Property Sharing – The Walton Way

Most of you will remember the American made series, The Waltons, set in the 1940/50’s in Virginian Mountains, America. It portrayed the lives and dynamics of three to four generations living under the same roof. It was a nice ideal but largely removed and unrealistic in our modern society. Surprisingly, we have had many parents buying with their children with the intention to live alongside their children and grandchildren. The promise of helping out with the grandchildren and helping son or daughter getting on the property ladder is largely the attraction. With it however, raises issues for the lawyer to discuss and ensure all parties are fully informed.

First: We need to identify who we are acting for and who may need independent legal advice. This is an important consideration as contributions made by the parties, especially Mum and Dad, are likely to be more than the son/daughter generation. Lending will be from one Bank and the parties are likely to be joint borrowers/mortgagors and therefore, Mum and Dad are taking on equal liability of son/daughter where, in reality, due to their equity they may not have needed to. If independent legal advice is required, and preferred then, those costs need to be factored into the transaction. A Deed of Indemnity is recommended to cover where one party ends up paying the borrowings owed by the other (ie Mum and Dad pay on behalf of the other couple).

Second: Ownership of these properties is mostly tenants in common, sometimes in unequal shares to reflect the equity of each couple/party. Regardless, a Property Sharing Agreement (PSA) needs to sit behind the ownership on the Record of Title and governs the obligations between the parties especially, should relations go awry. This is a very important step, but usually not considered by the parties with the excitement of entering into an agreement to buy the property. The PSA will cover lots of things, but mostly, what happens if the relationship turns sour ie: get out of jail card, what happens upon a party’s death, what happens if parties separate. It is also likely to cover obligations for maintenance and outgoings. Along with a PSA each party’s Will needs to be addressed to match the ownership on the Title and the PSA. If you take four (4) owning parties then, that’s 4 wills to complete and you can imagine along with a PSA and conveyancing – the costs now start to mount.

Third: Legal Fees – the reality is – this is not a cheap exercise. There is the conveyancing, Deed of Indemnity, independent legal advice, property sharing agreement and wills. All essential in these transactions and whilst it’s a substantial up-front cost, the cost of trying to sort out issues when these are not in place are extreme.

Our advice – get advice at the start, find out the costs and make sure you complete all the documents.

Methamphetamine Contamination

Meth contamination is a ‘hot issue’ in the property market, relevant to everyone and everywhere in New Zealand.

Recent reports show there are two issues affecting investors in residential property. The first is the LVR (loan to value ratio) requirements which, have slightly improved as at 1 January 2018. The second is Methamphetamine contamination – “P”.  Unfortunately P houses and P contamination is here to stay and is really starting to take hold in managing property sales and purchases but also creates significant issues for Landlords.

Purchasers need to consider, as part of their due diligence, to test for Meth. A purchaser cannot rely on a property’s LIM (Land Information Memorandum) report to divulge whether the property has been exposed to Meth. A Council will only advise those details they are aware of. Therefore, it is becoming increasingly important to have a due diligence clause or a specific clause that refers to drug testing.

The process is about being informed. In 2016 a national standards committee was established which set benchmarks of acceptable levels of Meth. They distinguished between high use areas (easily accessible and regularly used by adults and children) or limited use areas (accessed by adults for a short duration including crawl spaces and wall cavities).   These benchmarks are now encompassed in the Standards New Zealand, NZS8510:2017. Acceptable readings for High use areas are 1.50 ug (micrograms) per 100cm2 and below whereas limited use areas 3.8 ug per 100cm2 and below. Ministry of Health have endorsed this standard.

Remediation, can be a costly and lengthy process depending on the level of contamination.   The NZS8510 also sets out industry standards of the process of remediation and accreditation for those businesses completing remediation. Previously, there were no standards and anyone could remediate.

The best advice is, have the property checked by an accredited sampler to see if any contamination exists before you buy.

Importance of a Will

It cannot be understated how important it is to have a Will whether you are young or in advanced years of life. If you have assets totalling $15,000 or more then, you need a will. For the simple reason that, banks, kiwisaver fund providers etc, will not accept the death certificate alone and require Probate (High Court authority) to distribute to the person who has been given the authority to deal with the estate. A lot of young people don’t even think about having a will and don’t realise their Kiwisaver fund is likely to tip them over the threshold and sadly, young people pass away too.

What will a Will do? Fundamentally it gives the Willmaker control over who their Executors and Trustees will be and who will receive their assets. Upon death, the Will is sent to the High Court to be proved and gives authority to the Executor named in the Will the right to deal with the estate.

If there is no Will then, the Administration Act 1969 dictates who can apply to the court to be given grant of administration of the estate. That may end up being someone you don’t want. The Administration Act also sets out who receives from your estate subject to other statutory rights to make claims.   This has the potential of not turning out how you may have wanted.

The costs on an estate where there is no Will are much more expensive than, where a valid Will exists.

The team at Law4You can help you achieve the results you want.

Property Ownership – Joint Tenancy vs Tenants in Common

How do you own your property?

One of the important questions I regularly ask clients when they are purchasing their property is how they want to own their property joint tenants or tenants in common. Then that glazed look comes over their faces and I know instantly they are unfamiliar with those phrases. Usually we have a quick tutorial in Property 101 and ownership types and what it means on death and whether they have children to previous relationships.

What’s all the fuss about then?   Well it really does matter how you own your biggest asset – your home. If you hold the property as joint tenants, you cannot will your share and the survivor of the owners gets the property outright. For those with children together of that relationship they are likely to want joint tenants. On death it’s a simple transmission of the property title to the surviving party – easy!

Not so easy when the partners or spouses have children from previous relationships.  They have different obligations to their own children that the other partner or spouse do not. They are likely to want to ensure their share of the property goes to their children – fair enough. In that situation, we recommend they hold the property as tenants in common. Here’s the catch – they have to update their wills to allow the surviving partner or spouse to live in the property either for a period or time or for their lifetime. Otherwise, the Executors of the deceased partner or spouse can take steps to sell the property to meet the obligations to the beneficiaries of the deceased party. It can really complicate matters and create more anxiety for the surviving party.

Tenants in common can also be a good ownership option when you are getting older and have no family trust. If one dies and the surviving party needed or might need residential care then, any asset assessment would only be on the surviving party’s share, not the estate.

Talk to the team at Law4You about the options when you are next buying your property and take the opportunity to update your wills.

Guarantees in Leases

Tenants should not enter into commercial leases lightly. When most tenants take the form of a company structure, the Landlord usually requires personal guarantees from the directors and shareholders. What are you personally guaranteeing? Predominantly, the guarantors will guarantee the payment of the rental and OPEX (operating expenses, aka outgoings eg rates, insurance etc) up to the end of the term of the lease if the Tenant defaults and can’t pay. This is an important point not to be overlooked.  If the lease is assigned during the term of the Lease to another Tenant who subsequently defaults and doesn’t pay the rent the Landlord will look to the Guarantors for payment.

The guarantee also extends to the covenants implicit in the lease eg: repair and maintenance provisions.

How can the Guarantor mitigate their obligations?

  1. At the negotiation stage of the lease the tenants can negotiate so that the obligations of the guarantee terminate after a period, for instance, 1 or 2 years. The Landlord might be more amenable to this idea if the release is on the proviso that the tenant has complied with the obligations of the lease; or
  2. The guarantee could terminate on assignment of the lease; or
  3. The Tenant might try to assign close to the expiry of the term; or
  4. Another option may be to limit the amount the Guarantor is obligated for ie: a fixed sum.

There are options that can be explored in negotiating a new lease. Usually its preferable to enter into an Agreement to Lease to flush out any issues before being committed to the actual Lease itself.

Before you leap, talk to the team at Law4You to discuss your options.

Vendors To Do List

Vendors conditions on settlement

You’ve gone through the selling process, had the purchaser on the ‘hook’, the contract is finally unconditional and now you’re gearing yourself up for shifting and settlement day.

Your focus is on the shift, cancelling utilities and looking forward to the next house.   But wait, take a moment to pause and consider your obligations as a Vendor – what are they?

Did you know:

  1. It is a condition of settlement to provide all keys and remotes to all lockable doors and windows. Failure to do so, causing the purchaser to obtain locksmiths can cause retentions on settlement day.
  2. Vendors warranties in respect of chattels are now quite stringent. The obligation is for all chattels and any equipment or systems that provide services to the property eg: heating, air-conditioning, or the like, are to be in reasonable working order on settlement.   That means if your heat pump suddenly stops providing heat and maybe too old to fix or get parts for, the Vendor could be required to provide a new working heat pump.
  3. Finally, you might take some time to consider whether there is any damage to the property and what is damage? Damage not causing the property to be untenantable renders the property subject to an insurance claim, fixing or possible retention. The property should be in the same state of repair as when the purchaser entered into the contract, but what say you removed Tv’s, mirrors, pictures leaving holes – some purchaser’s might consider this damage.

Its always a good idea to check with your lawyer when signing the final paperwork if you have any concerns.

EQC settlement limitations

We are nearly seven years on from the first Canterbury earthquake in 2010. Earthquake Commission claims have been numerous and in most part settled.   Any challenges to the settlement would normally need to be raised within six (6) years of settlement as covered by the statutory limitation periods.


EQC however, apply the six year period differently depending on how the claim was settled, for instance:

  1. Where payment is made in settlement – time runs from the date of payment;
  2. If the claim is settled through a repair – time runs from the date of practical completion;
  3. If the claim is declined – time runs from the date the decision to decline is communicated.

You may ask, what does this matter? For property lawyers conveying property, it may become a point of detail in the paperwork completed for settlements. Claims are assigned from vendor to purchaser and, where settled, a residual benefit in the Claim is transferred for latent damage (damage discovered that can only be attributable to earthquakes), land remediation or repairs that need to be revisited. It may be time to start looking at those early claims to see if there is any real life left in them depending on when and how they were settled, reducing the need to assign those claims outside the limitation expiry period.

EQC clauses in Agreements for Real Estate

Watch out for those EQC clauses when Buying and Selling properties.

For the most part, properties are sold via a real estate agent who will have their own generic clauses. These clauses may not be specific enough to address the issues with EQC. Consideration needs to be given to:

  1. When the EQC claim was made
  2. Is it settled
  3. How was it settled eg cash settled and who did the repairs or was it EQR/Fletcher managed
  4. What, if anything, is there to assign
  5. Can it be assigned ie were the current vendors assigned the claim(s) from the previous vendor

With the passage of time and so many properties bought and sold over, it can sometimes be difficult to determine exactly what has occurred unless good records have been taken. Legal advice should be taken at the outset to craft the EQC clause particular to your property. Vendors need to be mindful of their obligations when assigning claims and what they are assigning. This should be fully discussed at the time a property is listed for sale, in light of, what EQC cover:

  1. Household contents
  2. Residential Dwelling
  3. Land Remediation
  4. Increased Flooding Vulnerability for some designated areas
  5. Increased Liquefaction Vulnerability for some designated areas

If you are selling your property and you have been advised by EQC of compensation for land remediation, flooding or liquefaction vulnerability then you need to talk to your lawyer before agreeing to assign the claim.

Protecting those assets after Separation

Separation of couples can be an emotional rollercoaster and division of relationship property bringing finality to the couples assets and liabilities can be a welcome end to the saga.

Often people find themselves “starting over” with a financial setback. The reality is, whatever you come out with may set you up in a new home and you need to ask yourself ‘do I want to do this again’?

In practice I have completed many matrimonial settlements, more than I care to remember. My advice is always, “you will meet someone else and when you do remember my advice and protect your assets”.

Its really important that as we grow older that the assets we have worked to acquire don’t keep being divided with a partner in a break up. Critical assets like the main family home, car and household chattels, after a three year relationship, will be relationship property unless protection measures are taken.

The options are:
A Contracting Out Agreement with your new partner under the Property (Relationships) Act 1976.  Basically this, by its very name, is a contract. It says “whats yours is yours and whats mine is mine” and if we split you take your property and I keep mine. Its a great tool to a lot of parties. Some pitfalls are, like any contract, two parties need to sign it willingly. The risk is if the other party won’t sign – then what? The answer is – not alot, you can’t make the other party sign it and that can create strains in any relationship. The other question arises – is a full proof? The answer is, usually provided the necessary criteria is met under the Act and there is not substantial injustice to one party. Costs of these agreements can vary from lawyer to lawyer and each party must be seen by independent lawyers. The overall cost can become expensive however, if this is an option for you then, you need to consider it an investment in your future.

The other option is a family trust. The great things about trusts is that on separation whatever property you are left with, is your separate property.  By then placing it into a trust keeps it separate. When you enter new relationships, no matter with who or how frequent, the property in the Trust remains trust property which origins are from separate property and protected from Property Relationship claims provided however that no other relationship property is settled into the Trust to confuse the status of the Trust Fund. This can be a great option for those left with substantial assets on breakup however, the one pitfall is it only protects those assets in the Trust and unlike an agreement above, it may not cover the bank account, superannuation or the vintage cars – those assets belong under an agreement.  If you are seriously considering this option then who need to be careful of how you manage the Trust.  There is evolving case law where non-owning partners have an expectation or made a contribution to the property in the Trust and the Courts have recognized a constructive trust exists and therefore looked to make a settlement on the non-owning partner.

Costs to establish a trust can be substantial and again vary from lawyer to lawyer and only encouraged for those who fundamentally understand the workings of a trust.

Whatever the method, there are protective steps you can take – be rest assured no matter how difficult the break up is – we often end up in new relationships.

Kiwisaver & Housing New Zealand

We are often helping our clients with the paperwork for Kiwisaver withdrawal applications and Housing New Zealand (HNZ) first home grants. Whilst we are very familiar with the process and the paper war our clients, understandably, are not and it can be overwhelming.

These are similar but different applications. To give you an idea:

The HNZ subsidy is an online application where you attach the agreement you have entered into to purchase the property and confirm kiwisaver contributions. If successful, you then receive a letter advising how much you are entitled to and requesting information of how you are paying for the property. This usually requires recent confirmation from your Bank of the funds in your bank account if being used towards the deposit. Your kiwisaver withdrawal can also make up part of your deposit. Once accepted HNZ then generate an agreement which is sent to your lawyers who are then required to advise you on it, have you sign it and return it to HNZ.

The Kiwisaver withdrawal application is quite different. Each kiwisaver fund provider have different forms with different identification and proof of address requirements. It pays to read the forms first, collect all the information before you head into the lawyer’s office.   You will need the application to be statutory declared in front of your lawyer or a Justice of the Peace.

If you have owned a property (even bare land) previously then, you need to complete the online application with HNZ to be a second chance home buyer to allow you to proceed with your kiwsaver withdrawal. That is a separate online application to the application for the HNZ subsidy. If accepted HNZ provide you with a one page letter advising you of your eligibility and that then is provided to your kiwisaver fund provider.

Its important to ensure the applications are being processed in a timely fashion to meet deadlines for contracts and settlement dates.