Written by Nicole Burrows-Healy - Solicitor (Property)

Ultra-low emission fires cost less over time, are better for the environment and are better for your health but are your clients aware of the various deadlines?

Older burners

From 31 October 2017 the replacement of an older burner will require the installation of an ultra-low emissions fire. The ECan website defines an ultra-low emissions fire as a solid fuel burner, including pellet burners, which achieve a stringent real-life emission standard.

Now that this date has passed it is important to determine the age of the burner prior to the property being marketed.  This will allow purchasers to be properly informed of any additional cost they may incur to have compliant heating in the home. It may also be important to discuss this requirement with the vendor.  While we have not yet seen such an issue, it is possible that a rigorous insurer may refuse provide insurance to a purchaser until this “problem” is remedied. 

Low emission burners

ECan has advised that homeowners can continue to use their existing low-emission burners for 20 years after they were first installed or until 1 January 2018, whichever is the later.

A purchaser can source information about the age of the burner from the agent, the LIM report (assuming the burner was properly installed using a building consent, if applicable), or from Ecan’s online database here.

It would be expected that as technology changes and new systems are invented, the overall cost to install an ultra-low emission burner may eventually become more affordable. In the meantime, we recommend that a purchaser is made aware of the deadlines for a property’s burner so that they are fully informed and can budget accordingly.

Having home heating options is a major selling point for a property.  However it will be important that the marketing information accurately records whether the fireplace can still be used. With the above deadlines in place it is important for both vendors and purchasers to consider what this will now mean for them.

Written by James Leggat - Solicitor (Property)

Weeks of speculation came to a close on 19 October 2017 when Winston Peters announced that New Zealand would soon see a change in Government. For better or for worse, the new Government has quite publically intended to implement tighter restrictions on overseas buyers. A lot is still not yet known about what these restrictions might entail. However as the year begins to wrap up we have a great opportunity to assess what we know so far.

Press releases by both major media outlets show two of the major Labour Party campaign policies to ban foreign speculators and tax (domestic) speculators are expected to pass into law early in the new year.

The planned ban on foreign speculators is expected to be accomplished by amending the definition of “sensitive” land as defined in the Overseas Investment Act to include existing residential housing. This would cause current overseas investors to have to obtain consent from the Overseas Investment Office for purchases of housing that is already constructed. The inclusion of standard residential housing could create a string of new requirements for overseas buyers. Caroline Mason of our office published a summary of the process required to obtain OIO consent here.

The other proposed change under Labour is to extend the bright-line test period from 2 years to 5 years. As a reminder, the bright-line test rule is that any gains from the disposal of residential land acquired and disposed of within 2 years will be taxable, subject to some exceptions (if you would like to read more about this click here)

It is unclear from what date this extension to the current policy would commence.  Therefore clients not relying on main home or other exemptions for their land acquisitions and disposals should be made aware of this potential change. This could impact a number of property investors especially for acquisitions entered into from 2018 onwards.  There is a possibility that owners may need to hold investment property for a longer period of time than they are currently required to do or be up for tax on any gain on a disposal within 5 years (or any other agreed time).

Other relevant policies included in the official Labour/New Zealand first coalition agreement include the creation of a comprehensive register of foreign-owned land and housing, as well as the establishment of a Housing Commission. It’s unclear at this stage how or when any of these changes will be implemented.

For more assistance with future law changes or questions about how these might affect you, have a chat to our residential property team.

Written by Lana McCarroll - Legal Executive (Property)

We continue our series on the general terms of the ADLS Agreement for Sale and Purchase and in this article look at Clause 11: Notice to complete and remedies on default.

In the majority of cases, a property settlement is completed on the agreed date and each party can make use of their new property or sale proceeds. Occasionally a settlement is unable to be completed on the stipulated settlement date. Although these scenarios are rare, parties need to understand the options provided by clause 11 of the ADLS Agreement for sale and purchase.

If a party cannot meet their obligations on the settlement date, the other party may serve the defaulting party with a settlement notice.

What is a settlement notice?

A settlement notice is served on a defaulting party and gives that party notice that they have 12 working days to complete settlement. This time may be extended by the party serving the notice if they wish. To serve a settlement notice a party must be in all respects ready, willing, and able to settle. Remember, if neither party is in such a position clause 3.16 provides for the settlement date to be shifted to 3 working days after such time that one party is in all respects ready, willing, and able to settle.

Damages available to vendor: In the event of default by the purchaser, the vendor has two main forms of compensation. Their first option is to sue the purchaser for damages and retain the deposit if one was paid. When exercising this option the deposit can only be retained up to a value of 10% of the purchase price under the agreement. “Damages” includes any interest on the unpaid portion of the purchase price charged at the rate noted on the first page of the agreement, all costs and expenses incurred in any re-sale of the property and all outgoings (other than interest or maintenance expenses) in respect of the resale of the property. A vendor’s other option is to sue for “specific performance” whereby if successful, the court will order the parties to complete the transaction.  Due to the costs involved specific performance is not commonly sought. Even if the purchaser is in possession of the property, but has not settled, the vendor may cancel the agreement if the purchaser has not completed settlement within the time frame set out in the settlement notice.

If there is a surplus of these funds (i.e. the vendor ends up making a gain) this is not recoverable by the purchaser.

Damages available to purchaser: If a vendor does not settle before the expiry of a settlement notice then the purchaser may sue for specific performance or cancel the agreement.  If the purchaser cancels the agreement in this way they may request the return of the deposit paid and any other money paid on account of the purchase price with interest added to this sum at the interest rate stipulated on the front page of the agreement.

If the agreement provides for the purchase price to be paid in instalments, and the purchaser fails to pay these instalments within one month of that payment’s due date, then the vendor may serve a settlement notice on the purchaser.  If the purchaser fails to make payment within the allotted time under the settlement notice, the vendor may sue the purchaser for specific performance; or cancel the agreement and retain the deposit and/or sue for damages.

Once the agreement is cancelled, the vendor is then free to market the property immediately if they so wish. Remembering that the additional commission payable should be recoverable from the purchaser as part of “damages.”

Stress levels for clients are running high during this time, as clause 11 of the ADLS agreement is usually a worst case scenario. It is important that both agents and lawyers have a good understanding of these terms in the agreement.

For more information about what to do when a party might not be able to settle in time, speak with our friendly residential property team today.

Partner - Property

Phone: +64 3 339 5642

Email: janine.ballinger@cavell.co.nz

Solicitor - Property

Phone: +64 3 335 3470

Email: nicole.burrows-healy@cavell.co.nz

Solicitor - Property

Phone: +64 3 339 5614

Email: james.leggat@cavell.co.nz

Legal Executive - Property

Phone: +64 3 335 3469

Email: lana.mccarroll@cavell.co.nz

Feel free to share this newsletter with colleagues or freinds by selecting "Forward to a friend". They may also wish to subscribe and can do so by clicking the "subscribe" link at the top of this newsletter.