Written by Lauren Jerard  – Senior Solicitor (Property)

From 1 July 2021 the Residential Tenancies (Healthy Homes Standards) Regulations 2019 come into effect. The regulations require that all rental properties comply with the Healthy Homes Standards (HHS) within 90 days of the commencement of any new tenancy or any renewed tenancy. All tenancies must meet this standard by 1 July 2024.

The purpose of the HHS is to ensure that renters will achieve warmer, drier homes which will help to reduce mould, dampness and associated health conditions.

However, any investment property owner also need to be immediately aware that from 1 July 2019 all rental properties must meet the ceiling and under-floor insulation standards where the insulation is reasonably practicable to install. If insulation cannot be installed then the Landlord must disclose this in the rental agreement.

These new insulation standards will vary according to a dwelling’s construction and location. The estimated costs for ceiling and under-floor insulation is likely to be anywhere between $4,000.00 to $6,000.00 for the average dwelling.

Smoke alarms must also be installed in every rental property by 1 July 2019. The MBIE Tenancy Services have advised that no extensions to landlords are to be granted as these requirements have been in the pipeline since 2016. Any Landlord who failed to comply with the regulations will be liable for a fine of up to $4,000 per offence.

For example, by 1 July 2021 landlords must ensure that their rental properties meet the below standards:

• Heating – there must be fixed heating devices which are capable of achieving a minimum temperature of at least 18°C in the living room only.
• Insulation – the minimum level of ceiling and underfloor insulation must meet the 2008 Building Code or (for ceiling insulation) have a minimum thickness of 120mm.
• Ventilation – this includes openable windows in the living room, dining room, kitchen and bedrooms, as well as an appropriately sized extractor fan in rooms with a bath, shower or indoor cooktop.
• Moisture ingress and drainage – there must be efficient drainage, guttering and downpipes. If a property has an enclosed subfloor then it must have a ground moisture barrier if this can be practicably installed.
• Draught stopping – any unnecessary gaps or holes in ceilings, walls, windows, floors or doors must be stopped if they are causing noticeable drafts. Any chimney or fireplace that is not in use must be blocked.

Furthermore, a landlord has to keep records of how they are complying with the HHS (i.e. code compliance certificates and receipt or invoices showing work has been done). These records must be able to be provided to the Tenancies Tribunal or Tenancy Compliance and Investigation Team as well as include compliance information in the Tenancy Agreement.

For some landlords who are yet to bring their rental dwellings up to these standards these requirements are likely to become a financial drain. It is possible that rents will rise accordingly, and could lead to more investment properties being sold on the market for more “flush” investors to buy.

Any prospective landlords who are keen to invest in a nest egg as soon as possible are recommended to undertake careful due diligence before purchasing a property. The investor will want to understand the cost of complying with the regulations and the HHS if they intend on renting out immediately.

If your clients require any clarification on the standards, or would like assisting carrying out due diligence on their next investment purchase, then please direct them to contact Cavell Leitch’s Property Team.

Written by Courtney McHugh – Registered Legal Executive (Residential Property)

We have noticed a trend whereby solicitor’s approval clauses are becoming more prevalent, and they are also evolving.  These clauses do seem to be more common in Canterbury, possibly due to the complexities around earthquake claim conditions.

Of concern, is that the scope of these clauses seems to be expanding, sometimes to the point that they are actually a broad due diligence clause.  The original intention of a solicitor’s approval clause was to give purchasers peace of mind that their lawyer would look over the agreement and check that the information in it (such as legal description) is correct. 

A traditional solicitor’s approval clause would state “This agreement is conditional upon the purchaser’s solicitor’s approval of the conditions and/or clauses either contained in, or omitted from, the agreement.”

Legally, lawyers can only withhold approval of such a clause in a limited range of circumstances.

However we are now finding that solicitor’s approval clauses often include wording like “This agreement is conditional upon the approval in all respects of the purchaser’s solicitor who may take into account all conveyancing and commercial aspects of the agreement,” and only giving lawyers 2-3 working days to do this.  Realistically, this should actually be part of a due diligence clause and not a solicitor's approval of form & content clause.

What is the intention behind the clause?

When drafting a clause such as this, you may wish to first ask yourself “what is the intention of this clause?”  If it is because a purchaser/vendor wants their solicitor to look over the agreement and give them peace of mind, then we would suggest that you actually direct the client to contact their lawyer before the agreement is signed.

If this isn’t possible and a purchaser/vendor has specific concerns, then feel free to call us for assistance with drafting a specific clause, or limit the form & content clause to address those specific concerns.

Limited ability to cancel

The Courts have held that traditional solicitor’s approval clauses can only be used to cancel on the grounds of ‘conveyancing aspects’, such as legal impediments and their implications.  An example of a legal impediment would be if the seller named in the agreement is not actually the registered owner on the record of title.  It doesn’t include (unless specifically mentioned, as in the example wording above) the overall commercial value or merit of the transaction.

A client cannot use solicitor’s approval clauses to ‘plug a gap’.  For example, if an agreement does not have a finance clause and one was required, a purchaser cannot use a traditional solicitor’s approval clause to cancel.  Purchasers need to understand that an unhappy vendor could pursue them in Court as they are required to take all reasonable steps to satisfy the conditions.

Ability to vary the agreement under a solicitor’s approval clause

Variations to the conditions and dates can only be made by agreement between the parties.  Under a solicitor’s approval clause we can request, for example, changes to the wording of a condition or the timeframe for confirmation of a specific condition, but the other party is under no obligation to agree to this request.  We are concerned that clients may hold the mistaken belief that a solicitor’s approval clause allows the parties to negotiate the conditions after the agreement has been signed.

Lawyers do work in good faith and often agreement is reached regarding minor amendments and/or variations to an agreement.  But it is important that you are aware that parties aren’t obliged to agree to these requests.  Solicitor’s approval clauses can often cause problems and parties may incur higher legal fees while lawyers review and negotiate terms that the clients should have settled prior to the agreement being signed. 

Please do not hesitate to contact our Property Team if we can be of any further assistance.

We have developed presentations covering the legal topics you are interested in. This series will include presentations from a range of our specialist teams and cover both professional and personal areas.

There will be no charge for these events and drinks and nibbles will be provided. These presentations will offer you the opportunity to learn and ask questions in a relaxed and social atmosphere.

We would love to see you at our next seminar:

Game of Life: Negotiating life’s milestones for young professionals

5.30pm, Wednesday 31 July

We can look at life like a game: play your deck right, with well thought-out moves and you have every chance of living your best life.

Join our Property, Relationships and Trusts and Estates experts for a discussion on some of life’s early milestones. We will present some real life scenarios to enable you to better understand how to navigate the 'game of life' and provide some advice on successfully establishing and protecting yourself and your assets.

To register for this event or for more information please contact Rebecca Connaughton on rebecca.connaughton@cavell.co.nz

Partner - Property

Phone: +64 3 339 5645

Mobile: +64 21 226 2630

Email: mike.parker@cavell.co.nz

Senior Solicitor - Property

Phone: +64 3 339 5662

Email: lauren.jerard@cavell.co.nz

Registered Legal Executive - Property

Phone: +64 3 339 5643

Email: courtney.mchugh@cavell.co.nz

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