Newsletter - July 2024
July is almost done and while there is still a definite nip in the air, the days are slowly getting just that little bit longer, and hopefully will become a little bit warmer. The second half of 2024 is now upon us and whilst there are still plenty of challenges out there for many, here is hoping the next six months brings some more of those potential winds of (positive) change.
This month, we have compiled information on sale and purchase agreements from our property team, as well as a detailed discussion on cross-leases. Our immigration team have a useful case study for any migrant looking to make the move here (or for those, already here who want to stay) and we finish off with a video from our private client team, answering some key questions on trusts and wills.
If you have any suggestions for articles or information you would like to know more about, then send us an email, with your suggestions to: Newsletters at TH (click to email).
Sale and Purchase Agreements
The 11th edition of the 2022 ADLS Agreement for Sale and Purchase of Property has introduced updated provisions concerning compensation claims.
Purpose and Process
The clause aims to enable purchasers to address any discovered property defects or breaches of the sale and purchase agreement by the vendor. This is facilitated through Clause 10, which outlines a structured process for determining the validity of claims and appropriate compensation amounts.
Once a resolution is achieved, settlement proceeds with adjustments made to the purchase price based on the agreed compensation.
Navigating Claims
During pre-settlement inspections, many home buyers encounter issues such as property defects or vendor breaches. In such cases, the ADLS Agreement, particularly its Clause 10 compensation provisions, provides a framework to resolve disputes between vendors and purchasers.
Clause 10, titled "Claim for Compensation," mandates that purchasers submit a comprehensive claim notice before the settlement date. This notice must include:
A detailed statement outlining the grounds for the claim (e.g., breaches of agreement terms, misrepresentation).
An itemized estimate of the financial losses incurred, supported by relevant evidence or quotes.
Purchasers must act reasonably when invoking Clause 10, ensuring all claims are consolidated into a single submission and adhering to strict procedural requirements.
Sale & Purchase Agreements
The 11th edition of the 2022 ADLS Agreement for Sale and Purchase of Property has introduced updated provisions concerning compensation claims.
Upon receipt of a claim, vendors have three working days to accept or dispute it. Acceptance involves agreeing on the compensation amount, which is then deducted from the settlement price. Disputes trigger a formal dispute resolution process, often involving property lawyers or litigators to determine the validity and amount of the claim. Costs associated with these appointees typically fall on the unsuccessful party.
If parties cannot agree on compensation, they may opt for an interim payment pending a final decision. If consensus on the interim amount cannot be reached, an additional appointee may be sought, with costs shared or determined by the appointee.
Key Considerations
For Purchasers:
It's crucial to understand the timing and requirements for submitting a compensation claim under the agreement. Delays in notifying the vendor should be avoided, and claims must be reasonable, clearly specifying the amount and demonstrating readiness to settle.
Each claim submission allows for only one opportunity, and new claims cannot be added once submitted.
Even if the initial determination is unfavourable, purchasers can still pursue compensation or special performance post-settlement if they believe their claims are justified.
For Vendors:
Compliance with Clause 10's provisions is mandatory upon receiving a compensation claim notice from a purchaser. Ignoring or bypassing these provisions is not advisable and could lead to delays and increased costs.
Vendors should carefully consider the merits of a purchaser's claim rather than outright denial. Expert determinations can be costly and time-consuming, potentially delaying settlement and impacting vendor interests.
General Advice for All Parties
Parties should assess the financial implications of disputes. Alternative dispute resolution methods, such as the ADLS Dispute Committee for smaller claims, can offer cost-effective resolutions. For larger claims, engaging experts and presenting relevant evidence are critical for successful dispute resolution.
Anticipating significant legal costs underscores the importance of commercially and practically resolving disputes through negotiated agreements whenever possible.
Cross Leases
Cross leases were originally developed in the 1960s as a way of getting around restrictive subdivision requirements and saved developers in cost and time. They have however been labelled New Zealand’s “greatest conveyancing issue”. A majority of the remaining cross leases are located in Auckland.
If you have a property with a cross lease title, together with the other owners of the cross lease title, you own undivided shares as tenants in common in the underlying land. You then ‘lease’ your separate dwelling or flat on the land from all owners (usually for 999 years in perpetuity).
Because of this dual nature of land ownership, you will have limited rights as the owner of a cross lease property. You will most likely need to get the consent of the other owners if you want to make any improvements to your property (e.g .build an extension to your house or add a garage). Often we find that this can lead to significant and expensive disputes between owners.
A fee simple title (this is where you own the whole of the property), on the other hand, gives you absolute ownership over both your land and dwelling so you can alter or make additions without having to get your neighbour’s consent (subject to local bylaws and legal requirements).
So, What Can I Do?
It is possible to convert your cross lease title to fee simple, although this does involve time and expense and will require Resource Consent. However, a recent ruling in the Environment Court, directed that local councils are to “approach an application mindful of the possibility that there may be few, if any, material environmental implications warranting a full-scale assessment of the property as if it were a new development”. In other words, Councils were directed not to overcomplicate such applications.
All owners of the cross lease title will have to agree to the conversion, however this means that you will all benefit from the results, including being able to share the costs of the conversion.
Why Would I Convert my Property to Freehold?
Simply put, if two identical properties were being marketed, one on a cross lease and the other a fee simple title, the fee simple title would most likely always look more attractive to buyers and therefore reach higher sales figures than the cross lease.
In addition, the Auckland Unitary Plan may allow for further development potential. Depending on the size of your share of that land, you may be able to construct two or more townhouses in place of that one dwelling.
Other benefits include:
You will not be a co-owner of the land with other people who can then make it difficult if you wish to undertake additions or alterations; and
When selling you will not get drawn into any argument as to whether your title may be defective or not. This can happen if the plan which accompanies the title of your property does not show the correct outline of your dwelling or is missing another building (e.g. a garage) which was constructed later than the dwelling;
Ultimately, as owner of your own land you have the highest degree of freedom of use and ownership.
Ok, What Do I Do Now?
First, talk to your neighbours to find out whether they would also be interested in gaining the benefits from the title conversion. It is always easier working together as a team. Once you have reached a verbal agreement get your lawyer to draft an agreement in writing so that the parties involved have certainty to what they have agreed to.
Cross Leases
Cross leases were originally developed in the 1960s as a way of getting around restrictive subdivision requirements and saved developers in cost and time. They have however been labelled New Zealand’s “greatest conveyancing issue”.
From there we recommend you complete a feasibility study , engage a surveyor to assist you with this but also talk to your individual mortgage advisers or your bank to ensure they would be happy to consent to the changes. Confirm that if you need funds to complete the work, they will be available from your lender.
The surveyor should as part of this feasibility study stage, visit the site and gather relevant information such as confirming access points, determine the position of drainage infrastructure, confirm the position of existing dwellings, and record any other details that will be necessary to ensure the cross lease can be collapsed and new freehold titles achieved.
An Engineer will also be required to review and report on the existing infrastructure to see whether any separation of services is required (this includes sewage, water supply and stormwater drainage).
Assuming the experts determine that the Freeholding of the Crosslease can be achieved, and all of your neighbours confirm the work is financially viable then the Surveyor will prepare a Resource Consent application for approval by your local Council.
The Council may set conditions on the consent that requires improvements to be undertaken to the existing infrastructure. If upgrades are required, then it will be necessary to complete this work before the surveyor finalises the final survey plan and obtains the relevant permits and certifications from Council
Once the certificates are issued (pursuant to section 223C and 224C of the Resource Management Act 1991) Turner Hopkins will then take over. We will work with the Surveyor, all the landowners and their lenders (if any) to lodge the required documents with Land Information New Zealand. Once the application is approved by Land Information New Zealand the old Cross Lease Titles will be cancelled and the new Fee Simple (freehold) titles will be issued.
Why Choose Turner Hopkins?
Turner Hopkins has an experienced property development team that can assist with all types of subdivision and property development needs.
Our team is engaged in multiple projects encompassing work such as collapsing a cross lease/free holding land, small 2-3 lot subdivisions all the way through to multi - lot large scale subdivision and construction projects.
We are also able to assist with developments that involve both unit titles (body corporate) and/or resident society management structures.
Our point of difference is that we are reliable, accessible, and work with you every step of the way. Regardless of what your property needs are – you will have someone here at Turner Hopkins that understands your needs and is available to assist.
Should you wish to find out more, please contact our team leaders, Joy Yuan (joy.yuan@turnerhopkins.co.nz) or Kate Chivers (Kate.Chivers@turnerhopkins.co.nz)
Visa Case Study
Migrating is a complex process for anyone brave enough to try it, however for some applicants the road is shorter and far less bumpy, with others having to take the much longer and potentially more challenging route. No matter how short or long your process might be, as a potential new kiwi, having someone to guide you through the process can be invaluable.
The team at Turner Hopkins Immigration Specialists (THiS), know this all too well and take great pride in being able to assist people to navigate the complexities of the New Zealand Visa system. They recently assisted a client to remain in New Zealand, who first came to see them in early 2023 as someone in New Zealand unlawfully and without a valid visa. One and a half years and four separate applications later, that applicant is now able to call New Zealand home,
Long or Short - It’s a Journey
For some migrants, the visa process can be a swift and efficient process, however for others, who may find themselves in a more complex situation, the road can be long and challenging.
In early 2023 - Ivy (not her real name), came to see the team, with her New Zealand citizen partner. Ivy had been in the country unlawfully for a number of years, but had also been involved with her kiwi partner for more than half of that time.
Our first job was to make Ivy lawful, which we did swiftly, but the complication came when she had to travel offshore to secure a new passport. Having been here illegally, INZ was less than happy about letting her come back, even with the NZ partner in the frame. The process involved some very careful negotiation with senior INZ management, resulting in Ivy finally being allowed to return. Following that we then pursued a longer-term temporary visa for Ivy to stay (and to work) and then finally Residence to tie it all together. The process had plenty of twists and turns along the way but staying focused on the end goal, as well as managing expectations were the key to the whole process ending very successfully. In the words of our client’s NZ partner:
“…we new what direction we were going in from day one and were given their support and help anytime we needed it, only with their help we managed to get our objective…”
While our immigration team can manage all sorts of applications, even the ones that might appear straight-forward, they get excited about tackling the more challenging cases - being able to identify a solution and helping people to realise a positive outcome, is what they do best.
Whether you are just starting out in the process and want to identify the available options or if you are already here, working out how to stay permanently, our immigration team can assist. Their first step is to undertake an initial eligibility assessment, followed by an in-depth one to one assessment.
If there is a pathway available to you, our immigration team will find it and then work closely with you to successfully achieve your end goal and a new life in New Zealand.
Paul Janssen - Manager, Turner Hopkins Immigration Specialists
Trusts, Wills & Estates
Looking for reliable, dependable and accurate advice on your Trust or Will, then speak to Samuel Ames (Partner) at Turner Hopkins Law. Samuel has a wealth of experience in this area and heads up our private client team.
Samuel provides advice on estate planning, trust structuring, relationship property, retirement villages and estate administration. He has a particular interest in charitable organisations and incorporated societies.
Samuel enjoys getting to know and understand clients and providing tailored, practical advice with the aim of bringing clients peace of mind, knowing their legal affairs are in order.
An incredibly safe pair of hands, able to identify the best solution for you and your family. For some of Samuel's key tips, check out our short video introduction.
That finishes off another month with the Turner Hopkins team as we usher in the second half of the year. Next month we will be exploring the property scene again, as well as articles from our family law and debt recovery teams. We will also be adding to our video information with an update from Kate Chivers (Partner).
Remember if you have any suggestions for articles you would like to see or information you would like the team to discuss, then email us with your thoughts.
Until next month!
The Team - Turner Hopkins
