Any construction or building project will involve a number of people to make it a success. These could include architects, engineers, surveyors, contractors and landscapers. It is important to get the early engagement right on a project and this will generally take the form of a consultancy agreement.

The legal arrangement could be directly between the person who wants to develop the project or they could appoint someone who then engages with the different consultants. Duties will be owed by those consultants to the client and that is why the consultancy agreement is critical because that is where these duties will mainly (but not exclusively) be set out (duties are also inferred by statue and common law).

Generally standard form consultant agreements are drafted by bodies that will be looking out for their member base. Examples are the Institute of Professional Engineers of New Zealand and the New Zealand Institute of Architects. Such documents need to be checked closely and the exclusions and limitations analysed thoroughly to check what they say eg that limits of liability are not set too low.

Key issues for Consultancy Agreements

Some of the key issues to be considering when looking at a consultancy agreement are:

Standard of care: The standard of care in the consultancy agreement will generally be based on market practice. An example of this is in the Conditions of Contract for Consultancy Services 2009 (published by the Institute of Professional Engineers New Zealand Inc.) which says:

In providing the Services, the Consultant must use the degree of skill, care and diligence reasonably expected of a professional consultant providing services similar to the Services.

Scope of services: the services to be provided should be within the expertise of the consultant. When drafting the contract it is important to check if there is a gap between what the consultant is to do (to the standard of care mentioned above) and what others in the project will do. Clear discussions over who exactly does what is very important at the early stage.

Design warranties: These should be included where the design risk is high – eg bespoke buildings. Design warranties may help focus the parties on the key risks and ensure the contractor stands behind it’s work. It may be that a discussion is also needed with the contractor about what insurance it has in place (or needs to take out) so that there is insurance if a design warranty is breached.

Indemnity: These are often the subject of much discussion because a consultant will not want to give indemnities. They are a potential liability where the consultant will have to pay if something in particular happens – and continue to pay where there is ongoing loss. It is important to be clear about what exactly will trigger an indemnity, who it will cover and how much the indemnity will be for. There are a variety of indemnities which may be used and those should be discussed with your lawyer in advance to find the best combination that works in the particular situation.

Limitation of liability and exclusion clauses: These are commonly included and essentially involve one party trying to get out of, or limit, it’s liability. Wording used should be clear, particularly if trying to exclude “consequential” losses. For example, “consequential” may not include loss of profit which may be considered a direct loss. So the wording used will be critical and should be clear.

Insurance: Consultants may try to have their liability linked to their ability to recover funds under an insurance policy. However, that means there is an extra step involved and it may even be possible that the insurance does not respond because it has not yet been triggered by an actual legal liability. The insurance position of the consultant should be clearly understood.

Construction Contract Act: From 1 September 2016 the definition of “construction work” has been expanded and applies to many consultancy agreements eg design, engineering and quantity surveying. This means that certain provisions will be included in Consultancy Agreements eg default provisions relating to payment.

Other issues: Other practical points to be covered in a consultancy agreement are (very briefly):

Key people: specify if a particular person is to be involved;
Price and payments: how much is paid and when? This may involve setting out milestone and deliverables and a design program;
IP: who owns what?;
Novation: ability to novate or assign eg if you later want to novate to a contractor;
Variations: how will these be requested and priced?;
Disputes: how will these be handled?;
Reporting: What reports are required and when?;
Health and safety: Who is responsible for what and who is a PCBU?;
Sub contracting: To what extent will this be done, and who is responsible for this?;
and Termination: Ability to terminate and what happens then?

In New Zealand consultants will often put forward a set of the industry standard terms and say “this is non-negotiable” – or words to that effect. These agreements are often signed before a lawyer is even involved. This is in contrast to the situation overseas where consultancy agreements are often drafted for particular projects to address the unique set of circumstances of an individual situation.

We hope these comments help you as you think through the content of your consultancy agreement. We would be happy to discuss your specific situation in detail with you.

Are you in the business of constructing property? Maybe instead your own property needs to be repaired, renovated or rebuilt? Whatever the scenario, ensuring you have adequate insurance in place to cover the risks allocated under your construction contract is vital.

Construction is booming in Canterbury, both new builds and repairs. Construction contracts allocate risk between owners, contractors, sub-contractors (and earthquake insurers) during construction, and beyond. Do you understand what risks the parties in the construction process, including you, have taken on and is there adequate insurance in place to cover those risks?

This article looks at these issues and answers some of your key questions in respect of them.

1. What kind of risks do I need to be aware of?

For Homeowners/the owner

Your existing home/building being damaged by your contractor;
Your existing home/building being damaged by sub-contractors;
New building work being damaged by your contractor or sub-contractor;
New and old building work being damaged by you;
New and old building work being damaged by an insurable event (accident, third party, natural disaster);
Latent defects in the building work – design flaws, faulty workmanship;
Damage to plant, machinery, your own materials and vehicles;
Being indirectly liable for other people’s faults

For Contractors

The Existing structure being damaged by the negligence of self or sub-contractors
The Contract works being damaged by the negligence of self or sub-contractors
Existing and contract works being damaged by accident, third parties and natural disasters
Consequential loss resulting from damage – delay, cost of rescheduling, need to redo undamaged work to fix damage
Continuing liability beyond project completion date for latent defects by self and sub-contractors
Damage to or loss of plant, materials, machinery or vehicles owned by the principal, you and sub-contractors
Damage to third parties or their property: trespass to land, nuisance, liability for fire, negligence, breach of statutory duty
Health and Safety and other statutory obligations (e.g. Consumer Guarantees Act, Fair Trading Act, Building Act and Resource Management Act).
Liability to your employees.

2. How do I know what risks I’m actually taking on?

If you have a building contract, this is the first place to start. Have you checked it to see what risks you are responsible for? Even where one of the New Zealand Standard contracts (i.e. NZS 3910) is used, the Standards can vary as to what risks are covered and by who.

If you are unsure of what your risks are, take professional advice on your build contract.

Where there is no building contract or the contract makes no provision for a risk, the basic rule is that the contractor bears the risk in respect of permanent and temporary structures until completion, subject to a couple of exceptions such as damage by the homeowner/principal.

3. Do I have to insure against my risks?

No, not unless your building contract requires you to. You therefore also need to check to see who, if anyone, is responsible for insurance? Again, the New Zealand Standard contracts can vary as to what insurance is to be taken out and by whom.

However, even if the contract does not require you to take out insurance (or there is no build contract), you need to consider whether you can afford to cover your risks without insurance? If the worst case happens – a fire, natural disaster, leaky building – what would it mean for you and for the building project? Likewise, if you are homeowner/principal, consider the same if your contractor does not have adequate insurance.

4. I’m the owner, won’t my home/property insurance policy simply cover me?

No, most home/general property insurance policies do not cover construction risks. If your property is being repaired/altered, make sure you contact your insurer to let them know and to find out what you need to do to ensure the relevant risks are covered off.

5. Is it enough just to take out a general “All risk” insurance policy?

Not necessarily. The key question is whether your specific insurance cover actually covers the risks you have taken on and to what extent?

Does it adequately reflect your contractual obligations, the value of works, plant, materials, equipment etc? Does it cover additional costs, e.g. demolition of damaged structures, removal of debris, site preparation, professional fees, cost inflation etc?

For contractors, you need to focus on the risks you are responsible for and which, if they occur, may make it difficult for you to complete the work (i.e. financially or otherwise).

For the principal/homeowner, you need to focus on ensuring your responsibilities under the build contract are covered, as well as those taken on by the builder which may impact on completion of your build (even if those are to be insured by the builder).

Included within these checks is being aware of what risks are excluded under the build contract. For example, a contractor may limit its liability as to what works it is responsible for, the amount (i.e. a cap on liability), and the time period they are liable for. This means those risks pass to the homeowner/principal. Have you checked that any excluded risks are also covered by your insurance?

Again, if you are unsure, take professional advice. There is no point paying for an insurance policy which will not deliver when you need it to. It is better to know in advance what your policy will and will not cover in the event of a claim, than to find out later.

6. Are there any time limits on how long the policy covers me for?

Yes, Contract Works policies, for example, include a time limit as to when coverage stops. This is often the date of practical completion, use by the owner, Code Compliance or a set date.

Why is this important? Chiefly because there may be a period of time when certain risks are not insured, i.e. if there is a gap between the Contract Works policy ending and a new home insurance policy being taken out by the homeowner. Some insurance companies will not grant a new policy to the homeowner/principal until Code Compliance is obtained, which may be after the Contract works policy expires.

Has the policy also been extended to cover the maintenance period? Delays in completion may mean the policy expires before the work is finalised.

For Contractors who have professional indemnity insurance, have you checked how long your policy will remain in place? If it ends when the building works are complete and/or on the winding up of your business, you may not have cover for the possibility of future/ongoing claims in respect of the work.

7. What about the excess – who pays this in the event of a claim?

If it is you under the Contract, you need to check how much it is so you can factor this into your budget. If there is no contract or it is silent as to the excess, the general rule is that the party who takes out the insurance is responsible for the excess.

8. If a claim is made and my insurer pays out, what happens to the insurance proceeds?

Where your build contract obliges you to insure, there is an implied obligation to use any insurance pay out to fix the insured loss or damage. Some contracts also expressly state this. This again underlines the importance of ensuring any insurance cover is adequate otherwise your own funds may be needed to top up any shortfall to complete the work.

Who the funds are actually paid to depends on a number of things. For example, if the insurance policy is in the names of both the homeowner/principal and contractor, the proceeds can be paid to either party.

Correspondingly, if the principal/homeowner has a mortgage, the proceeds may be paid to the bank under the terms of the mortgage and the Property Law Act 2007. If that situation is relevant to you, have you checked with your bank whether they will re-advance the funds to enable completion of your building work?

9. Summary

Before you embark on a building project, make sure you know the risks you are taking on, your insurance obligations, and what your policy actually covers you for. Even if you are not obligated to take our insurance, consider – can I afford to complete this project without insurance if the worst case happens?

If are you are unsure of what your obligations are under your build contract or whether your insurance cover is adequate, take professional advice. Don’t leave it until a claim is made to find our whether your insurance cover adequately protects you or not.

If we can assist in any way with a building or insurance matter, please do not hesitate to contact us at insurance@parryfield.com.

In the recent case of Skyward Aviation 2008 Ltd v Tower Insurance Ltd, the Court of Appeal considered whether, on the basis of Tower Insurance’s policy wording, the insurer or the insured customer had the right to decide between settling the insurance claim by rebuilding on site, rebuilding elsewhere, or buying elsewhere where the property had been deemed not “economically repairable”.

The Court held that, on the policy wording, the insured customer had the right, not the insurer.

Background

The case concerned a Christchurch property located in the “Red Zone”. The owner had accepted CERA’s offer to buy the land. It had settled with EQC and had attempted to settle its insurance claim with Tower.

Tower maintained it had the right to decide how the insurance claim was settled, the insured argued otherwise.

The Policy wording

The key policy wording provided:

HOW WE WILL SETTLE YOUR CLAIM

We will arrange for the repair, replacement or payment for the loss, once your claim has been accepted.

We will pay:

the full replacement value of your house at the situation; or
the full replacement value of your house on another site you choose. This cost must not be greater than rebuilding your house at the situation; or
the cost of buying another house, including necessary legal and associated fees. This cost must not be greater than rebuilding your house on its present site; or
the present day value;

as shown in the certificate of insurance.

We will only allow you to rebuild on another site or buy a house if your house is damaged beyond economic repair

In all cases:

we will use building materials and construction methods commonly used at the time of loss or damage.

We are not bound to:

pay more than the present day value if you have full replacement value until the cost of replacement or repair is actually incurred. If you choose not to rebuild or repair your house or buy another house we will only pay the present day value and the reasonable costs of demolition and removal of debris including contents;
pay the cost of replacement or repair beyond what is reasonable, practical or comparable with the original;
repair or reinstate your house exactly to its previous condition.

The Decision

In holding that the insured customer had the right to decide how the claim was settled, the Court noted the following aspects of the policy in support (emphasis ours):

Tower reserves the right to pay only present day value “if you [the insured] choose not to build or repair your house or buy another house …
Tower reserves the right to disallow the insured from either building on another site or buying a house if the existing house is not damaged beyond economic repair. This right of veto could only be exercisedonce the insured had made the underlying choice. In other words, it assumes that the insured is generally at liberty to make the choice, then restricts the insured’s ability to choose options two (build elsewhere) or three (buy elsewhere) to the case where the existing house is not economically repairable
The second alternative provides for full replacement value of the house “on another site you [the insured] choose” – that is, it is the insured’s right to choose.

Will this decision apply to other insurers?

Yes, if the relevant parts of the policy wording is the same or very similar. The Court held that “An insurer cannot rely on a general statement of economic desirability to override the express or clearly implied provisions of its policy.”

The Court indicated however that the position may be otherwise if the policy expressly states that the insurer has the right to choose between the alternative bases for payment.

What if the insured customer does not intend to rebuild or buy elsewhere?

The Court agreed that, on Tower’s policy wording, Tower was only liable to pay the “present day value” of the home until the insured incurred the cost of buying or rebuilding elsewhere. “Present day value” included an allowance for depreciation and deferred maintenance and was limited to the market value of the property less the value of the land.

In other words, if the insured wanted a cash settlement, Tower was not liable to pay more than “present day value”.

What if the property is “economically repairable”?

The Court indicated that, if the property was “economically repairable”, Tower was entitled to insist on repairing or rebuilding on the same site.

In addition, Tower was entitled to control the repair work for the reason that the cost of repair was at Tower’s risk (so it would want to control the cost) and to decide whether repairing or rebuilding is ultimately the better option.

This decision was appealed by Tower to the Supreme Court and heard in November 2014. The Supreme Court dismissed Tower’s appeal holding that, where Tower has decided not to rebuild or replace a house, Tower’s payment obligation is determined by the choice the homeowner makes as to whether to rebuild the house, replace it on another site or buy another house.

If we can assist in any way with your insurance claim, please don’t hesitate to contact Paul Cowey at paulcowey@parryfield.com.

The ADLS (Auckland District Law Society) Deed of Lease is the document most commonly utilised for commercial tenancies. An updated version (6th edition) has recently been released.

The updated lease contains a number of key changes which, if left unamended, could prove problematic for landlords and/or tenants. We summarise some of those changes/issues below.

We always recommend that, before you sign a new Agreement to Lease, you forward it to us for our review – as once signed, it sets the terms of the Lease in stone, potentially having significant consequences down the track.

Insurance

The Lease now makes it clear that the tenant is responsible for meeting (part of) the insurance excess in respect of a claim – increased to a maximum of $2,000 (previously $500). The parties can of course negotiate a different excess amount, and some landlord will require tenants to meet the whole of their excess, which can be significant, particularly for earthquake damage.

It is important that Landlords ensure they can meet the insurance obligations set out in the lease and, if not, make specific changes to the documents which reflect the true insurance position. While the lease does provide that the Landlord will not be in breach if insurance cover becomes unavailable (other than because of the Landlord’s act or omission) the Landlord must still use all reasonable endeavours on an on-going basis to obtain cover. There are also additional obligations to advise the Tenant when cover becomes unavailable and to give reasons, as well as provide the Tenant with reasonable information relating to the cover on request.

The types of “optional” insurances that the Landlord may insure against – loss of rent, loss to fixtures and fittings and public liability – have been moved to the First Schedule and, if not specifically deleted, mean a landlord may be obliged to effect insurance that they do not have in place.

Landlords should also be aware that, as a result of the Canterbury earthquakes:

they may be unable to obtain certain types of insurance (eg full replacement cover);
the annual insurance premiums are likely to have increased significantly; and
they may be liable for an excess much higher than the $2,000 set out in the lease.

This reiterates the need for even the Agreement to Lease to accurately reflect the landlord’s specific circumstances.

Lack of Access in an Emergency

New provisions have been included in an attempt to address situations such as the “red zone” in Christchurch where the leased premises were either not damaged or only partly damaged but could not be accessed by the tenant and the lease remained on foot.

In such cases, there is now to be an abatement (reduction) of a fair proportion of rent and outgoings where the tenant is unable to gain access to fully conduct its business because of reasons of safety of the public or the need to prevent any hazard, harm or loss that may be connected with the emergency. These provisions only apply however if the lease has not been cancelled as a result of the premises being totally or substantially destroyed.

The new provisions specifically include as reasons of safety/need to prevent harm:

a restricted access cordon;
prohibition of the use of the premises pending completion of structural engineering or other reports; and
a restriction on occupation of the premises imposed by any competent authority.

In these situations, the lease also now provides that either the landlord or tenant may cancel the lease if access cannot be gained for a period specified in the lease (the default period being nine months) or if the party cancelling can at any time prior to cancellation establish with reasonable certainty that the tenant will be unable to gain access to the premises for that period.

Landlords need to consider their insurance position if rent is abated in circumstances where there is no damage to the premises – i.e. can they in fact cover this risk when most loss of rental policies only respond to actual damage to the premises?

Legal Costs

Previously the tenant was liable to pay the landlord’s costs for the preparation of the lease and any variation or renewal of it. Now each party is to meet their own costs unless the lease specifies otherwise.

The landlord’s costs of providing consent and legal costs relating to enforcement are still chargeable.

Rent reviews

If no rent review date is specified in the lease (again, including the Agreement to Lease), the default position is now that there are no reviews. Previously, the default position had provided for a rent review on each renewal date. There is also no default review upon a lease renewal – again, a review on that date will need to be specified.

In addition, the lease now provides for a choice between market rent review or CPI rent review (or a combination of both throughout the lease term). Both forms of rent review will operate as “ratchets”, even if a CPI rent review follows a market review.

Premises Condition Report

A Fifth Schedule has been attached being a Premises Condition Report which, if completed, provides evidence of the condition of the premises at the commencement date of the lease. The intention is to avoid disputes as to the condition of the premises at the end of the lease.

Outgoings

Clause 16 of the First Schedule provides for an estimate of the Outgoings as at the Commencement Date. This may not always be easy to ascertain with any degree of certainty and it may be prudent to consider deleting this part.

Maintenance and Improvements

The re-decoration clauses in the lease now clarify that replacement items (eg floor coverings) are to be to a same or better quality, specification and appearance as before.

The landlord also now has an express obligation to keep the building weather-proof.

The 6th edition makes it clear that the landlord is responsible for the maintenance and replacement of “building services” – which are those services provided by the landlord as an integral part of the building – e.g. water, gas, electricity, lighting, air conditioning, heating, lifts and escalators etc. The cost of replacing these are not recoverable by the landlord as an outgoing – the rationale being that this is consistent with the expectations of a tenant who pays rent for premises with a level of services enabling that tenant to use the premises for it’s specified business use.

Make good/reinstatement must now occur by the end the lease term – not within a reasonable time thereafter, as had previously been the case.

If the landlord requires access to the premises to comply with the requirements of any statute or regulation (such as bringing a building up to building code) then the tenant must grant such access, but an abatement (reduction) of a fair proportion of rent and outgoings will apply if the tenant’s use of the premises is “materially disrupted”. The landlord can require the tenant to vacate the premises altogether while repairs are being carried out.

There is also a good faith requirement on the part of the landlord, supposedly to ensure that there is reasonable co-operation with the tenant in terms of timing and extent of work. Particularly where upgrades to meet the Building Code are involved, timing may be very important – e.g. avoiding the Christmas season for retailers.

The improvements rent percentage has been deleted, partly out of fear that landlords may try to inappropriately pass expensive building strengthening costs onto tenants under the clause. This does not, of course, stop the parties themselves specifying what terms should apply if building strengthening/improvements are in fact contemplated during the term of the lease.

Related to the above, clause 13 of the Outgoings Schedule now specifies that the costs of upgrading the building to comply with the Building Act 2004 are not an outgoing recoverable from the tenant.

Counterpart clause

A counter part clause is now included which means that, in essence, the Lease can be signed concurrently by the Landlord and the Tenant in their respective lawyers’ offices.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Tim Rankin at Parry Field Lawyers (348-8480) timrankin@parryfield.com

In Part I of our series on EQC and Land Damage Settlements, we looked at what the EQC Act provides in general in respect of “land damage” and what it is. In this Part we examine what EQC’s obligations/rights are under the Act in respect of settling land claims. Read more

In April 2013, EQC released two guides for settlement of earthquake land claims (flat land and hill properties), together with sample Land Settlement Packs. The Guides note that they are a summary of EQC’s obligations and that the provisions of the EQC Act 1993 will be “applied by EQC at all times.”

This article looks at what cover the EQC Act actually provides for “land damage” and what qualifies as “land damage”. In Part II to come, we will look at what are EQC’s obligations/rights in respect of settling land claims.

1. What general cover is provided under the EQC Act for earthquake related land damage?

2. Is EQC responsible for covering all areas of a property where there is land damage?

3. What level of “insurance” cover does EQC provide for land damage?

4. What qualifies as “physical loss or damage”?

5. What types of “physical loss or damage” does EQC cover?

1. What general cover is provided under the EQC Act for earthquake related land damage?

The EQC Act provides that, where a home is insured against “natural disaster damage”, the land on which the home is situated is insured against:

any “physical loss or damage” to the land occurring as a direct result of a natural disaster (such as an earthquake); and
Any “physical loss or damage” to the land occurring as a direct result of measures taken under property authority to avoid the spreading of, or otherwise reduce the consequences of, any natural disaster (e.g. land works necessary to redirect flood run-off).

2. Is EQC responsible for covering all areas of a property where there is land damage?

No, EQC only covers damage to the following areas of land:

a) the land under the house;

b) all land within 8m (extending outwards) of the house or outbuildings such as any garage (but excluding artificial surfaces such as asphalt or concrete);

c) the main access way to the house (excluding coverings such as asphalt or concrete) from the boundary of the land (so long as that access way is situated within 60m of the house);

d) the land supporting the main access way;

e) bridges and culverts situated within the above areas; and

f) retaining walls and their support systems within 60m of the house which are necessary for the support or protection of certain specified areas of land (e.g. the house or garage).

EQC does not cover certain things that are on the land, such as trees, plants, lawn, paving and driveways.

3. What level of “insurance” cover does EQC provide for land damage?

Qualifying properties are insured for an amount equal to the lowest of the value of:

a) a parcel of land that is the minimum lot size under your district plan.

i. In Christchurch, if your property is zoned as Living Zone 1, the minimum lot size is 450m2.

ii. If your property is in Christchurch’s Living Zone 2, the minimum lot size is 330m2.

b) An area of land of 4000 m2; or

c) The area of land that is actually physically lost or damaged.

These values are the maximum amounts EQC could be liable to pay, rather than what you will automatically receive from EQC.

In the case of bridges and culvert and retaining walls, EQC is only liable to pay up to the “indemnity value”of that property (e.g. this is often described as the property’s “market value” at the date of the loss or the property’s value allowing for its age and condition immediately before the loss or damage happened).

EQC advises that payment of claims for land (where EQC considers its maximum liability has been reached) will be based on a professional valuation.

In each case, EQC’s excess is deducted off each land claim (if the claim is $5,000 or less, EQC will deduct an excess of $500. If the claim is more than $5,000, EQC will deduct 10% of the claim up to a maximum of $5,000 per claim).

4. What qualifies as “physical loss or damage” in the context of “natural disaster damage”?

This is not defined in the EQC Act.

In the case of Earthquake Commission v Insurance Council of New Zealand Incorporated & Orrs [2014] NZHC 3138, the Court held that, for land damage to qualify as “natural disaster damage” for the purposes of the EQC Act, there must be:

a physical change or loss to the land that has occurred or is imminent as a direct result of the earthquake. Put another way, some type of disturbance or loss to the physical integrity of the land; and
which adversely affects the uses or amenities that could otherwise be associated with the land (i.e. building on it/habitating on it).

5. What types of “physical loss or damage” does EQC cover?

This is again not specified in the Act. EQC has however identified nine types of land damage on the flat residential land in Canterbury. Seven are said to be apparent from looking at the land:

Cracking caused by the sideways movement of land, often towards water;
Cracking caused by backwards and forwards ground movement;
Undulating land (e.g. uneven settlement of the land, often as a result of sand and silt being pushed up or settlement of liquefied soils below the ground);
Ponding (due to lowering of the land in areas which results in water “ponding” in places where previously it did not);
Localised settlement resulting in drainage issues (e.g. drains flowing the wrong way due to land settlement;
Groundwater springs (new springs flowing over the ground where previously they did not); and
Pushed up sand and silt, either under a house or over a large area.

Two further types are not necessarily visible but have increased the future vulnerability of the land to liquefaction or flooding:

increased liquefaction risk (the ground surface has subsided closer to the water table than previously, reducing the ground crust thickness and therefore increasing the risk of liquefaction occurring); and
increased flooding vulnerability (the ground surface has again subsided making it more at risk of flooding if the land is situated near a water way).

In the case of Earthquake Commission v Insurance Council of New Zealand (referred to above) however the Court held that “circumstances where one or more earthquakes have caused physical changes to the land only and such changes have caused the residential building to reduce in height and adversely affected the uses and amenities that could otherwise be associated with the residential building by increasing its vulnerability to flooding events does not include “Natural disaster damage” (emphasis ours).

EQC advises that it assesses Increased RIsk of Flood/Liquefaction utilising drilling data, aerial laser levels taken after each major earthquake/aftershock which record changes in land elevation, and Water Table Levels.

In the Port Hills, EQC has identified other types of damage such as:

- Debris material (e.g. rock fall and cliff collapse) being deposited on the land where this materially affects the physical use of the land;
- Land cracking/bulging/undulations and loss of land as a result of land moving vertically and/or horizontally downslope where the land no longer occupies the space it did before the earthquakes, where this materially affects the physical use of the land.
- Land damage as a result of impacts from rock fall and cliff collapse.

This post provides a general outline of what the EQC Act provides for “land damage” and what qualifies as“land damage”. In Part II to come, we will look at what are EQC’s obligations/rights in respect of settling land claims.

If we can assist in any way with your land claim, please don’t hesitate to contact Paul Cowey at paulcowey@parryfield.com.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

If you are married, or in a civil union or de facto relationship, New Zealand’s Property (Relationships) Act 1976 will have an impact on what happens to your property in the event of separation or death.

Read more

Do you and your married spouse own and live in your home? Are either of you self-employed or involved in some occupation that involves personal exposure to financial risks(e.g. personal guarantees)? If you answer ‘yes’ to both these questions you should seriously consider registering your home under the Joint Family Homes Act 1964. It could prove to be very cheap protection against losing equity in your home in the event of being sued or bankrupted.

What is a Joint Family Home?

Most people think their home is registered as a joint family home because both their names are on the title. This is WRONG! It requires a special application to the Land Titles Office for your home to be registered as a Joint Family Home (“JFH”) under New Zealand’s Joint Family Home Act 1964.

The cost is between $500.00 – $1,000.00 plus GST. Costs vary depending on whether or not you wish to publicly advertise the application. The advantage of advertising is that the protection takes effect within six months rather than the standard two years after application. Also your bank may charge a small fee if you have a mortgage.

What is the Protection?

You will not be protected against secured creditors e.g your mortgagee, but part of your property will be protected against unsecured creditors; e.g. trade creditors to your business, if it is not a company.

Essentially the Joint Family Home Act 1964 creates a protected fund of $103,000 which is safe from unsecured creditors. This fund is to assist in the purchase of a replacement home unless unsecured creditors convince the High Court of New Zealand to exercise its discretion and agree to the sale of the home. (In practice creditors are reluctant to apply to the Courts because of high cost, and the reason that a judge has to balance the general desirability of preserving the matrimonial home for the family on the one hand against the just claims of creditors on the other.)

The Court cannot order the sale of a JFH home if there is less than $103,000 equity in the home. A mortgagee,however, can sell the home (in the event of default) no matter what equity the owners have. The protection is all the more worthwhile if the matrimonial home has previously only been registered in the name of one spouse.

Summary

For quick protection against creditors, some lawyers think a JFH application is more secure than selling the property to a family trust and dealing with the debt back. While this is debatable ,especially at higher levels of equity, it is certainly more affordable. Protection, however, can be lost if it is found at the time of application that the parties were unable to pay all their debts (other than those charged against the house) without recourse to the house sale proceeds.

One way to view the application is as a type of insurance. The insurance is cheap and involves a once only payment which is good for as long as you own the house. It is a simple procedure and the loss is small even if, at the end of the day, protection is not achieved.

Also for a small fee the registration can be transferred to your next home, and registration does not preclude transferring ownership to a family trust later on.

There are a couple of catches : a) you must be legally married to apply for a JFH, and b) if you die, the property automatically goes to the surviving spouse regardless what your Will says!

There are other criteria to satisfy also, so you should contact your Parry Field Lawyer to see if there are advantages for you in registering your home as a Joint Family Home.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance with this, or with any other Relationship Property matters, please contact Hannah Carey at Parry Field Lawyers (348-8480) hannahcarey@parryfield.com

Section 15 of New Zealand’s Property Relationships Act 1976 was introduced to address issues of inequality between partners following a breakdown of their relationship. The section empowers the Court, following a division of relationship property, to compensate a spouse/partner if his or her living standards and income will be significantly less than the other party because of the division of functions in the relationship.

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The rate of GST is changing on 1 October 2010 to 15%. Get this wrong and it could cost you dearly, especially if you are purchasing or leasing property. This short note covers a couple of important situations that could save you money, in terms of the New Zealand GST Transitional Rules. First we consider the situation where you purchase a property now, but the contract does not become unconditional until after 1 October 2010. This is likely to happen more and more frequently as the time gets closer to 1 October 2010, and will be something to watch out for if you are in the market for a house. This will only apply if you are purchasing from a registered vendor.

1. What kind of risks do I need to be aware of?

2. How do I know what risks I’m actually taking on?

3. Do I have to insure against my risks?

4. I’m the owner, won’t my home/property insurance policy simply cover me?

5. Is it enough just to take out a general “All risk” insurance policy?

6. Are there any time limits on how long the policy covers me for?

7. What about the excess – who pays this in the event of a claim?

8. If a claim is made and my insurer pays out, what happens to the insurance proceeds?

9. Summary

Background

The Policy wording

The Decision

Will this decision apply to other insurers?

What if the insured customer does not intend to rebuild or buy elsewhere?

What if the property is “economically repairable”?

Insurance

Lack of Access in an Emergency

Legal Costs

Rent reviews

Premises Condition Report

Outgoings

Maintenance and Improvements

Counterpart clause

What is a Joint Family Home?

What is the Protection?

Summary

Christchurch CBD

Christchurch – Riccarton

Rolleston

Hokitika

Auckland