New Zealand: Significant Changes On The Way For NZ Property Laws

Last Updated: 25 June 2009
Article by Tammie Watkins and Claudia Collinson

The New Zealand Government has signalled that regulation of property managers and a number of key pieces of property related legislation are under review. This article provides a brief update on the status of the various reviews.

Areas under scrutiny include laws governing:

  • Property managers.
  • Unit titles.
  • Overseas investment.
  • Maori customary interests and public rights and interests in foreshore and seabed areas.
  • Residential tenancies.

Regulation of Property Managers

The Ministry of Justice released a public consultation document in February 2009 seeking the public's views on property managers and considering options for regulation. Currently, there are no specific rules governing property managers' activities.

The public consultation document 'Review of Regulation of Property Managers' looks at existing practices of property management in all property sectors (residential, commercial and rural) to help identify whether there is a need for regulation.

Some of the potential solutions contained in the document include requiring property managers to:

  • Provide disclosure statements setting out whether they are a member of a professional body, providing contact details for that body, flagging any potential conflicts of interest and detailing what services will be provided for a property management fee.
  • Comply with minimum standards in order for them to become and remain a member of the profession.
  • Complete minimum education standards or experience requirements including undertaking continuing education.
  • Follow money handling standards, such as having accounts audited annually and maintaining trust accounts.
  • Comply with proposed minimum standards for property inspection.

Submissions on the public consultation document closed on 16 March 2009.

The Government's next move, including whether it will press ahead with regulation, is eagerly awaited. The Government has made it clear that regulation will only be implemented if it is considered necessary. The aim is to complete the review and pass any legislation (if required) by 17 November 2009 so that the legislation's timing coincides with the new Real Estate Agents Act 2008 fully coming into force.

Given the large number of property owners that use property managers it seems appropriate that a regulatory regime around property management is put in place. This would bring New Zealand into line with other jurisdictions (for example, Australia and the United States) which primarily regulate property managers with real estate agents. The Real Estate Institute of New Zealand supports the view that property managers should be regulated in a similar manner and to the same extent as real estate agents. However, it acknowledges that the qualifications for property managers need to be tailored appropriately for the activity and service of property managers.

Unit Titles Bill

The Unit Titles Bill 2008 (UT Bill), which will repeal and replace the Unit Titles Act 1972, had its first reading on 5 March 2009. The UT Bill has been referred to the Social Services Select Committee for consideration.

Four main changes proposed under the UT Bill include:

  • Large scale unit title developments will be able to be layered with separate body corporates for each subsidiary unit development. For example, a development comprising of apartments, retail units and carparks could have three subsidiary body corporates managing each group of owners' interests. These subsidiary body corporates would also be members of a head body corporate.
  • The body corporate will be required to develop long term maintenance plans covering periods of at least ten years to protect the capital value of the development and units in the development.
  • Common property will be owned by the body corporate and unit owners will have a beneficial interest in the common property.
  • Body corporate resolutions will no longer need to be unanimous. It will be sufficient to have agreement by a 75% majority of eligible voters.

The Select Committee recently heard submissions on the UT Bill. Many submitters generally supported the Bill. However, it was noted that various parts of the UT Bill would be dealt with through regulation and it would be difficult to fully assess the UT Bill without an opportunity to review draft regulations before the new Act is enacted.

A common concern expressed in submissions was the short transition period to the new Act, being six months after being passed. A gradual transition period was recommended.

A positive change for unit owners is the requirement on bodies corporate to make appropriate provision over time for maintenance of buildings and other improvements within their development. This will enable unit owners to plan for and pay a regular amount for maintenance. Also, the reduced voting thresholds should enable decision making to be more easily managed and allow bodies corporate to act in the interests of the majority.

The review has been a long time coming. The Unit Titles Act 1972 was not designed to handle the large scale mixed-use developments that are being created and the law needs to provide a more flexible regime to set up and manage all types of unit title developments.

Overseas Investment Review

The Government is undergoing an overhaul of the Overseas Investment Act 2005 and accompanying regulations in an effort to reduce the complexity of the current rules and decrease the processing time for applications.

Key aspects of the review include:

  • Refining the scope of the sensitive land provisions.
  • Reviewing how the screening thresholds for investments in significant business assets and sensitive land may be amended to promote the flow of investment into New Zealand.
  • Introducing measures to improve turnaround time and minimise compliance costs.

Cabinet will consider recommendations from the review by 30 June 2009 and changes to the Overseas Investment Act will be open to public submissions through the select committee process.

Comments have been made in the media against opening up New Zealand's foreign investment regime amid concerns of profits moving offshore. However, it can be argued that the review is necessary to reduce uncertainty in the Overseas Investment Act and regulations. The complexity of the legislation often creates confusion and lead to delays in processing applications and increased costs. This impacts on overseas investors and New Zealand vendors alike.

Foreshore and Seabed Act Review

The review of the Foreshore and Seabed Act 2004 was announced in early March 2009. The purpose of the review is to fulfil a term of the confidence and supply agreement between the National Party and the Maori Party. It includes considering the effectiveness of the current Act in balancing Maori customary interests and public rights and interests in the foreshore and seabed area.

A Ministerial review panel (Panel) has been established to undertake the review. If the current law is not considered satisfactory, the Panel will outline options to the Government to recognise and provide for customary and public interests in the foreshore and seabed.

As part of the review, the Panel will consult with various groups, including Maori groups, foreshore negotiating groups and the general public and will report to the Attorney-General by 30 June 2009. The Government is expected to make policy decisions on the future of the Act by the end of 2009.

Residential Tenancies Amendment Bill

The Residential Tenancies Amendment Bill (No 2) (2008 RTA Bill) was introduced to Parliament on 29 May 2008, but was not passed before the National Government came to power.

On 19 February 2009, the Housing Minister, Phil Heatley, announced that the 2008 RTA Bill would be reviewed. This announcement followed the 2008 RTA Bill's lengthy and contentious passage through the House since May 2008.

The new Residential Tenancies Amendment Bill (2009 RTA Bill) was introduced on 13 May 2009. It had its first reading on 2 June 2009 and has been referred to the Social Services Select Committee for consideration. Submissions on the 2009 RTA Bill are due on 3 July 2009.

The intended purpose of the 2009 RTA Bill is to provide a good balance between the needs of tenants for a decent home and landlords to manage their properties effectively.

Key changes contained in the 2009 RTA Bill include:

  • Extending the Residential Tenancies Act's coverage to include, for example, boarding houses.
  • Clarifying the responsibility for outgoings such as water, rates and insurance.
  • Introducing clearer and fairer processes for terminating tenancies to provide a balance between flexibility and certainty of term. Fixed term tenancies can automatically convert to periodic tenancies unless the parties enter into a new fixed term agreement or give advance notice that they do not want the tenancy to continue.
  • Increasing the value of existing fines and exemplary damages and introducing new sanctions to improve compliance.
  • Improving the enforceability of Tenancy Tribunal orders.

Many of the proposals set out in the 2008 RTA Bill were a significant step forward in addressing the effect of the changes that have taken place in the residential rental market since 1986. The 2009 RTA Bill seeks to further balance both landlord and tenant obligations and rights.

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