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Fencing: Who pays?

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Introduction

The Fencing Act 1978 (“the Act”) deals with the question of who pays for the erection of fencing and repairs to dividing fences between adjacent properties.  This can also be dealt with by way of a fencing covenant or agreement.

If you are looking to buy some land, it is recommended that you first check the title to the land to see if there is a fencing covenant or agreement in place.  If there is, it is important to consider the particular implications of the fencing covenant or agreement before committing to a purchase.

This article discusses those implications as well as the requirements of the Act.  The Act will apply in the event that there is no fencing covenant or agreement in place.

The Act

Section 9 of the Act  provides that where you are an occupier of adjoining land that is not divided by an adequate fence, you are liable to contribute in equal proportions to the costs of erecting a fence or for any work to be carried out on a fence.

However, this does not apply where there is a fencing covenant or agreement in place that is registered against the title to the land to which it relates.

Fencing covenant

A fencing covenant is an agreement between two parties where one party may not be required to contribute towards the costs of erecting a fence or the the costs of any work to be carried out on a fence.

If you have the burden of a fencing covenant noted on the title to your land and wish to erect a boundary fence, the adjoining owner will not be required to make any contribution towards the cost.  It is usual for developers to ensure that they hold the benefit of a fencing covenant when they sell lots on subdivided land.

If you are purchasing a rural block of land, the cost of erecting fencing will have greater financial significance.  Therefore it will be more important to make sure that, before committing to a purchase of a rural block of land, the title of the land does not give you the burden of a fencing covenant.

If a fencing covenant is registered after 1 April 1979, it will expire automatically 12 years from the date it was registered.  Subject to this, the burden of a registered fencing covenant will run with the land.  The benefit of a fencing covenant will not bind any subsequent purchaser of the adjoining land.

Fencing agreement

A fencing agreement works in a similar manner to a fencing covenant.  In terms of content however, a fencing agreement can also include an agreement not to erect a fence.

A fencing agreement can be registered, allowing the benefit of the agreement to run with the land and be passed on to any subsequent purchaser.

No fencing covenant or agreement

If there is no fencing covenant or agreement that applies, the position is as per section 9 of the Act, as set out above.  Under the Act, there is a specific process that must be followed by any occupier who wants an adjoining occupier to contribute to the costs of any fencing work.

The first step is to serve a notice on the adjacent owner.  The notice must contain particular matters such as a description of the boundary along which the work will be done, details of the work that it is proposed be undertaken, an estimate of the costs for the work and details of the consequences of failure to comply with the notice.

If the adjacent owner does not agree with what is proposed in the notice, an objection can be made within 21 days by serving a cross-notice.  The adjacent owner may propose a different approach in their cross-notice.  By way of an example, they may think that the existing fence is adequate or that the proposed new fence is too expensive.  If you and your neighbour cannot agree, you can take the dispute to the Disputes Tribunal.  Under section 24A of the Act, the Disputes Tribunal can deal with fencing disputes if the dispute is regarding an amount up to $15,000 (or $20,000 by agreement between the parties).

An adjacent owner will not be required to contribute to the costs of erecting or carrying out work on a fence where:

  • The work is done prior to the relevant notice being served;
  • The work is done between service of the notice and before service of a cross-notice; and
  • The work is done while any dispute about the work is being resolved.
Conclusion

If you are purchasing land with the burden of a fencing covenant noted on the title, your legal representative should review the covenant or agreement to confirm whether it is still subsisting.  If the land is not fenced, you will need to factor in the cost of erecting a fence on top of the purchase price.  If you do not want to erect a fence you may consider waiting until either the fencing covenant has fallen away after the 12 year expiry period or the adjoining property is sold to a new owner.

Where there is no fencing covenant or agreement, section 9 of the Act applies.  A copy of the Act can be located online.  It is self-explanatory and easy to follow.  You will also find sample notices and cross-notices and detailed information regarding the steps to be taken by both parties where there is no fencing covenant or agreement in place.  The Act can also help you to clarify whether a document noted on the title to your land is a fencing covenant or agreement.

If you would like further information please contact Dale Thomas on 07 958 7428.

Body corporate governance: A warning to committee members

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Introduction

Every owner of a unit title property is a member of the body corporate.  Every body corporate is supposed to have a chairperson, and almost every body corporate of any size has a body corporate committee.

Guardian Retail Holdings (2013) is the latest word of the Courts on the risks of being a member of a body corporate committee.  The case highlights the potential personal liability involved in being a committee member and the importance of being aware of the nature of the role.

Outline of claims

Guardian Retail Holdings was a member of body corporate 323599 and brought proceedings against the body corporate and three members of the body corporate committee, claiming various breaches of body corporate rules and misuse of monies.

The body corporate tried to ratify the actions that were the subject of the claims, and also tried to support the committee members, including by meeting their defence costs.

Part of Guardian’s claim was that the body corporate’s law firm had a conflict in acting for both the body corporate and the committee members, particularly as the law firm’s advice was in issue in the proceedings.

Guardian also claimed that the body corporate should not fund the committee members’ defence costs, as this was not in the best interests of the body corporate.

Guardian therefore sought orders to stop the law firm from acting, and to stop the body corporate from funding the committee members’ defence.

Background

The relevant building in the Guardian Retail matter was a mixed use building, with seven commercial units and 169 residential units.  Guardian owned six of the commercial units, giving it 21% of the ownership interest and voting rights.

The developer had tried to put in place body corporate rules that would relieve the commercial owners from meeting common area and facility servicing costs, as the relevant units were only used by the residential owners.

In 2011, the body corporate received advice that the rules were invalid. Based on the advice received, the body corporate concluded that all levies should be based on unit entitlement (now ownership interest/utility interest).

The committee had also taken steps to replace the body corporate secretary.  Guardian’s representative on the committee was excluded from some decisions because of a perceived conflict.

The removal of the secretary was challenged by Guardian on the basis that this was a power reserved for a resolution at a general meeting of owners.

The committee then resolved to reverse the 2010-2011 levies and recharge them, leading to the proceedings.

Liability of committee members

The Court’s view on liability deserves to be set out at some length:

A body corporate that has a body corporate committee exercises its powers through its committee. It is vicariously liable for breaches of its obligations occasioned through the conduct of the committee. However, the committee members themselves have personal obligations to act in accordance with the relevant statutory powers and rules. Breaches by them of those rules may result in personal liability in two ways. First, the body corporate has a right of action against the committee members concerned for ultra vires acts that result in liability to the body corporate. Secondly, other members of the body corporate may look to individual committee members for losses caused by breaches of their duties.

… Individual members of a body corporate must act in accordance with the body corporate rules and are personally exposed for their wrongful acts. If that were not the case … there would be no constraint on committee members and, importantly, any claim brought by a member of the body corporate would be devalued by the fact that the member would be required to meet a proportion of the claim himself.

That is, committee members may be personally liable for actions they take.

This is an important finding – particularly given the fact that many bodies corporate find it difficult to get committee members to stand for office at all.

Conclusion

The Court held that the body corporate could not indemnify the committee members for their legal costs.  The Court restrained the body corporate from contributing to or otherwise funding the defence costs of the relevant committee members.

This left the committee members responsible for their own costs, reinforcing that committee members need to be very clear on their obligations and the risks associated with a committee role if things go wrong.

It also means that body corporate secretaries will find it even more difficult to get unit owners to stand for a committee.

If you would like further information please contact Dale Thomas on 07 958 7428.

When do lease negotiations become binding on the parties?

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Often when parties enter into negotiations before signing a contract, the parties will intend that they are not bound until the contract is drawn up and signed.  In terms of leases, section 24 of the Property Law Act 2007 sets out that, in order to be enforceable, a lease must be in writing and signed by the party against whom it is to be enforced.   A recent decision of the High Court, Dunroamin Nurseries Ltd v Zealandia Horticulture Ltd [2013] NZHC 1074 (Dunroamin), holds that this can be negated if the circumstances indicate that the parties intended to be bound by negotiations entered into before a formal lease was signed.  This article summarises that case and provides some guidance for both landlords and tenants when entering into lease negotiations.

The facts

In Dunroamin, the landlord (Dunroamin Nurseries Limited) and tenant (Zealandia Horticulture Limited) had been in a business arrangement with each other for some years.  The tenant was leasing a premises which belonged to the landlord and after some time the tenant’s business grew to the point where new premises were required.  A proposal was developed to demolish the existing building and build a new purpose-built distribution depot.  The depot was constructed and the tenant started operating from the new premises.  A draft deed of lease was prepared but a final version was never signed.  The tenant was paying rent to the landlord in accordance with the draft lease.

After three years, a dispute arose between the parties as to the terms of the lease.  The tenant sought to terminate the lease, alleging that it had never agreed to the terms of the draft deed, and that there was a month to month tenancy in place.  The landlord asked the Court to enforce the draft deed of lease.

The negotiations and the Court decision

The Court considered the lease negotiations between the parties in detail, which were as follows:

  • Negotiations started in February 2008 on very general terms.  The Court could not find any concluded agreement on any aspect of the proposal at this stage.
  • In April 2008, the parties met to discuss the terms of the lease.  Again, it was clear that the parties had not reached agreement.
  • The landlord then commenced with the construction of the premises and obtained advice from a valuer as to a likely rental figure.  The landlord passed this figure onto the tenant.  The Court found that at this stage there was no formal offer made nor any acceptance.
  • In May 2008, the landlord instructed its solicitor to prepare a deed of lease which included terms usually included in a lease such as term, commencement date, rent reviews, and rights of renewal.
  • The parties met in June 2008 and the landlord presented the deed of lease to the tenant.  The tenant did not take the lease away from this meeting.  The presentation of the deed of lease at this time was not considered by the Court to be a formal offer as it was not taken away to be considered.
  • There was a further meeting in August 2008 where the lease was given to the tenant and taken away.  Handing over the deed of lease was considered by the Court to be an offer by the landlord.
  • Later that month, the tenant entered into possession of the premises and did not make any offer of other lease terms to the landlord.  The tenant did not make any suggestion that the lease terms were not acceptable to it.

The Judge noted that acceptance of an offer can be inferred by looking at the conduct of the parties.  The Court held that silence is not acceptance, but silence accompanied by certain conduct may be acceptance.  The Court considered that the conduct of the tenant in this case could only be interpreted as acceptance of the landlord’s offer.  On that basis, the Court made an order that the draft deed of lease was enforceable against the tenant.

Guidance for landlords and tenants

This case highlights the importance of being clear as to when an offer has been made and whether and when the offer has been accepted, binding the parties to the agreement.  The failure to expressly reject an offer or make a counter offer may result in acceptance of an offer being inferred.

To avoid a similar situation, we recommend:

  • Parties clearly document any contract between them.
  • Entering into an agreement to lease prior to construction of premises or prior to spending significant sums of money, even if you have a longstanding relationship with the other party.
  • If you do not intend to accept an offer, you must communicate this clearly and in writing.
  • If the intentions of either party are unclear, or could be misinterpreted, make your position clear and seek confirmation of the other party’s position.  In this case, the tenant should have communicated with the landlord that it did not accept the terms of the draft lease.  Likewise, the landlord should have followed up with the tenant and insisted that the deed of lease be signed.

If you would like further information please contact Dale Thomas on 07 958 7428.

Plumbers, Gasfitters and Drainlayers Board: An organisation for its members or for public benefit?

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Introduction

Since charities have had to register under the Charities Act to obtain charitable tax status, there have been a number of cases which have dealt with professional organisations.  At the heart of these cases is the issue of whether such professional organisations are for the benefit of their members or  the benefit of the public.

In August 2013, the High Court released its decision granting an appeal of the Plumbers, Gasfitters and Drainlayers Board (PGDB) against a decision of the Charities Registration Board (the Board) to deregister the PGDB.

Background

The PGDB was established under the Plumbers, Gasfitters and Drainlayers Act 2006 (the PGDA).  It was registered as a charitable entity by the Charities Commission on 30 June 2008 (since replaced by the Board).

The PGDA provides that the purposes of the PGDA are to protect the health and safety of members of the public by ensuring the competency of persons engaged in the provision of sanitary plumbing, gasfitting and drainlaying services and to regulate persons who carry out sanitary plumbing, gasfitting and drainlaying.

Section 137 of the PGDA sets out the extensive functions of the PGDB.  They essentially involve registration, licensing, education, qualification, complaints and prosecution.

The Charities Commission (as it was then known) received a complaint from a member of the public alleging that the PGDB was not entitled to be registered as a charitable entity.  The Charities Commission had to decide whether the PGDB’s purposes are charitable as falling within “any other matter beneficial to the community” – the fourth head of charity under the Charities Act.

The law

To be charitable within this head of charity, the purposes of the entity in question must confer a benefit on the public or a section or the public, and the purpose must come within the spirit of the preamble to the Statute of Elizabeth 1601.

The Preamble provides a list of charitable uses as follows:

The relief of the aged, impotent, and poor people; the maintenance of sick and maimed soldiers and mariners, schools of learning, free schools and scholars in universities; the repair of bridges, ports, havens, causeways, churches, sea banks and highways; the education and preferment of orphans; the relief, stock or maintenance of houses of correction; the marriages of poor maids; the supportation, aid and help of young tradesmen, handicraftsmen and persons decayed; the relief or redemption of prisoners or captives and the aid and ease of any poor inhabitants.

Interestingly, the Judge in this case did not put much emphasis on the Preamble, but instead focussed on the purposes of the PGDA.

The Board’s decision

The Charities Commission was replaced by the Board during the course of this case.

The Board determined that protection of the health and safety of the public through the regulation of the subject industries is not the PGDB’s exclusive purpose.  It found that the PGDB has an independent purpose, which is to regulate plumbing, gasfitting and drainlaying for the benefit of individuals working within the subject industries.  This was because of the considerable benefits conferred on those particular occupations.  The implication of this was that, according to the Board,  the PGDB was not entitled to be registered as a charity under the Charities Act.

This was a similar decision to that of the High Court in Re New Zealand Computer Society Inc.  In that case the importance of maintaining high standards in the IT profession could not be equated with the medical profession or the nursing profession.  The Computer society case demonstrates that generally an organisation that benefits its members will not be charitable.

There are a number of other similar cases which establish that organisations that are formed for the purpose of benefiting their own members are not charitable, unless they also hold purposes benefiting the public and the private benefits are merely incidental to those purposes.

In Commissioner of Inland Revenue v Medical Council of New Zealand, the Court of Appeal decided that, although the Medical Council‘s main purpose was the registration of medical practitioners, this purpose was charitable because it provided protection to the public regarding the

delivery of medical services. There was a clear and obvious public interest in ensuring high standards in the practice of medicine, and any benefit to medical practitioners was merely incidental.

The Board distinguished the PGDB from the Medical Council as the Medical Council was exclusively established for the protection of the public in relation to the quality of medical and surgical services. Benefits to the medical profession were incidental to that primary benefit to the public and not an independent purpose of the Council. Conversely, the Board found that PGDB has an independent purpose to regulate plumbing, gasfitting and drainlaying for the benefit of the subject industries.

The appeal

On appeal, the Judge reviewed the PGDA – constituting legislation of the statutory body – including reviewing the overall purpose of the organisation.  The Judge discussed that the list of functions (covering registration, licensing, education, qualification, complaints and prosecution) would provide benefit to those working within the subject industries.  However, the Court held that the main purpose of the PGDB is to maintain standards for the safety of the public.  Any benefits to individual members were ancillary.  The Judge relied on the Medical Council case and overturned the decision of the Board.

Commentary

Often when charitable organisations look to become registered, it is important that the focus is not solely on the words in the constituting document.  What the organisation actually does in practice is going to have far greater influence on the Board’s decision regarding whether to proceed with registration.  This case demonstrates the importance of both – the words in the constituting document played a significant part in the Judge’s decision.  The essence of this case is that the overall purpose of an organisation must be for the public benefit.  If there are benefits for a subset of the public as well, that may not necessarily affect the ability for an entity to be registered.

Charities Law in New Zealand is constantly evolving – even though the law in this area dates back to the 1600s.  The pace of change in the law is perhaps not in line with the rate society is changing.  For example, many members of the public could argue that maintaining high standards in the IT profession is for the public benefit in this day and age but obviously would not be within the spirit of the statute of Elizabeth, as was decided in the Re New Zealand Computer Society Inc.

If you would like further information please contact Jessica Middleton on 07 958 7436.

A review of New Zealand’s constitutional arrangements

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Introduction

In June 2013 I prepared an article titled “The Constitution Conversation – He Kaupapa Nui te Kaupapa Ture”.  The article discussed the “constitution conversation” or the review of New Zealand’s constitutional arrangements (“review”) that was conducted by the Government throughout 2013.  As part of the review, the Ministerial Advisory Panel (“Panel”) held a series of consultation hui across the country and invited public submissions on a number of questions regarding the constitutional arrangements of our country.  The report by the Panel titled “New Zealand’s Constitution – A Report on a Conversation, He Kotuinga Kōrero mo Te Kaupapa Ture o Aotearoa”, was released in November 2013.  Set out below is a a summary of the key findings and recommendations from that report.

The review

The review originated from a 2008 Confidence and Supply Agreement between the Māori Party and the National Government.  The review called for public submissions on how we want our country to be run and sought views from the public on the following topics:

  • The pros and cons of having our constitution written in a single document;
  • The role of the Bill of Rights Act 1990 in our constitution;
  • The role of the Treaty of Waitangi in our constitution;
  • How Māori views should be represented in national and local government; and
  • Electoral issues such as the size of Parliament and the length of each government’s term.

During public consultation in 2013, the Panel members attended over 120 community hosted hui and other events.  There was also a significant media campaign.

The Panel received 5,259 submissions in total from individuals and groups, which, it has been noted, reflected a diversity of views.

The Panel’s report is 176 pages in length and responds to the topics and questions posed in the review by identifying what it considers to be key themes coming out of the consultation process and providing “Perspectives and Reflections” as well as overarching recommendations to the Government.

Key themes of the conversation

In the review the Panel identified themes or common factors that most people appeared to consider and balance while developing their views on the topics of the conversation.  Common themes included: a sense of belonging, fairness and justice, representation and participation and checks and balances on power.  The Panel said that, while there were some contradictory views on some of the topics, participants’ aspirations for the constitution were fairly consistent: “to provide for stable, adaptable, legitimate, representative, responsive, principled, considered, accountable, transparent, inclusive government that aspires to ensure people’s well-being”.

Recommendations, reflections and perspectives

The key recommendation of the Panel was that the Government continue the constitution conversation with Aotearoa.  Co-Chairs of the Panel, Sir Tipene O’Regan and Professor John Burrows stated, “The report signposts a way forward for future conversations about the constitution – a conversation that many within our nation are enthusiastic to continue”.¹

However, in terms of continuing the conversation, the Panel noted that there was a lack of strategic leadership in this field, highlighting that the existing resources on the constitution are incomplete and difficult to find.  For example, the Panel identified that there are few resources on constitutional topics that are suitable for Māori medium schools.  Therefore, to support a continued conversation, the Panel recommended that the Government improve access to information about the Treaty of Waitangi, civics, and citizenship in our schools and communities.

On the specific topics tendered as part of the review, the Panel makes the following recommendations to the Government:

  • A Written Constitution: That the public needs more information on the subject of a written constitution.  The Panel notes that, although there is no broad support for a supreme constitution, there is considerable support for entrenching elements of the constitution.
  • Te Tiriti o Waitangi, The Treaty of Waitangi: In terms of Te Tiriti o Waitangi, the Panel recommended that the Government continue to affirm the importance of the Treaty as a foundational document.  The Panel also recommended that the Government set up a process to develop a range of options for the public to consider for the future role of the Treaty in our constitution, including options within existing constitutional arrangements and arrangements in which the Treaty is the foundation of the constitution.
  • Māori Representation: The Panel recommended that the Government investigates how Māori representation in Parliament might be improved by looking at how local government processes and decision-making can better reflect the interests of Māori.  In addition, when conducting the recommended investigation,  the Panel recommended that the Government has regard to a range of options including Māori political structures and local and international models.
  • The New Zealand Bill of Rights Act 1990: The Panel recommended that the Government set up a process for the public to explore in more detail the options for amending the Act to improve its effectiveness, including:
    • Adding economic, social and cultural rights, property rights and environmental rights;
    • Improving compliance by the Executive and Parliament with the standards in the Act; and
    • Giving the Judiciary powers to assess legislation for consistency with the Act,  entrenching all or part of the Act.
  • Electoral Matters: In terms of the size of Parliament, the Panel’s view was that there was no need for the Government to further review this matter.  The Panel advised  that the discrepancy in geographic size affects the representation of people in large electorates, particularly Māori and rural electorates.  The Panel noted that there is a reasonable level of support for a longer term of Parliament and a fixed election date.
  • Other Issues:
    • The status and functions of local government and its relationship to central government;
    • The role of He Whakapūtanga o te Rangatiratanga o Nu Tireni, the Declaration of Independence;
    • The role and functions of the public service;
    • The distinct interests of citizens of countries within the realm of New Zealand;
    • The role and functions of the head of state and symbols of state; and
    • An upper house of Parliament.²

The Government has indicated that it will respond to the recommendations contained in the report within six months.

If you would like further information please contact Aidan Warren on 07 958 7426.

  1. “New Zealand’s Constitution –A Report on a Conversation, He Kotuinga Korero mo Te Kaupapa Ture o Aotearoa”, November 2013
  2. Ibid

Tips for the silly season

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‘Tis the season to be jolly

With the silly season upon us, ‘tis the season to be jolly. However for both employers and employees there are a few things to remember and certain ground rules that should always be observed. We set out below a few tips for end of year work functions so that everyone can let their hair down with ease.

Employer expectations

Whether a function is held during or after work hours, there is still a behavioural code of conduct to be kept and employees should be made aware of this. If there are any specific policies in place, we would recommend these be circulated prior to the function to remind those attending of their duties as an employee and, at a practical level, avoid embarrassment for all.

It is also important that there are clear health and safety rules at work functions. Organisers should always check with venues to see if there are any specific health and safety requirements. This should then be conveyed to attendees well in advance.

It is often wise to have the workplace alcohol policy circulated or to develop a particular policy for functions in particular. This will provide certainty around acceptable consumption behaviour.

Responsible host

As with any other social event arranged through work, we strongly recommend employers are responsible hosts particularly in regards to food/alcohol, health and safety issues and ensuring that everyone is able to get home safely. Having someone ‘in charge’ means that issues which may arise during the night can be properly dealt with by someone sober and with the company’s best interests in mind. Everyone should know who that go to person is in case issues do arise.

One of those things that may sound simple but is crucial, is ensuring that there is enough food. While some might gear up for a big night, studies show that food is a significant factor in managing the effects of alcohol. Expectations around transport should also be made clear. If functions are away from main city centres and taxis are not available, we would recommend employers arrange suitable alternative transportation methods.

Employee conduct

So while it may seem reasonable to “let your hair down” at Christmas parties, employees should be aware that a Christmas party arranged and hosted by their employer is an extension of work. More importantly, inappropriate behaviour at a work function could lead to disciplinary action.

In any social situation, there is always a fine line between banter and overstepping the mark. It is important that everyone feels comfortable and should any inappropriate behaviour occur, know that it will be addressed correctly although not necessarily on the night. This applies equally to employers and employees.

While end of year functions are a good chance to celebrate the successes of the year that has just been, we recommend that employers lead by example and set the tone, while employees enjoy (without overindulging) the festivities.

If you would like further information please contact Renika Siciliano on 07 958 7429.

Treaty settlement negotiations: An overview

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Iwi groups throughout the country are currently in Treaty settlement negotiations for the comprehensive settlement of their historical Treaty of Waitangi claims against the Crown.

Some of these iwi groups will have their claims discussed in Waitangi Tribunal reports and have a body of evidence already prepared as part of the Waitangi Tribunal process. Others have skipped the Waitangi Tribunal inquiry phase altogether and have proceeded to direct negotiations with the Crown without that background.

Direct Negotiations vs Tribunal Inquiry

Both avenues have their merits. Proceeding through a Waitangi Tribunal inquiry/hearing process prior to negotiations has the benefit for iwi to be able to draw from significant evidence once in negotiations with the Crown. It also means recommendations and findings from the Waitangi Tribunal which, although not binding, do have weight when later negotiating directly with the Crown.

For those who proceed to direct negotiations without a Tribunal Report in support, one upside is that negotiations can progress more quickly without a lengthy Tribunal inquiry being carried out beforehand. On the other hand, the evidence base provided via the Tribunal process will not be available but may be met in some ways via research funded separately and prepared specifically for negotiations.

Each iwi group will need to consider what the appropriate course is for them, bearing in mind the nature of the grievances suffered by them, the timing factor and potential opportunity cost of delaying negotiations and the background evidence which may be provided via the Tribunal inquiry.

There is no right or wrong way to approach settlement negotiations but, for those who do commence negotiations with the Crown, we set out below an overview of the key milestones involved and some of the considerations to be made when embarking on this journey.

Mandating

The first step in settlement negotiations is the mandating process, whereby a iwi group receives the mandate, or authorisation, from the iwi members to act on their behalf in negotiations with the Crown towards a settlement of that groups Treaty of Waitangi claims. In order to do that a mandate strategy must first be prepared by the iwi group and approved by the Crown (via the Office of Treaty Settlements and/or Te Puni Kōkiri) which sets out the process through which a mandate will be achieved. The mandating process will invariably require a series of mandate hui at which the proposed mandated body will present to the iwi and to explain why it seeks a mandate and on what basis.

Following those mandate hui, if sufficient support is provided, the iwi group will prepare a Deed of Mandate for the mandated body. That document is submitted to the Crown for formal recognition. Once formally recognised, the mandated body can commence negotiations with the Crown.

In order to do so, the Crown will prepare its work plan through to an Agreement in Principle (at least). There is always the possibility that work plans and timeframes will vary during the course of negotiations and, whilst this can be frustrating for iwi groups, it is often inevitable given the political nature of negotiations. With that in mind, iwi groups must factor those potential delays into communication strategies and also funding application(s) to groups such as the Crown Forestry Rental Trust.

Terms of Negotiation

Terms of Negotiation are another milestone on the way to a settlement. At times, these can be relatively pro-forma however they do serve a purpose in setting the ground rules between the mandated body and the Crown going forward into what can be intense negotiations. Terms of Negotiation also have other impacts in terms of limiting iwi group’s involvement in Waitangi Tribunal proceedings and other Court proceedings. Whilst Terms of Negotiation are non-binding, they are based on good faith and must be followed by both parties if the negotiations are to progress.

Agreement in Principle

Following the signing of Terms of Negotiation between the two parties, formal negotiations can commence towards an Agreement in Principle. An Agreement in Principle is a major milestone for any iwi group, as it sets out the overall redress package agreed to.

In recent times, there has been a move towards more informal Agreements in Principle or Agreements in Principle equivalents, where the level of detail is less than that of a normal Agreement in Principle. This has been a result of a drive to reach settlements where there may not be resources to complete all aspects of the standard Agreement in Principle at that stage of the process. This can leave considerable work to be carried out in the following phase through to Deed of Settlement, but can also mean that claimant groups avoid delays at this phase (and flow on funding issues). That said, the Crown’s preference now seems to be moving back towards having full details in an Agreement in Principle to ensure completeness.

Deed of Settlement

Obviously, the Deed of Settlement is the ultimate aim, together with the settlement legislation. Following Agreement in Principle, the groups will work towards an initialled Deed of Settlement detailing all redress to be provided in full and final settlement of the iwi group’s historical claims.

A Deed of Settlement will include the following redress:
  • Historical Account covering the claims of the iwi group and Crown breaches of the Treaty;
  • Crown acknowledgment and apology;
  • Cultural redress, including redress over sites of cultural significance to the group and relationship redress/agreements with Crown departments;
  • Commercial redress, including a quantum amount and specific commercial sites which are to be purchased from that quantum.

Once the Deed of Settlement is initialled by the mandated body, the Deed is referred back to the iwi for approval (known as ratification).

Ratification is the formal process where all beneficiaries of the settlement have the opportunity to comment and vote on the settlement redress package agreed to between the mandated body and the Crown. This is a particularly important part of the process and is often tied together with the ratification of the post-settlement governance entity for the group. The Crown must approve the post-settlement governance entity for any iwi group, as it will be the group that receives the settlement redress following the passage of settlement legislation.

Summary

Although the key planks of settlement negotiations are set out above, we have recently seen a number of variations from the standard process which bring their own benefits and challenges. Our team is available to advise on all aspects of negotiations, including advice on unique approaches to settlement and specific on account settlements.

Renika is an Associate in our Māori Legal Team and can be contacted on 07 958 7429.

Changing the landscape: The land acquisition process under the Public Works Act

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Over the last few years the Waikato landscape has undergone some significant changes. The Wairere Drive Extension and the Waikato Expressway are just two examples of important projects helping to grow and connect the region.

The Public Works Act 1981 provides for the land needed for these projects to be accumulated and set aside for a number of years. This allows local councils to plan for the future and helps to ensure that these new roads and developments are able to go ahead.

It is important to consider the implications of the Act and stay informed about public works, in particular if you are purchasing or selling property.

What is the Public Works Act 1981?

The Public Works Act gives power to the Crown to acquire land for public works, and sets out the payments that may be made to the former owners of the land. The Crown may take land for a wide variety of purposes, such as the building of new roads, schools or parks. The Act does not authorise these projects, rather it provides for the acquisition of land, and land can only be acquired through the process set out in the Act. Land acquired in this way is referred to as ‘designated’ land.

Land Information New Zealand is responsible for administering the Act on behalf of the Crown. A number of organisations are able to apply for land under the Public Works Act. Usually these designating authorities will be State Owned Enterprises or territorial authorities such as your local or regional councils.

When land is required for a public work, the Crown will engage a Land Information New Zealand accredited supplier to carry out the negotiations.

Under the Public Works Act the Crown may choose to acquire the whole or just a specified part of the land.

Land acquired by agreement

The accredited supplier will obtain a valuation from a registered valuer. The owner of the property may also obtain an independent valuation from a registered valuer. These valuations are used for negotiation and agreement on compensation between the parties. The reasonable cost of this advice may be reimbursed if the advice is necessary to quantify the loss of the owner.

If parties cannot agree on the amount of compensation payable, the Land Valuation Tribunal may be used to decide the compensation.

Once an agreement has been reached by the parties, the accredited supplier will prepare an agreement for sale and purchase. When this agreement is signed, it becomes a binding contract. The land will be transferred to the Crown by the normal conveyancing process, with the land owner acting as the vendor and the Crown as the purchaser.

Compulsory acquisition

If a voluntary agreement between the parties cannot be reached, the Public Works Act provides for compulsory acquisition of land by the Crown.

If the owner of the land in question objects to the acquisition of the land by the Crown, an objection may be made to the Environment Court.

Compensation

Under s 60(1) of the Public Works Act affected land owners are entitled to full compensation for acquired land. The compensation provisions of the Act aim to ensure that land owners are left in a position that is no better or worse than their original position. Compensation is available to the owners of the land, as well as parties who have an interest in the land (such as a tenant), if that interest is acquired under the Act.

Compensation will usually consist of the value of the land. This is determined by considering what the land would be expected to sell for on the open market by a willing seller to a willing purchaser.

These include compensation for:

  • Any damage caused by the acquisition to any remaining property;
  • Any depreciation in the value of the land retained; and
  • Any disturbances caused by the acquisition process.

Compensation for disturbance is inclusive of inconvenience, removal costs and contribution to valuation, legal and other professional costs incurred by the party.

How do I know what is happening in my area?

Often land owners are aware of these projects many years before construction begins. Owners are not able to claim compensation under the Act and then sell their property to a third party. The process under the Public Works Act means that the Crown becomes the new owner of the land.

If you are looking to purchase a property and are unsure about how these projects may affect your new property, it is advisable to do your research.

Websites such as Land Information New Zealand and New Zealand Transport Agency both provide up to date information and plans for these projects. A Land Information Memorandum (LIM) may also list any proposed or existing transport network projects in the local area.

The Public Works Act is a significant piece of legislation which helps to shape the local landscape. If you are considering purchasing or selling it is important to be aware of local developments and how these may affect your property.

If you would like further information please contact Dale Thomas on 07 958 7428.

Agreements to lease

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Before entering into a formal commercial deed of lease the landlord and the tenant are often presented with an agreement to lease to sign, particularly where a real estate agent is involved with the leasing of the property. The agent sometimes uses its own version of an agreement to lease. Where agents are not involved and parties wish to enter into an agreement to lease they often use the Auckland District Law Society agreement to lease form (currently the 5th Edition 2012 version).

Why enter into an agreement to lease before the deed of lease?

Clients often ask why it is necessary to first enter into an agreement to lease and then a formal deed of lease rather than proceeding directly to sign the deed of lease. An agreement to lease is commonly used where there are:

  • Works to be carried out to the premises by either the landlord or tenant prior to the commencement date; or
  • Conditions to be satisfied by either party before the lease agreement becomes unconditional. Examples include a due diligence condition which means the tenant secures the premises pending the completion of their due diligence investigation and conditions relating to resource and other consents.
Some points to consider before entering into an agreement to lease
Tenant entity

If you are the Landlord has the tenant got “substance”? Does the tenant have the financial resources and commercial experience to comply with its lease obligations?

If you are a tenant should you be entering into the lease personally or setting up a company to enter into the lease?

Personal guarantees

Consider who should provide personal guarantees – normally directors/ shareholders of tenant company.

Premises description

Check the address and legal description of the property and attach a plan clearly identifying premises and any car parks being leased. Is there sufficient access to the premises?

Fitout obligations

Itemise the fitout obligations of both the landlord and tenant so parties are clear as to exactly what they must do and when.

Term and rights of renewal

Check these are acceptable.

Rent reviews

Consider how often rent review are to take place and whether these are to be based on CPI or the market rent (or a mix).

Insurance obligations

Check insurance options and likely costs. Usually the landlord insures the premises but the tenant pays the premium. If you are the tenant you may wish to ask the landlord about the amount of insurance cover.

Business use

Is the proposed activity permitted within the relevant zoning rules? Most standard lease agreements leave this squarely in the tenant’s corner.

Costs

Is each party to pay its own costs relating to negotiation and completion of the agreement to lease?

Summary

It is important parties obtain legal advice before signing an agreement to lease. By doing so the parties have the ability to negotiate terms of the deed of lease. Just because the agreement is a “standard” form doesn’t mean it is right for the particular circumstances. On signing the agreement to lease the parties are almost always committed to entering into a deed of lease under the terms in the agreement. With rights of renewal factored in, that commitment can be for many years.

If you would like further information please contact Dale Thomas on 07 958 7428.

PPSR and PMSI: Registered charges over property

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Introduction

The Personal Properties Securities Register (PPSR) is an electronic register which allows a secured party to register the details of property that they have an interest in. For example, if a Bank (the secured party) lends money to a company, the Bank will take a charge over the company’s property, creating a security interest, until the debt is repaid. The Bank will then register its interest on the PPSR which gives notice to other parties that the Bank has an interest against the company’s property.

The purpose of the PPSR is to provide an avenue for individuals or companies who lend money or provide goods on credit to register their interest against the borrowers property as security. Dependent on what the parties agree, the secured party may register an interest against all the borrower’s assets or against specific assets e.g. a laptop, a car or a computer.

It is important to be aware of when the PPSR may be relevant as it acts as a notice board for both secured parties and purchasers (debtors).

Secured parties

Common situations where a security interest will be registered against property is when individuals or companies purchase property on hire purchase, or borrow money to purchase property such as a car. The secured party may register its interest against the car alone, or they may negotiate to register their interest against all of the borrower’s current and future acquired property, which is known as a ‘general security agreement’. A general security agreement most commonly arises when a company borrows from a finance provider and in return the financier will take a charge over all assets currently held by the company, and any future assets that are purchased.

Purchasing property

It is important for consumers to be aware that when they purchase second hand property, a secured party may have a security interest registered against property that relates to money borrowed from the previous owner. Irrespective if the property is bought in good faith and at market value, if a security interest is registered against the property and there is still an outstanding debt, the secured party has the right to repossess the property. For example, if John borrows money from the bank to purchase IT equipment, the bank would take security over the IT equipment until the debt was repaid. If the IT equipment was on sold to Jim and John’s debt was not repaid in full, the Bank would be entitled to repossess the IT equipment from Jim to repay John’s debt.

The PPSR is an imperative tool to notify prospective purchasers of any interests against property they intend to purchase, which may still have money owing, and can be repossessed.

Securing property

In situations where you are a secured party the Personal Property Securities Act 1999 (PPSA), sets out how to register your security interest against the borrowers property. The priority of your interest in the property is determined by the date you register your interest on the PPSR and not that date the parties signed the agreement. When registering your interest (registering your financing statement) you want to ‘perfect’ your interest. Perfecting your interest is the term used to determine whether you followed the right process to give you the first claim to the property, meaning you are the first to be repaid if the borrower defaults. There are two ways to ‘perfect’ your interest; you can ‘perfect by registration’ which gives you first priority if you are the first to register or ‘perfection by possession’. Although the PPSA does not define what actions must be taken for ‘possession’, leaving the property with the debtor after they have defaulted does not constitute possession. Therefore, as a minimum you must be seen to go through the appropriate channels to try and repossess the property.

Exception – PMSI

It is important to note there are exceptions to the ‘perfection’ rule. A common and very important exception to the priority rule is the Purchase Money Security Interest (PMSI). A PMSI is a security interest which gives superior priority over all other interests, even if there has been a financing statement registered against the same property at an earlier date. The requirement to claim a PSMI status will occur where the secured party has loaned funds to the borrower to purchase property, and the funds can be traced to show the property purchased was what the secured party intended to be purchased. This is an important requirement and is why the secured party will often pay the owner of the property directly to ensure the loan funds are used to purchase the agreed property. The second PSMI requirement is for the secured party to register their interest on the PPSR within 10 working days (perfection by registration) from the date the debtor takes possession of the asset (e.g., picks up the new car).

Another common example of a PMSI is where a secured party supplies inventory to their customers and retains ownership of the property until full payment is received. However, in most situations ownership is irrelevant when it comes to the PPSR as ownership will not protect either party if the correct perfection rules have not been adhered to.

If a secured party correctly complies with the registration requirements, a PMSI will take priority over all other security interests, including all interests that were registered prior to the PMSI.

In practical terms, it is important when purchasing second hand goods to check the PPSR register to ensure there are no interests registered against the property and run the risk of the property being repossessed. However, there are strict privacy conditions that determine who can search the register, they are as follows:

  • You must have the consent of the individual/company who you are searching;
  • The search is required to help you decide whether to lend or invest with the individual or company; or
  • The search is required to establish whether there is a security interest over the property you intend to purchase.

You can check the PPSR by going online at www.ppsr.govt.nz or using your mobile phone (TXTB4UBUY).

If you would like further information please contact Laura Monahan on 07 958 7479.

Contact us

HAMILTON OFFICE

P. 07 838 2079

E. reception@mccawlewis.co.nz

Level 6, 586 Victoria Street
Hamilton 3204
New Zealand

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P. 07 878 8036

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Te Kūiti 3910
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