, for example, where developers are playing a key role in regenerating the city post-earthquakes.

What is ‘buying off the plans’?

Buying off the plans is when you sign an agreement to purchase a property sight unseen, typically from a developer, before construction has been completed or, in some cases, even before the build has begun. If you get in early enough, you may be able to modify the design to suit your taste and style.

Instead of going to an open home and getting the feel for a place when you walk in the door, you are deciding to buy based on your review of the plans and specifications prepared by the developer. While this prospect may be daunting to some (especially the visual learners out there), the result is you will end up with a brand new home constructed in accordance with the latest building standards. If you get in early enough, you may be able to modify the design to suit your taste and style.

How does it work?

With no open homes, no auctions and sometimes no real estate agents, the process of buying off the plans is different to purchasing an existing home. You still sign an Agreement for Sale and Purchase. However, unlike getting a building report to ascertain the condition of the dwelling, you need to consider whether the property will meet your needs by looking very carefully at the plans and specifications as well as considering the property’s location and outlook. The developer may have already completed other similar homes that you can view to get an idea of their style and workmanship.

When you decide to proceed with the purchase, you pay a deposit to the developer. This is usually 5% to 10% of the purchase price. You then may need to wait some time for construction to be completed and a code compliance certificate to be issued before you pay the balance of the purchase price to the developer and move in. This longer timeframe may be attractive to some buyers as the construction period allows more time to save.

Sometimes, the agreement may have a deadline date by which you can withdraw from the purchase and have your deposit refunded if construction has not been completed. This is known as a sunset date.

Why buy off the plans?

Unlike buying an empty section and building your own home where construction prices may increase over time, buying off the plans usually means the purchase price is locked in when you sign the agreement. The upside may be that, depending on the market, the property may have increased in value even before you move in.

You will also have the benefit of owning a brand new home constructed to the latest building standards. This means there should be little to no maintenance or repair work required by you, at least for the first few years. A brand new home will also typically be warmer and drier than an existing one.

Another advantage of buying off the plans is that by purchasing a new home you may be eligible to use the Kāinga Ora First Home Grant of up to $10,000 per person.

What to look out for

There are a few things to look out for when buying off the plans. If you need a roof over your head sooner rather than later, agreeing to buy a property off the plans could be problematic as the timeframes are usually quite long.

As there is no open home to ‘try before you buy’, you should get an understanding of the exact outlook and location of the dwelling — make sure there is sufficient sun, it won’t be overshadowed by a large building next door and so on. You should also note the room dimensions and compare with your existing living or bedroom space to get a feel for how much room you will have once the walls are up.

There might not be flexibility in layout and design so do check that the design of the dwelling is actually what you want.

Seeking out other dwellings completed by the same developer could help you get an idea on the look and feel of your new home.

Getting more technical, it is very important to check the fine print in the agreement and seek legal advice (talk with us!) as to whether the purchase price can be increased by the developer, and what happens if construction takes longer than expected. In addition, we can advise as to whether a sunset date is in place for you to withdraw from the purchase if construction has not been completed by a certain date. It is also important that only you can withdraw from the purchase in these circumstances, not the developer.

You should also ask around about the reputation of the developer and whether they are known for the quality of their buildings, sticking to their proposed timeframes and so on.

Buying off the plans can be a great way for prospective buyers to get on the property ladder and to own a brand new, warm and dry home.

We strongly recommend that if you are considering this way of buying a property, you talk with us early on so we can guide you through the process.

Clarity around fixtures and fittings

House, News
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Address these before the lease is signed

In December 2020, a commercial landlord and their tenant found themselves in the High Court arguing about who was responsible for replacing fixtures and fittings because their lease was silent on the issue.[1] These types of disputes around fixtures and fittings in commercial leases are quite common.

For both landlords and tenants negotiating a commercial lease, it is always best to turn your mind to your intentions for any fixtures and fittings attached to the premises; this will help enormously in avoiding costly disputes later on.

Issues to think about

Which items are the landlord’s fixtures and fittings? Will a tenant’s fixtures and fittings be added to the premises?

A lease may allow the tenant to make various alterations to the premises to ensure the fit-out meets its business needs. Whether certain fixtures or fittings belong to the landlord or the tenant often affects the rights and responsibilities around those items. It is critical that a clear schedule of landlord’s fixtures and fittings (and the condition of those items) is included in the lease.

Who is responsible for maintaining and repairing the fixtures and fittings?

Under some leases, the landlord’s fixtures and fittings are defined as being part of the premises. This means that the tenant’s obligations around maintenance and repair of the premises include the maintenance and repair of fixtures and fittings. However, this is not always the case and you should make sure that the lease otherwise addresses who holds these obligations.

Who is responsible for replacing broken or worn out fixtures and fittings?

In the Ventura case, the lease was silent about who was responsible for replacing fixtures and fittings during the lease. The High Court determined that, on the wording of the lease, Ventura could decide whether to replace any fixtures and fittings if required for its business and either remove or allow its landlord to purchase these items at the end of its lease.

If it is intended that either the tenant or landlord must replace any fixtures and fittings where necessary, this should be clearly expressed in the lease.

What happens with the tenant’s fixtures at the end of the lease?

Ordinarily, fixtures are considered to be part of the building, and ownership will pass to the landlord at the end of the lease (subject to any requirements that the tenant reinstate the premises to their original condition).

However, if a lease does not specify otherwise, the default rules in section 266 of the Property Law Act 2007 allow a tenant to remove their trade, ornamental or agricultural fixtures at the end of the lease. These fixtures can be removed before, or a reasonable time after, the end of the lease as long as there is minimal removal damage and the tenant repairs (or compensates the landlord for) that damage.

Commercial landlords should make sure their leases provide specific direction on a tenant’s fixtures if, for example:

  1. The removal of the fixtures and repair of any damage must occur before the end of the lease or within a set timeframe following the end of the lease to avoid, for example, the landlord being unable to re-let the premises while the reinstatement is still ongoing, or
  2. The tenant is required to leave certain fixtures in place and transfer ownership to the landlord at the end of the lease.

Lease assignment

When a tenant assigns the lease, a new tenant may want to change which of the previous tenant’s fixtures they will need to remove at the end of the lease. If this is not done, you may be able to require the new tenant to meet the cost of removing all tenants’ fixtures and fittings – even those installed by the previous tenant.  Before agreeing to reduce the new tenant’s responsibilities, you will need to consider carefully how you want the premises to be left at the end of the lease and who should bear the cost of removing any unwanted fixtures and fittings.

Replacing an expired lease

When replacing an expired lease, both landlords and tenants should ensure that the records of the tenant’s fixtures are up-to-date and included in the new lease. Otherwise, there could be a dispute about whether those fixtures became the landlord’s property at the end of the expired lease.

Take care

The points in this article are just some of the matters to consider around fixtures and fittings in a commercial lease. If you are entering into a commercial lease, please do get in touch, we can advise you in more detail and tailor your lease’s terms to match your intentions for the fixtures and fittings in the property.

[1] Ventura Ltd v Robinson [2021] NZHC 932.

Property briefs

House, Latest news, News
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Government housing package: other notable points

The big ticket items of the government’s recent housing package included the extension to the bright-line test as well as landlords no longer being able to offset their tax with interest paid on their rentals. We have covered these two items here.

There are, however, a number of other features of the package that may make it easier for New Zealanders trying to get onto the property ladder and to help increase the housing supply.

Increases to income and price thresholds for First Home Grant

Since 1 April 2021, more New Zealanders can qualify for government assistance to buy their first home. Income thresholds for singles applying for the First Home Grant have increased from $85,000 pa to $95,000 pa as well as an increase for a couple’s combined income from $130,000 pa to $150,000 pa.

Similarly, the price thresholds for both new homes and existing homes in many areas of the country have also been increased. With the rapid rise in house prices leaving the scheme’s original house price caps desperately out of kilter from the real-time housing market, first home buyers have suffered. Some had to rely on parents for additional funding or others have been completely priced out of their local housing market where prices had risen well above the threshold for government assistance.

The increases vary between regions and differ depending on whether you are looking to buy a new or existing home. There is a full list of the changes to the house price thresholds in your region here. With more people now being eligible to apply for the First Home Grant to subsidise the purchase of their first home, we hope that more Kiwis will get the assistance they need to help get them on the property ladder.

Housing Acceleration Fund

Property developers will also get a helping hand from the government’s housing package. A $3.8 billion boost to development has been announced and will subsidise the cost of providing services and infrastructure to ‘build-ready’ land. In subsidising these significant upfront costs which often slow housing development, the government hopes to increase the supply of a range of affordable, public and mixed housing.

The Housing Acceleration Fund is available to a range of key stakeholders in both the private and public sector but it will rely on local government playing its part in opening up suitable land to allow more housing development projects to take place. Developers involved in housing development should speak to their local council first for more information about whether they are eligible for assistance from the fund or for what stages of housing development the fund is available.

Kāinga Ora Land Acquisition

The government continues to support affordable housing by lending Kāinga Ora an additional $2 billion to assist with land acquisition for social housing development projects. The increased capital is expected to see the rate of acquisition of land increase which, along with the funding boost for development of public and mixed housing, aims to increase the supply of housing across the country.

Apprenticeship Boost

Finally, the apprenticeship subsidy scheme (Apprenticeship Boost) is extended for a further four months. Employers taking on apprentices can access a $1,000 per week wage subsidy for first year apprentices and $500 for second year. This extension will help ensure that enough skilled tradespeople are trained to take advantage of the government’s plans to increase housing supply by not only enabling a greater workforce to achieve the government’s affordable housing goals, but also by providing private developers with a sufficient pool of skilled workers to draw on to keep up with housing demand.

Whether you are a first home buyer trying to find your feet in the property market, a property developer looking for a financial boost to kick-start your latest housing development project or an employer with apprentices, the government’s housing package will help address the supply issues affecting the housing market and will give a financial leg-up for those working to increase supply.

Rural leases: should be more specific

Rural
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Should be more specific

Leasing of farms, orchards and cropping land is becoming more common. It is a good way for farming operations to expand without capital commitments involved in buying land. For landowners, it can be a useful way to retain ownership of the capital but give away the day-to-day farming operations, either through a desire to semi-retire or to hold the farming asset for a period while family or continued ownership issues are resolved.

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Covid relief roundup

Health Issues, Latest news
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How many schemes are you eligible under?

Since the pandemic arrived on our shores, the government has made available multiple types of financial relief; more than one may be available to your business. Although applications under the popular Wage Subsidy Scheme ended on 1 September 2020, other options are still available for support if you need it.

Apprentice Support Programme

If your business has an apprentice who is actually training, you may be eligible to receive $1,000/month for first year apprentices and $500/month for second year apprentices. This payment is for a maximum of 20 months from August 2020 to March 2022. Visit here at Work and Income Te Hiranga Tangata to apply.

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Rural leases

Kids, Latest news
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More on COVID and access issues to land

In the Autumn edition of Rural eSpeaking we discussed the situation that Covid had caused with leases where tenants were unable to access their premises due to lockdown restrictions. Potential issues for the rural leasing sector arose from this problem, particularly given that rural leases are often in a different form to urban commercial property leases.

The article pointed out that the main lease issue due to Covid was the inability of tenants to access their premises. Since we published the Autumn edition, the government has announced that it proposes further changes to the Property Law Act 2007 where it would imply in certain leases a clause similar to that in the latest version of Auckland District Law Society (ADLS) lease, section 27.5, where a tenant has:

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