Adapting the agreements can help property developers

Helps mitigate risk

There has been recent media attention on the way property development contracts are structured following the cancellation of a number of Agreements for Sale and Purchase by the developers of a project in Tawa, just north of Wellington. Reportedly, the developers said that without being able to cancel the existing agreements, the companies establishing the development would have otherwise faced liquidation and the development would have been halted.

In this article we look at how agreements can be adapted to suit the specific characteristics of a property development and how they can help mitigate the risks (and costs) to developers. As well, we address some of the questions you should ask to determine where the risks and burdens of the development will fall.

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Property briefs

Frequent buying and selling of property tax rules under review

If you frequently buy and sell property, you may want to keep a close eye on Inland Revenue’s review of some property tax rules that was announced in September 2019. One area being targeted is the use of the ‘main home exemption’.

Under current rules, you may be exempt from paying tax on a property sale if the property is your main home. You cannot rely, however, on the ‘main home exemption’ if:

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Residential tenancies

Affecting both landlords and tenants

The Residential Tenancies Amendment Act 2019 came into force on 27 August 2019. This legislation affects both landlords and tenants in a number of ways including limiting a tenant’s liability for careless damage in rental properties, and how methamphetamine (meth) contamination of rental properties is to be tested and managed. Landlords are also now required to provide a statement in the tenancy agreement about the property’s insurance.

Damage to rental properties

The legislation is designed to encourage tenants (and their guests) to look after the property they rent, and for landlords not to be out-of-pocket for careless or intentional damage by their tenants.

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Leasing commercial premises

Before you sign the lease

Commercial leases come in varying shapes and sizes. Whether you operate a transport business and need a place to park your trucks, manufacture and sell goods from a warehouse or conduct your trade from a boutique store in the heart of the CBD, your lease agreement will be at the heart of your business.

Before you sign a lease, there are a number of core issues to consider. It is important to do your homework and talk with us before you commit to anything.

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Property briefs

Building report conditions

If you have read an agreement for sale and purchase, you are likely to have seen the term ‘building report condition’. But do you know what a building report condition actually allows you to do, and what it doesn’t?

A building report condition gives you, as the buyer, the opportunity (10 working days is the standard, but this can be lengthened or reduced) to have a suitably qualified building inspector go through your soon-to-be-settled property and report on various elements of the building including the integrity of the construction materials used and its weathertightness.

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The secret lives of tenants

The ‘KFC test’ and tenant privacy

Following publicity in 2018 that some property managers were using the ‘KFC test’ to vet prospective tenants, landlords’ protection of their tenants’ privacy has come under scrutiny by the Privacy Commissioner. Any unlawful intrusion into your tenants’ private lives can be a costly mistake. If you are a landlord, it is timely to ask yourself, “How can I best protect my property without risking a privacy breach?”

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Subdivisions

Steps to take for a successful project

Subdivisions are more common than you think. A subdivision can range from the carving up of hundreds of acres of rural land for housing, developing land in a prime commercial area, selling half your quarter-acre section or simply wanting to extend your boundary a few metres. Whatever the scale of your subdivision, there is a common thread of stages to be ticked off – we explain below.

subdivision

Getting your land ready to subdivide

The first thing is to line up your professionals – discuss the project with us, arrange finance with your bank, consult your accountant and speak with a surveyor. If you are undertaking a large commercial development, you may want to line up buyers early on. A real estate agent can help with this so that you avoid cashflow issues half way through.

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Postscript

Claiming legitimate business expenses

With the recent media coverage about the claiming of business expenses, we thought it timely to remind you to always keep in mind what expenses are tax-deductible and what are not.

expenses

If you’re self-employed, there is very useful information here at Business NZ: https://bit.ly/31WdFgS

For those of you who work in a corporate environment, your organisation will no doubt have an expenses policy to ensure all claims are legitimate.

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Emissions Trading Scheme

Implications for owners of forestry blocks

New Zealand’s Emissions Trading Scheme (ETS) was established by the Climate Change Response Act 2002. The ETS was created as the vehicle for New Zealand to meet its obligations for the reduction of greenhouse gas (GHG) emissions under the Kyoto Protocol. The purpose of the ETS is to achieve a reduction in GHG emissions through emissions trading. Emissions trading is the exchange of carbon credits between those parties with surplus credits and those who are required to contribute credits as compensation for their production of GHG emissions.

Although the ETS affects nearly all New Zealanders in some way, it has significant impact if you are buying or selling forestry blocks, and/or own a forestry block. The first part of this article focuses on the implications of buying and selling of forestry lots, or land destined to be planted in forests. The second part gives you some background on the ETS, New Zealand’s obligations under the Kyoto Protocol and this country’s acceptance of the Doha Amendment. Continue reading “Emissions Trading Scheme”

Property Briefs

Healthy Homes Standards: what you need to know

Becoming law in 2017, the Healthy Homes Guarantee Act establishes regulations to improve the quality of rental housing in New Zealand.

mould

Following public consultation in 2018, the Healthy Homes Standards Regulations were approved by Cabinet on 13 May; you can find them here. The compliance timeframes in the regulations require rentals to comply with the regulations in all tenancies entered into after 1 July 2021 and all rentals will need to comply by 1 July 2024.

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