Newsletter Winter 2018 2018-05-30T09:33:50+00:00

ARL News

Our team is growing!

ARL is delighted to welcome three new staff solicitors to our team of lawyers. Luke Havler has joined the Property Team, Grace Cummings has joined our Trusts and Estates Team, and Alice Laurence has joined our Dispute Resolution team. All three enjoy walking and hiking on the tracks around Wellington so keeping up with them will be the challenge!

Read more about them on our website at www.arl-lawyers.co.nz.

Left to right Luke, Alice and Grace

 

Subdividing Land – What to Expect

A subdivision involves the conversion of one large property, whether it be a parcel of land or a building, into two or more parts, to enable those parts to be sold or split into separate ownership.

To do this a subdivision consent is required from the relevant local Council.

The statutory requirements governing subdivision are contained in the Resource Management Act 1991 (the Act). The Act enables district and city councils to oversee and manage all subdivisions through district plans and resource consents, thereby controlling any adverse effects on the community and environment that the subdivision may have.

A range of different subdivisions is possible: fee simple, unit title or cross lease. A fee simple subdivision creates a new allotment from an existing allotment. A new certificate of title is created for this new parcel of land and this is independent of the original parent title. This is the most common form of subdivision and will be the focus of this article.

Anyone that is thinking about subdividing should be aware of the length of time involved in the subdivision process, whether it be in a rural or urban area. The length of time depends on the size and complexity of the subdivision project. The council, surveyors, Land Information New Zealand, and lawyers are each required to provide their input.

Below is a summary of the stages involved in a subdivision process. The times indicated will vary depending on the complexity and size of the subdivision but as a general rule of thumb, the process could involve around one month per party. In other words, a typical subdivision process can take 5-6 months in total. It is essential that whoever is undertaking a subdivision project plans well in advance for matters such as interest rate changes, holding costs, and the need for certificates of title to be issued before mortgages and sales of the new titles can be secured.

The subdivision process can be summarised into five stages:

  1. Subdivision consent.
  2. Survey plan approval.
  3. Section 224c certification.
  4. Lodgement with Land Information New Zealand.
  5. Certificate of title.

Stage 1: Obtain Council Approval

Anyone wishing to subdivide will need to obtain a resource consent. Even in situations where the proposed subdivision is a permitted activity, a certificate of compliance will be required.

Stage 2 – Approval of Survey Plan

The subdivision consent obtained under Stage 1 above must be given effect to within five years of the grant of the consent. This is done by obtaining approval of a survey plan from the relevant city or district council.

The council will assess whether the survey plan conforms with the subdivision consent or certificate of compliance, including determining whether the conditions of consent have been or will be satisfied. If the survey plan is compliant, the council must approve the survey plan. If the survey plan is not compliant, the council must decline to approve the survey plan.

Stage 3 – Section 224(C) Certification

Before a survey plan can be deposited, a certificate must be lodged with the Registrar-General of Land confirming the relevant council has approved the survey plan and all of the conditions of the subdivision consent have been complied with to the satisfaction of the council.

Stage 4 – Land Information New Zealand

The second-to-last stage of the subdivision process requires the lodgement of the legal title documents and the survey plan with Land Information New Zealand for approval.

Stage 5 – Certificate of Title

Once Land Information New Zealand’s approval under Stage 4 above is received, the subdivision process concludes with the cancellation of the existing title and the issue of new certificates of title for each new parcel of land shown on the survey plan.

For further information, contact Ian Avison or Rebecca Dickie.

 

Lease Agreement versus Tenancy Agreement – What is the difference?

We regularly see clients interpreting lease agreements and tenancy agreements as being the same document. The agreements are similar, but it is important to understand the differences.

Lease Agreements

A lease is a contract between a landlord and a tenant for a commercial building. Typically, tenancy conditions in leases are very detailed so there are no discrepancies or issues during the term.

Leases will typically include details such as the term of the lease, its expiry date, rent payments, rent reviews and rights of renewal. Rent review dates and rights of renewal ensure the landlord cannot arbitrarily raise the rent or cancel the lease. However, they also ensure that the tenant cannot leave the property before the end of the term without repercussions.

When a lease reaches its expiry date, it is at an end. If the tenant does not leave, under the Property Law Act 2007 they will be considered to be on a month to month tenancy. Therefore, if a tenant wishes to remain in the property, both parties must enter into a new lease. The landlord has the option to renew the terms of the old lease or is free to change the terms and rental as they see fit.

We recommend that you enter into a Deed of Lease, in order to ensure the long-term letting of your commercial premises.

Tenancy Agreements

A tenancy agreement is used for tenants of residential properties and is subject to the Residential Tenancies Act 1986 (the Act). There are two types of tenancy: periodic tenancy (lasting longer than 90 days) and fixed term tenancy. This article focuses on periodic tenancies.

At the end of a periodic tenancy term, the landlord can alter the terms of the tenancy agreement. However, if a tenant does not intend on renewing the tenancy agreement they have to give the landlord 21 days’ notice prior to the expiration of the tenancy agreement in accordance with the Act. A periodic tenancy typically requires that the landlord give 90 days’ notice for the tenant to vacate premises in accordance with the Act.

Tenancy agreements are suited to short-term tenants such as people who are transitioning and are often used in residential rental properties.

For further information or assistance with a lease or tenancy agreement, contact Ian Avison or Luke Havler

 

Cross-leases – What are they and what implications do they have?

Historically, cross-leases were a popular form of dividing land for landowners because they could avoid certain subdivision restrictions and gain similar results to a formal subdivision, but at a fraction of the price.

However, when the Resource Management Act 1991 was introduced, it made significant changes to the existing subdivision laws and practices, which meant that cross-leased properties were deemed to be a subdivision and were no longer a way to avoid subdivision requirements and costs for landowners. As such, we are seeing the slow sifting out of cross-lease properties across New Zealand in favour of fee-simple titles where possible.

 

What is a Cross-Lease?

A cross-lease is where multiple individuals own an undivided share of land and a lease for part of the land/buildings. For example, if the property is divided into three separate segments, the owners will usually own an undivided 1/3 share in the land.   Each owner of the land may then erect a building on their allocated segment of the land. This building will then be leased back to them (often for a term of 999 years) and recorded on the certificate of title.

The leases that are created for the owners will record a right of exclusive use and enjoyment for each building and often the associated yard. This affords the owners of the relevant building under the lease the right of exclusive use of that segment of land and the building without interference from the other owners.

Along with these rights of exclusive use, the lease specifies rights and responsibilities in respect of common areas (such as driveways, shared lawns or parking spaces) which apply to all owners.

Unlike a fee-simple property, how you maintain and develop a cross-lease property is restricted and connected to the rights of the other owners. The level of restrictions can vary depending on the lease and/or any variations made to it. A common example of the restrictions other leasehold owners can impose are limitations on alterations to the external dimensions of the dwellings or structures on the property;

Therefore, you must seek written agreement from all other leasehold owners before carrying out work that changes the outline of your building.

If you own a cross-lease property, it is beneficial to maintain a good relationship with the other cross-lease owners, as there is no guarantee their permission will be given freely to any proposed work.

Buying a cross-lease

When buying a cross-lease property, you need to weigh up the limitations of the lease against your intended use and/or development of the property and buildings to ensure you can fulfil these obligations.

With a cross-lease property, it is also important to clarify the boundaries for the exclusive use and common areas on the property. While most exclusive use and common areas are well marked on the flat plan and by fences or grass/concrete, some properties are not so clear, or all grounds/yards are shared, which can be the cause of disputes between owners.

Selling a cross-lease

If you are selling your cross-lease property, you should be aware that if the dimensions of the dwellings on the property do not accurately reflect those recorded on the flat plan attached to the title, a purchaser can raise an objection. This is called ’requisitioning the title’. If you do not agree to amend the title, the purchaser has the right to cancel the sale and purchase agreement.

For further information, contact Rebecca Dickie or Jason Taylor.

 

Alternative Disputes Resolution Series: Negotiation – How can it help you?

Alternative Dispute Resolution (ADR) methods are an alternative option to going directly to court. This article is the third and final article in our ADR article series and will focus on negotiation.

Negotiation is usually the first method of ADR used when a dispute occurs. This is because negotiation has the advantage of being quick, inexpensive and providing a binding resolution.

There are two types of negotiating methods commonly used: unassisted negotiation and formal negotiation. Unassisted negotiation is when the parties involved in the dispute negotiate directly with one another. In a formal negotiation, all correspondence will go through the parties’ respective lawyers.

Unassisted negotiation is an inexpensive option in comparison to formal negotiation as all it costs the parties is their time. Occasionally, lawyers can polarise the matter and cause the other party to be defensive. Therefore, depending on the nature of the dispute, attempting unassisted negotiation has the potential to be more beneficial than immediately sending the correspondence through a lawyer. However, we recommend seeking the advice of a lawyer to establish your entitlements prior to undertaking unassisted negotiation.

If the parties are entrenched in their views or have a sense of grievance, it can become ineffective and necessary to turn to other types of ADR options, one being formal negotiation.

Pros of Negotiation

Negotiation in general gives the parties more control to create their own process and craft their own agreement. It can be more time effective than any of the other ADR methods, is generally more informal, and typically less stressful.

A benefit of involving a lawyer and engaging in formal negotiation is the introduction of an objective third party which can improve communication between parties and preserve and enhance the relationship.

Cons of Negotiation

Any type of negotiation regularly requires the parties to compromise. This can cause issues if both parties are uncompromising in their approach. If this is the case, usually another method of ADR is required.

Formal negotiation incurs legal costs. Also, if the formal negotiation does not work, the parties may see it as wasted cost and time.

For further information, contact Ben Sheehan or Joshua Pietras.

 

In Brief

Proposed Bright-line Amendments

Historically, the Bright-line Test required gains on the sale of residential property (excluding main homes) within two years of purchase, to be treated as income and accordingly created an income tax liability on the gain.

The Bright-line Test was recently amended and has been extended from 2 to 5 years. Any profits may be taxed regardless of intention when the property was acquired. Residential properties acquired before 29 March 2018 remain subject to the 2-year Bright-line Test.