Handy information

Property Law - important legal information

The New Zealand Law Society has very useful information whether you are a buyer or a seller of property. They have a section on their website dedicated to Property Law. The Property Law Section is part of the New Zealand Law Society. It aims to assist members of the public, as well as support the legal profession in property law matters. There are several sections including a link to finding a property lawyer near you.

propertylawyers.org.nz

Preparing your property to look its best

I am always available to offer advice on how your property could be enhanced to both improve the value and appeal of your home or property. There may be many things large or small that you could do - some things may also be left as they are, allowing the new owner to put their own stamp on a home. It is always good to de-clutter as much as possible.

Also have your gardens looking their best, it may even be appropriate to bring in a professional if need be. Please consult with me before undertaking any major renovations and I will advise if they are necessary or if you’re simply over-capitalising as buyers will often prefer to make changes to their own taste.

I may also advise you to engage a professional stylist especially if your place is unfurnished. Don’t be offended if I do suggest a different style of furnishing be used in some rooms and if strong wall colours should be replaced with a less ‘vibrant’ tone.

If you choose to wash the exterior of the home, best advice is to not water-blast, but choose a contractor who uses a wet-brush wash system. Water blasting can often cause damage to surfaces and create leaks where none existed prior. On the other hand, this form of cleaning is ideal for pathways, drives and fences.

LIM reports

A Land Information Memorandum (LIM) is a document prepared by the Council to help provide useful information to those buying or selling property. A buyer will gain additional information, which might help their decision making process; a seller might benefit by being better equipped to answer questions from potential buyers. The New Zealand Law Society offers the following information on LIM documents.

A LIM might include information about things such as:

potential erosion;
contamination or flooding;
structural requirements;
where the street water pipes and sewerage run;
rates details;
consents and notices that have been issued relating to this or neighbouring properties;
the zoning (which tells you what you can do with the land);
likely future use such as new roads, information from other utility providers; and any other information the local authority regards as relevant.

The information covered within a LIM is normally more detailed than what can be viewed on a property file alone. It includes checks by various Council departments and aims to tell you what you might want to know before buying a property.

A LIM report can be particularly important if you want to carry out alterations or additions to the property or to subdivide the property. It might also alert you to an illegally installed solid fuel burner. Even if it was correctly installed, if there was no permit (now called a consent) obtained, the house insurance is likely to be invalidated if the burner causes a fire.

You should always compare the information on the LIM with what is physically at the property. For instance, if there is a recent carport or other structure on the property but no reference on the LIM to a consent being issued for it, you should discuss this with your property lawyer.

If you are borrowing money to purchase the property, your lender will often require you to obtain a LIM and (depending on the information contained in the report) may impose new terms and conditions on the loan. This could result in additional expenses.

Key things to note:

LIMs are a great tool in assisting buyers to feel confident about the property they are looking to buy and it greatly assists them to reduce the conditions that may need to be placed in a contract when it comes to preparing their offer to purchase.
If an offer is conditional upon the purchaser obtaining and checking the LIM for the property this condition may take up to 15 working days (3 weeks) before the purchaser is able to confirm or otherwise on a property.
LIMs can take between 3 and 5 working days.
Currently a 3-day report costs $357.00 inclusive; 5-day $305.00.

I encourage my vendors to purchase a LIM prior to going on the market and this is then made available via the e-book that is emailed to all interested potential purchasers.

Order a LIM report

Insulation regulations for rental properties

If you’re a landlord in New Zealand wanting to avoid a $4,000 fine, it’s time to make sure your rental property meets the insulation regulations.

Insulation is compulsory in all Kiwi rental homes from 1 July 2019.
Ceiling and underfloor insulation must be installed, where reasonably practicable.
Failing to meet the insulation regulations is considered an unlawful act.
You could face a penalty of up to $4,000.
All new tenancy agreements must include an insulation statement.
Wall insulation is not compulsory.

If you’re not sure whether your rental property is insulated, or you’re not positive that the insulation is up to scratch, now is the time to check.

Talk to your property manager about the insulation regulations, as they’ll be very familiar with these, and able to organise the checks and any work that’s required to ensure the property is compliant. If you already know your insulation needs replacing and need more information on how to do this, visit your local Bunnings store or read more here.

First thing’s first – is the house insulated at all? Landlords (or property managers) can check this by physically looking in the property’s ceiling cavity and underfloor area, hiring a professional to do an assessment, or by checking the council building file.

If there’s no insulation at all, you’ll need to install insulation that complies with the regulations.
If the place is insulated, this should be at least 70mm thick.
If the insulation is less than 70mm thick, you’ll need to top it up with additional insulation in order to comply with the regulations that come into force on 1 July 2019.

If the insulation is 70mm or thicker, you’re good to go, assuming the insulation remains in reasonable condition. This means there are no gaps or spots missing (except around lights and other heat sources), and no defects, such as insulation that is wet or damp.

If you’re installing new or top-up insulation, it’s a good idea to aim for 120mm in thickness, in order to future-proof the home and meet the 2021 Healthy Homes Standards.

If the house’s underfloor insulation is foil insulation, this is okay, as long as the top surface is still shiny and there are no rips, gaps or damage. If the foil is damaged, it needs to be replaced with another insulation product. Remember, there’s a risk of electrocution with foil, so turn the power off before touching it or hire a professional.

If you’re unsure about the thickness or state of the home’s insulation, it’s a good idea to talk to a professional insulation installer, or ask your property manager for advice.

The design or construction constraints of some properties mean it’s not reasonably practicable to install insulation, making these homes exempt from the rules.

According to Tenancy Services, examples of the types of properties that would meet the exception criteria are:

Apartments where there is a habitable space above and below the apartment.
Houses constructed on concrete slabs where it is not feasible to install underfloor insulation.
Houses with skillion roofs where there is no ceiling in place to install insulation above.

There are also some access exemptions, which is when an experienced professional insulation installer can’t access the location to install insulation without:

removing any cladding or lining.
carrying out other substantial building work.
causing substantial damage to the house.

If the insulation can be installed with only some minor work required, like temporarily removing baseboards from the exterior of the property to access the underfloor, then you’ve still got to install insulation.

If your rental property ticks one of these exemption boxes, it’s important to keep this in mind when planning any future work to the home. If a change is made that allows insulation to be fitted, then the landlord must do so as soon as reasonably practicable. For example, if the home is exempt because it has a skillion roof, and then a new roof is installed down the line, you’ll be expected to fit insulation.

If you think your place qualifies for an exemption, talk to an experienced professional insulation installer and, if needed, a builder. Ask for written confirmation that outlines the reasons the home is exempt, and include this in future tenancy agreements for tenants to be aware of and understand.

If you plan to demolish or substantially rebuild all or part of the house within 12 months of the start of a tenancy, the property can also be exempt. The landlord must be able to provide evidence of having applied for the necessary resource consent and/or building consent for the redevelopment or building work.

The Healthy Homes Standards will include additional requirements for insulation, which will take effect from 1 July 2021.

According to the Ministry of Housing and Urban Development, the Healthy Homes Standards aim to make a significant change to the quality of Kiwi rental homes. The standards will cover heating, insulation and ventilation, as well as moisture ingress, drainage and draught stopping.

It’s a good idea for landlords to read up on these new standards before planning any work to a rental property, in order to future-proof the home and be sure that any work you do today will help you meet these new standards in 2021.

Bright-line test for vendors

Wondering if the "bright-line" test applies to your residential property sale?

In New Zealand we don't have a Capital Gains Tax (CGT). In fact it's been ruled out by the current government. However there is a form of capital gains tax on profits made if you "flip" a property with the intention of making a profit on the purchase/sale - this was extended from two to five years in 2018.

your main home.
transferred as part of an inheritance.
transferred to you as an executor/ administrator of a deceased estate.

If you're selling a residential property and your intention when you purchased the property was to re-sell it, then you MAY have tax to pay on any PROFIT you make from its resale.

If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years.

If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test.

Your intent when you purchased.
Your history of buying and selling.
Whether you're in or associated with the property industry.
Whether you buy and sell a property within five years (two years if the property was purchased on or after 1 October 2015 through to 28 March 2018 inclusive).

It's your intention when buying a property that matters.

Nearly everyone buying a property will sell it at some stage. Most people will hope that their property will gain in value, and we know that an increase in value is common. However, this alone isn't enough for any profits to be taxed.

In most cases you don't have to pay tax on the eventual sale of your family home.

If you bought a property as a long-term rental, then you probably won't have to pay tax on the sale either.

However, when a property has been bought with the firm intention of resale you'll have to pay tax on any profit from the sale. The intention to sell does not need to be the main reason for buying the property - it could be one of a number of reasons for buying.

Recommended resources for first home buyers, experienced buyers and vendors

settled.govt.nz – contains great information whatever your situation.

sorted.org.nz/guides/home-buying/shopping-for-a-mortgage – this website discusses advantages and disadvantages of using a mortgage broker or going directly to a bank. It also contains information including budgeting and a mortgage calculator.

govt.nz/browse/housing-and-property/buying-or-selling-a-home/selling-your-house – information covering all aspects of selling including if your home is considered a water tightness issue home or after a natural disaster and possible tax implications.