April 2008

The Property Law Update is produced to keep you up to date with the developments in the law relating to property. We look at legislation and cases covering property and personal law issues (such as leases, mortgages, easements, sale of land, family law, trusts and assets management etc.), as well as environmental concerns and local government matters. If you would like to know more about any of the topics covered, please contact us. This update is produced by our Property and Private Services Group and the Resource Management teams.

This issue:

• Inaugural Brookfields Property Forum
  How will the global credit crunch affect the local commercial real estate market? Come along to our inaugural Property Forum and find out.more
• Oppressive buy back agreement
  A recent caveat case is of interest for its comments on oppression in a buy-back situation. more
• Buildings on the move?
  Mobile homes that are basically immobile may well be buildings under the Building Act 2004 and therefore require a building consent! more
• Building Amendment Act 2008
  The Building Amendment Act 2008 (BAA08) came into force on 15 March 2008. Priority should be given to the review of website information, forms and practices to ensure compliance with BAA08 amendments. more
• NZ Planning Institute Conference - Sustainability
  A recent conference suggested that sustainability principles and programmes in the UK could provide a way forward for NZ planning and development. more
• New Zealand China Free Trade Agreement
  If you are interested in taking advantage of the free trade agreement, Brookfields can help. more
• Publications
  Brookfields is committed to keeping its clients up to date and produces regular updates on the law. You are welcome to subscribe to any of these. more

Brookfields Inaugaral Property Forum

29 August 2008 5.30pm Brookfields House

Markets around the globe have felt the effects of the credit crunch initiated
by the sub prime mortgage debacle in the United States. Will New
Zealand's commercial real estate markets be immune? What potential
impacts might have a bearing on our local commercial real estate
markets?

Our guest speaker is Stephen Saul, Managing Director, Jones Lang
LaSalle New Zealand. He is the author of local and industry specific research.
Jones Lang LaSalle is one of the world's leading real estate services and
money management firms, committed to delivering exceptional strategic,
fully integrated services for property owners, investors and occupiers.

View the invitation here.

For more information please contact: Deborah Miller, Ian McCombe or Howard Johnston (Partners, Commercial Property)

Oppressive buy-back agreement

Robson v Shortt (2007, High Court)

This case involved an application to lapse a caveat registered against the defendant's property that the registration of dealings on the title.  However it is equally of interest for its comments on what the court found to be an oppressive credit contract - a buy back agreement.

The plaintiff had to show an arguable case of oppression to ensure that the agreement for purchase remained on foot following the defendant's purported termination.  This would in turn allow the caveat she had registered against the defendant's property to stay in place. 

Ms Robson was in financial difficulties and was facing a mortgagee sale.  She entered into a buy back agreement with Mairangi Properties Limited ("MPL").  She did receive legal advice before entering the agreement, but she herself had little business acumen.

Under the buy back agreement, she was to make weekly repayments.  The agreement specified that default interest was payable in respect of late payments, and that MPL was entitled to terminate for default where payments were more than 21 days overdue. This default was not rectified within 14 days of notice. 

Ms Robson fell into default almost immediately. Her payments from Work and Income New Zealand were insufficient to cover the amounts required.  MPL contacted her informing her of the arrears and the need for her to supplement the payments from WINZ. No interest was demanded or charged. A cheque was received from Robson's solicitors clearing her arrears and putting her into credit, but soon after she fell into arrears again.

MPL wrote to Robson reminding her of its ability to terminate the Agreement. Robson registered a caveat, using the agreement as the basis for the caveat.  Her arrears worsened as her WINZ payments reduced. Further correspondence and discussions took place to encourage Robson to clear her arrears and continue making payments which was partly successful as some further extra payments were made. However, Robson again fell behind.

MPL wrote to her reserving its right to charge penalty interest and to back date the interest to the beginning of the Agreement. Finally MPL wrote, giving an account of her arrears which included the back dated penalty interest. MPL then purported to cancel the Agreement.

Robson's solicitors replied that Ms Robson did not accept the termination and that MPL had acted oppressively in terminating the agreement, which was a credit agreement under the Credit Contracts and Consumer Finance Act 2003. This would mean that the termination was invalid, the agreement would remain on foot and Ms Robson would continue to have an interest in the land that was capable of supporting the caveat.

In considering whether one party has acted oppressively the Court will consider:

• all of the circumstances relating to the making of the agreement;
• the time given to a defaulting party to remedy the default;
• the likelihood of loss to the creditor;
• an inequality of commercial experience;
• the presence or absence of independent legal advice.

Financial hardship is not enough by itself for a defaulting party to avoid its obligations under an agreement.  However, the Court found the following reasons indicated oppression:

• Robson had limited business acumen;
• the amount of the arrears was small;
• MPL knew that Ms Robson was a pensioner and that there was a strong likelihood that if she fell behind she would not be in a position to catch up;
• MPL was not entitled to back date the penalty interest without making demand;
• MPL never contacted Robson's solicitors when they knew she was represented;
• MPL knew that any amount of arrears enabled it to cancel and the buy-back agreement was prepared with this possibility in mind;
• regular statements of account were not provided.

While parties may have consensus on what it is they wish to achieve, often neither party has a full comprehension of the potential legal ramifications of entering into an agreement and their obligations under it – particularly a non-standard agreement such as this.  A full consideration of all the circumstances is required to ensure adequate protection for both parties.

For more information please contact: Deborah Miller, Ian McCombe or Howard Johnston (Partners, Commercial Property)

Trailer homes ruled to be buildings

The District Court has recently ruled that Leisurebuilt Mobile Homes are "buildings" which require building consent.

In Thames-Coromandel District Council v Te Puru Holiday Park Limited & Julian the Council prosecuted a company and its director for relocating Leisurebuilt mobile homes on to a holiday park without first obtaining building consent.  The Council issued Notices to Fix which required the company to either apply for building consent or to remove the mobile homes.

The mobile homes had the appearance of a small holiday home but were constructed on a galvanised steel trailer with wheels.  The trailers had no suspension or brakes and did not have a warrant of fitness.  The mobile homes were over 2.5m wide so could not be towed on the road without a special permit.  Once in position on the holiday park the trailer homes sat on concrete blocks and timber packers.  There was some plumbing beneath the mobile homes that discharged waste water into the ground.

Both the holiday park owner and the Leisurebuilt manufacturer contended that each mobile home was a "vehicle" within the definition of the Land Transport Act.  They argued that the mobile home was a "caravan" not a "building" and did not require building consent.

The Judge found that the mobile homes were "buildings" in terms of the Building Act 2004 when constructed in the Leisurebuilt factory and that building consent was required to relocate the mobile homes to the holiday park.

Te Puru Holiday Park Limited was fined $10,000.  The director of the company was also fined $10,000 because he was the "controlling mind" behind the company.

For more information please contact: Andrew Green, Melinda Dickey or Linda O'Reilly (Partners, Local Government Team)

Building Amendment Act 2008

The Building Amendment Act 2008 came into force on 15 March 2008. Priority should be given to the review of website information, forms and practices to ensure compliance with BAA08 amendments.

This week, when referring to the new Act, the Government announced that restrictions on “do it yourself” (DIY) building would be relaxed. The BAA08 amends the definition of restricted building work leaving to Regulations the job of defining exactly what work is restricted from DIY builders.

A summary of the amendments brought about by the BAA08, and now incorporated into the BA04, is available on our website.

Report on 2008 NZ Planning Institute Conference

Heading down to sunny Greymouth for four days of discussion and debate with 400 town planners for  2008 NZPI Conference proved to be both extremely informative and highly enjoyable.

The key themes were carbon trading, renewable energy and planning new development around sustainability principles.  The last of these was the subject of two excellent papers by keynote speaker Jonathan Smales, a leading light in the development of green housing and sustainable urban development in the UK.

It was clear that New Zealand has much to learn from the UK, as it seeks to deal with growing concerns about climate change by planning entire new urban areas around carbon neutrality principles.  The core ideal of "walking communities", with mixed use residential, commercial and industrial areas built up around central retail and infrastructure hubs was given detailed attention. Principles of green housing, with the accompanying development of community wastewater treatment, heating, telecommunication and electricity generation were also the focus of discussion. 

All of this offered some genuine food for thought and engendered some entertaining debate as some of NZ's top planning minds sought to explore the application of the UK principles to a New Zealand context.  This is a trend in international best practice for development and planning, and may well become a feature in the New Zealand landscape in years to come.

Matching the debate on the greening of new urban development were interesting and informative papers and workshops on carbon trading and renewable energy sources (particularly the future in NZ of wave and tidal power).  Again, the discussion was considered and thought provoking.  It became very clear that New Zealand's renewable energy strategy (90% renewables by 2025) faces massive hurdles, and that huge amounts of work will be needed to make effective carbon trading a workable reality, both globally and within NZ.

For more information please contact: Nick Wright, (Partner, Resource Management Team)

New Zealand China Free Trade Agreement

The much heralded Free Trade Agreement with China  provides New Zealand businesses and individuals with many exciting opportunities.  The agreement covers a number of areas including trade, investment, immigration and employment.

Brookfields can provide legal assistance to those wishing to take advantage of the FTA.  We are the New Zealand member of Globalaw, an organisation of over 4,000 lawyers and attorneys in more than 75 jurisdictions worldwide, including other areas of China such as Beijing, Hong Kong, Tianhe Guangzhou, Shenzhen, Macau and Ulaanbaatar.

Please contact us should you require further information.

Publications

Brookfields produces a range of newsletters and updates on legal developments. These include:

The Property Law Update
LGLaw and Public Law
Immigration
i-News
Employment Law
TrustLaw

If you would like to be notified when any of these publications are issued, please contact us.

Notice:

The items contained in this update are intended to be brief in nature and should be used for information only. They should not be relied on as legal advice.

Last updated: April 2008