Changes to the Residential Tenancies Act
OLIVIA COWDY / Manager, Property Management
In a bid to encourage the rental property market and alleviate housing pressures, the coalition government has unveiled a series of amendments to the Residential Tenancies Act. Housing Minister Chris Bishop revealed the proposed changes on 11 April 2024, highlighting their aim to incentivise landlords to re-engage with the rental sector.
According to Bishop, the alterations come as a response to what he described as a “war on landlords” waged by the previous administration. He cited adverse outcomes such as soaring rents, increased demand for social housing, and a surge in families residing in emergency motels since 2017.
The focal point of the reform is to strike a balance between the rights of landlords and tenants while addressing the pressing issue of housing affordability. Key modifications outlined in the proposed legislation include:
- Reintroduction of 90-day ‘no cause’ terminations for periodic tenancies, enabling landlords to end tenancies without specifying a reason.
- Restoration of landlords’ ability to terminate fixed-term tenancies at the end of the term without citing a specific reason.
- Reduction of landlords’ notice periods for ending periodic tenancies to 42 days where:
- they want to move themselves or a family member into the property, or;
- the tenancy agreement notes the property is usually used to house employees, and they want to move an employee into the property, or;
- where the property is subject to an unconditional agreement for sale requiring vacant possession.
- Reinstatement of tenants’ notice period for ending periodic tenancies from 28 days to 21 days.
Bishop emphasised that these adjustments aim to facilitate small-scale landlords’ participation in the rental market, thereby augmenting the availability of rental properties and curbing rental inflation.
Additionally, the government intends to introduce a “pet bond.” This provision would allow landlords to request an additional bond to cover potential damages caused by pets. By capping the pet bond at a maximum of two weeks’ rent, landlords can mitigate risks associated with pet-related damages while providing tenants with the opportunity to secure rental accommodations for their furry companions. Housing Minister Chris Bishop reiterated the importance of accommodating pets in rental properties, acknowledging the significant role they play in Kiwi households. Minister of Regulation, David Seymour, echoed this sentiment, emphasising the policy’s potential to facilitate domestic abuse victims’ access to pet-friendly rentals, thereby fostering safer environments for vulnerable individuals.
While the proposed amendments aim to strike a balance between landlord and tenant interests, some remain sceptical about the potential ramifications. Officials at the Ministry of Housing and Urban Development expressed concerns regarding increased insecurity of tenure for tenants.
Despite these reservations, the government remains steadfast in its commitment to tackle New Zealand’s housing crisis comprehensively. By leveraging regulatory reforms and incentivising landlord participation, policymakers aspire to create a well-functioning rental property market that caters to the diverse needs of both landlords and tenants.
Pending parliamentary approval, the government anticipates the proposed changes to take effect in early 2025, marking a pivotal step towards addressing the nation’s housing challenges and fostering sustainable housing solutions.
Further information on these changes can be found here.
Public Submissions are being called for by 11.59pm on Wednesday 3 July 2024. Submissions can be made here.
Cowdy Awards Night – Celebrating Success
JANICE COWDY / Director
In April, we held our annual Cowdy Awards night. This is always a great opportunity for everyone to come together, and for us to celebrate the remarkable achievements of our team over the past financial year. From outstanding property management to exemplary residential and commercial sales, the night was a testament to the dedication and excellence that defines Cowdy.
As we reflect on the achievements of the past year, we are filled with gratitude for our incredible team. Each member’s dedication and passion have been instrumental in our collective success. Congratulations to all the award winners and every member of the Cowdy team. Your commitment, hard work and dedication to excellence are truly commendable.
Here’s to another year of success, growth, and prosperity. Onwards and upwards!
Upcoming AML Changes
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the AML/CFT Act) and its regulations place obligations on New Zealand’s financial institutions to detect and deter money laundering and terrorism financing.
The government introduced changes to regulations in the Act following a Ministry of Justice-led review, held between July 2021 and June 2022. The review focused on how the Act has performed since 2017, as well as whether any changes were necessary or desirable.
The findings and recommendations were based on private sector and community feedback, agency views, and the Financial Action Task Force (FATF)’s conclusions in New Zealand’s Mutual Evaluation Report. In response to the review’s recommendations, Cabinet approved the Ministry’s proposal to implement immediate changes to the AML/CFT regulations in October 2022. This involved issuing new regulations and amending existing ones to address identified shortcomings and enhance the regulatory framework’s effectiveness.
The implementation of the revised regulations is being carried out in three stages, with the first stage having commenced on 31 July 2023 to provide immediate relief. The second stage, which introduced new obligations for entities already subject to AML/CFT requirements, took effect on 1 June 2024. The final stage, scheduled for 1 June 2025, will extend AML/CFT obligations to sectors previously not covered by the legislation.
Rolled out in stage 2, these are the significant updates concerning reporting entities’ obligations under the new regulations:
Risk Assessments
One of the primary focuses of the updated regulations is on risk assessments. Reporting entities are required to review and adjust their risk assessments to encompass emerging technologies, products, or delivery mechanisms before integrating them into their operations. For instance, if a firm transitions from using Google searches to an external screening tool for gathering adverse information on clients or related parties, it must reflect this change in its risk assessment template promptly.
Customer Due Diligence
The updated regulations introduce notable changes in customer due diligence (CDD) procedures, particularly for legal persons and arrangements. For legal persons like private companies or limited partnerships, reporting entities must now collect and verify extensive information, including legal form, proof of existence, ownership and control structure, governing powers, and regulations. Moreover, for companies, details regarding nominee directors and shareholders must be thoroughly documented, while for limited partnerships, information on nominee general partners becomes essential.
Similarly, for legal arrangements such as trusts, reporting entities are mandated to gather comprehensive data on legal form, existence, ownership and control structure, governing powers, and regulations. Furthermore, the identification of the settlor(s) and any protector(s) of the trust is imperative.
Verification Procedures
Verification procedures play a critical role in ensuring compliance with the updated regulations. Reporting entities are tasked with authenticating details against documents, data, or information issued by reliable and independent sources. For instance, to validate the existence, legitimacy, ownership, and control of legal entities like private companies, gathering official documents such as company extracts, shareholding registers, and company constitutions is essential. Similar verification steps apply to trusts and limited partnerships.
Ongoing Customer Due Diligence (OCDD)
The new regulations necessitate additional measures for ongoing due diligence. Reporting entities are required to regularly review, update, and verify customer information based on risk levels and transactional activities. Triggers for OCDD include changes in beneficial ownership, address jurisdiction, or business activities, requiring proactive assessment and verification procedures.
Enhanced Due Diligence (EDD)
Differentiating between the source of wealth and source of funds is now a crucial aspect of enhanced due diligence. Reporting entities must outline specific criteria within their compliance programs based on their risk profiles and exposure to money laundering risks. Moreover, additional EDD requirements may be prescribed if typical enhanced CDD measures prove insufficient, necessitating measures such as expanded information collection, stricter transaction monitoring, and enhanced senior management oversight.
Reliance within Designated Business Groups (DBGs)
Reporting entities within designated business groups can streamline compliance efforts by relying on the CDD procedures of other members within the group, provided they meet or exceed the required standards. This facilitates efficient compliance while maintaining robust anti-money laundering measures.
Utilising External Agents
Reporting entities engaging external agents for CDD procedures must update their compliance programs to outline clear procedures, policies, and controls. This includes vetting agents, providing adequate training on AML/CFT matters, and maintaining comprehensive records of agents involved in the AML/CFT program.
Virtual Assets
Virtual Asset Service Providers (VASPs) face heightened AML requirements, particularly concerning transactions involving virtual assets of $1,000 or more. Such transactions are now classified as wire transfers under the AML Act, necessitating adherence to stricter regulatory standards.
The Department of Internal Affairs, the Financial Markets Authority and the Reserve Bank of New Zealand have produced new and updated guidelines of the new regulations, which can be viewed here.
New Brighton Non-Profit Housing Development
In the heart of New Brighton, a new residential development is emerging. Named Te Pākau Maru, meaning “place of shelter,” this ambitious project is set to transform the landscape for existing and future residents of New Brighton.
The brainchild of housing charity Kāinga Maha, Te Pākau Maru is a testament to innovation and foresight. With a keen eye on the future, developers are building 63 terraced homes, each meticulously designed to adapt to the evolving climate dynamics over the next 200 years.
Working in close collaboration with architects, the developers have ensured that every aspect of the homes is future-proofed to withstand even the most extreme scenarios. Elevated to a higher finished floor level, these homes provide protection against a one-in-200 year flood event, surpassing the requirements set by the Christchurch City Council.
The journey of Te Pākau Maru began with a vision to provide affordable housing options while revitalising the vibrant community of New Brighton. With a focus on mixed tenure, the development offers a range of housing options including progressive home ownership, build-to-rent, affordable rentals, and market sales.
In 2021, Kāinga Maha was chosen by the council’s economic development agency, ChristchurchNZ, to spearhead this transformative project. The acquisition of three car parking blocks from the Christchurch City Council on Beresford Street marked the first step towards realising this vision. The council issued building consents for all six stages last year, with an expected build cost of just over $15 million.
Construction has begun on the first stage between Union and Mafeking Streets, two blocks back from the beach, comprising 25 homes with a mix of 2, 3, and 4-bedroom options. After sales were launched in March last year, all homes in stage one have been pre-sold. Five of these will be sold through the Home Foundation and the Tangata Atumotu Trust, which help Pasifika people buy homes through a progressive ownership scheme. For more information about the Progressive Home Ownership (PHO) scheme, visit The Home Foundation.
Te Pākau Maru represents a collective endeavour fuelled by the shared goal of providing quality housing at an affordable price. Annie Wilson, General Manager of Kāinga Maha, emphasises the collaborative spirit that underpins this initiative, highlighting the multitude of individuals and organisations who have joined forces to make this vision a reality.
As construction progresses on the initial phase of these homes, anticipation builds for the positive impact Te Pākau Maru will have on the New Brighton community. Scheduled for completion by early 2025, this development stands as a beacon of hope, offering not just shelter but a promise of a brighter, more inclusive future for all.
Te Pākau Maru renders.
Property Tax Rules – What’s Changing?
NICK COWDY / Residential Sales Consultant, Principal Agent
In a bid to streamline tax regulations and address the complexities surrounding property investment, the government has announced significant changes to the country’s tax landscape, particularly affecting property owners, investors, and renters. The revisions encompass changes to both the bright-line rule and mortgage interest deductibility, aiming to foster a more transparent and equitable housing market.
Starting from 1 July 2024, the bright-line rule for property sales is changing. Previously, if you bought and sold a property within 5 years (for purchases made between 29 March 2018 and 26 March 2021) or within 10 years (for purchases made on or after 27 March 2021), you might have to pay tax on the profit. The new rule shortens this period to just 2 years for any property bought and then sold.
This change aims to make tax rules simpler for property owners. The original 2-year bright-line test, introduced in 2015, was designed to target those buying and selling properties quickly for profit. Over time, the government extended this period, trying to cool down the housing market and reduce speculation. However, these extensions made the tax rules more complicated, leading to this decision to return to a simpler 2-year rule.
With the rule going back to 2 years, buying and selling property becomes less tangled in tax worries for most people. If you sell a property more than 2 years after buying it, this tax rule won’t apply, with some exceptions still in place (like for your main home or inheritance cases).
Simultaneously, the government has announced the reinstatement of mortgage interest deductibility for residential investment properties, marking a departure from the previous phase-out initiated in 2021. Effective from 1 April 2024, property investors will be eligible to claim 80% of their mortgage interest expenses, with the allowance increasing to 100% by 1 April 2025.
Associate Finance Minister David Seymour claims that this reinstatement aims to alleviate financial strains on landlords and renters, particularly amidst escalating mortgage rates and a challenging cost-of-living environment. By easing pressure on rents and simplifying the tax code, policymakers anticipate fostering a more attractive investment landscape, potentially expanding the rental property pool.
As the country navigates these policy changes, the conversation continues about the best path forward to ensure a balanced, fair, and sustainable housing market. The government’s decision marks a significant pivot in strategy, with long-term implications for investors, renters, and first-time homebuyers alike.
Residential Property Managers Bill Dropped
OLIVIA COWDY / Manager, Property Management
The decision to scrap the Residential Property Managers Bill, which sought to establish minimum standards and oversight mechanisms for the property management sector, has reignited discussions about the need for safeguards to protect both tenants and landlords.
Housing Minister Chris Bishop defended the government’s stance, arguing that the proposed bill’s cost-benefit analysis was deemed marginal and uncertain. Instead, Bishop emphasised the need for policies aimed at addressing the ongoing housing crisis, including reforms to the Residential Tenancies Act designed to incentivise landlords and stimulate housing supply.
The decision, however, has faced criticism from organisations such as the Real Estate Institute of New Zealand (REINZ), which has long advocated for regulations to ensure professionalism and accountability within the property management sector. REINZ expressed disappointment over the government’s reluctance to support the bill, highlighting the lack of oversight in an industry responsible for managing billions of dollars in assets.
According to REINZ chief executive, Jen Baird, the absence of regulation poses significant risks, particularly amidst a housing crisis where rental demand continues to rise. Without minimum standards and protections in place, vulnerable tenants and landlords are left exposed to potential fraud and misconduct.
REINZ outlined several key reasons why they believe regulation of property managers is necessary:
- Complexity of the Residential Tenancies Act: With more New Zealanders turning to rental accommodation, there’s a growing reliance on property managers to navigate the complexities of the Residential Tenancies Act. Without adequate training standards, the quality of service provided by property managers can vary widely.
- Lack of Formal Oversight: The absence of formal checks on client funds leaves landlords and tenants vulnerable to potential misuse or fraud. Instances of bond fraud highlight the urgent need for regulatory intervention to safeguard client funds.
- Limited Recourse for Landlords: Currently, there are few avenues for landlords to address concerns about property managers’ performance. Regulatory oversight would provide a formal mechanism for addressing disputes and ensuring accountability.
- Necessity of Regulatory Intervention: Without regulatory intervention, many of the issues plaguing the property management sector are unlikely to be self-correcting. Minimum standards and oversight mechanisms are essential to maintaining professionalism and integrity within the industry.
While Cowdy acknowledges and supports the need for regulation, we feel the proposed bill fell short of the mark and requires significant refinement.
Understanding Easements
An easement grants an individual or entity the legal authority to utilise a property they do not own for a specific purpose. For instance, a property might be subject to an electricity easement in favour of a network company like Orion. This grants Orion access to the property for the installation or maintenance of the electricity infrastructure, whether above, below, or on the land. While the Land Transfer Regulations 2018 provide overarching guidelines on easements, it’s prudent to review the specific easement document itself. This document may supersede general regulations with more customised terms tailored to the specific arrangement.
Types of Easements
Easements can be either for the benefit of specific neighbouring landowners or for entities like local councils or utility companies, known as “easements in gross.” These serve various purposes, from facilitating infrastructure installation to providing essential services like water and electricity to multiple properties.
Some of the common types of easements are:
- Right of way – This easement grants a property owner the right to use a particular driveway, path or accessway.
- Right to convey water, electricity, telecommunications, or computer media – This type of easement is usually in favour of Orion, Enable, or a neighbouring property.
- Right to drain water or sewage – This easement is occasionally in favour of the council but typically favours neighbouring properties.
- Party wall – Where adjoining townhouses share a supporting wall, the easement would set out the arrangements between owners, such as maintenance obligations.
- Eaves encroachment – This is often the case with townhouses. If the eaves of one house extend over an adjoining property, the easement would give that property owner the right to enter the other property to maintain or clean the eaves.
Maintenance and Repair Responsibilities
Disputes often arise concerning the maintenance and repair of shared easements. The Land Transfer Regulations 2018 outline the obligations regarding these matters. In cases where multiple parties utilise an easement, each party is typically responsible for an equal share of the maintenance and repair costs. However, exceptions exist, such as when damage is caused by one party’s actions or when parties agree to unequal shares based on their usage proportions.
In instances where repairs are necessary, but the landowner responsible for the damage refuses to cooperate, the Regulations provide a mechanism for access to complete the works. This involves giving reasonable notice to the owner and causing minimal disturbance during the process. If disputes persist, the Regulations outline a dispute resolution process involving arbitration, which serves as a last resort to resolve ongoing issues.
Whether you’re the landowner “burdened” by an easement or a neighbour benefiting from it, understanding your rights and obligations is important. While the Land Transfer Regulations offer guidance, seeking legal advice is crucial before taking any actions to enforce rights, or when considering purchasing properties with easements. Lawyers can review a property’s title to help you understand any easements in place, and ensure you are aware of any applicable terms.
Cathedral Reinstatement Faces Funding Crisis
Christ Church Cathedral, a symbol of resilience and heritage in Christchurch, is facing a critical juncture in its reinstatement journey. Christ Church Cathedral Reinstatement Limited (CCRL) announced in April that without a secured funding pathway by August of this year, the project will be indefinitely “mothballed”.
Mark Stewart, Chair of CCRL, expressed the gravity of the situation, acknowledging the challenges faced by the project, which is already more than a third of the way through its entirety. In March last year, unprecedented access to the Cathedral’s interior since the 2011 Canterbury earthquakes provided new insights, prompting a comprehensive review of costs and timelines. The findings challenged early assumptions, revealing complexities that were not initially foreseen. This necessitated a significant pivot in the project’s trajectory. On the recommendation from the project review team, the CCRL Board decided to reduce the scope, cost, and associated risks by eliminating the deep foundation for the tower and lower courtyard.
Consequently, the overall cost of the project has escalated to $248 million, with a substantial funding gap of $114 million. While $26 million is expected from fundraising efforts, and the Anglican Church has committed $16 million, urgent action is needed to secure a funding stream of $30 million by September 2024 to continue strengthening efforts. Further funding will then be needed for the reinstatement to be completed by October 2031.
A recent report by the New Zealand Institute of Economic Research, commissioned by CCRL, estimated that the reinstated Cathedral could generate up to $20.8 million in additional tourism spending annually. Furthermore, it would unlock the full value of surrounding investments, supporting the wider regeneration of Christchurch.
Despite the challenges, there is determination to find a solution. Bishop Peter Carrell reaffirmed the Anglican Church’s commitment to securing further funding, echoing the sentiments of the community’s strong passion for the Cathedral’s restoration. “The Cathedral would not have been built in 1881 without the full weight of the community behind it. It is now critical we demonstrate the same leadership as our 19th century Canterbury pioneers in returning the Cathedral to life,” says Bishop Peter.
Christ Church Cathedral Concept Design.
The path ahead is uncertain, but there is a collective resolve to overcome obstacles and see the Christ Church Cathedral restored to its former glory. Now more than ever, the support of the community, government, and philanthropic partners is crucial to ensure that this iconic symbol of Christchurch’s heritage remains a beacon of hope for generations to come.
Donations can be made to the Reinstatement Project on the Christ Church Cathedral website here.
A Beginner’s Guide to Real Estate Investment
NICK COWDY / Residential Sales Consultant, Principal Agent
Whether you’re a local or international investor, it’s important to understand the basics of property investment in New Zealand so you can navigate the market with confidence. This guide aims to provide a comprehensive introduction to the dynamic world of real estate investment to those new to the market.
The real estate market, characterised by a range of property types from urban apartments to beachfront homes, has shown resilience and consistent growth over the years. Key investment areas include major cities like Auckland, Wellington, and Christchurch, known for their robust economies and steady demand for housing. Recent trends indicate a rise in demand for suburban properties, driven by a desire for more space and better lifestyles. Understanding these trends is crucial for making informed investment decisions.
Legal and Regulatory Framework
While our legal system is generally investor-friendly, there are specific laws and regulations it’s important for you to know, especially concerning foreign investment. The Overseas Investment Act requires non-residents to obtain consent for purchasing certain types of property. Before purchasing, it’s essential to understand the legal process, including property search, due diligence, and the conveyancing process. Engaging a lawyer early in the process is advisable to navigate these legalities smoothly.
Financing Your Investment
Financing is a critical component of real estate investment. There are various financing options available, including bank mortgages and private loans. It’s important to compare interest rates and lending criteria across different financial institutions to find what works best for you. Securing finance often requires a solid understanding of your financial health and a clear investment strategy, which is where working with a Mortgage Broker can be incredibly beneficial. It’s also worth keeping an eye on the Reserve Bank’s policies, as they can significantly impact lending rates and criteria.
Finding the Right Property
The key to successful real estate investment is finding the right property, and this is where expertise really counts. Start by researching the market, focusing on areas with high growth potential. Consider factors such as property type, location, and proximity to amenities. Evaluating a property’s value and potential return on investment requires careful consideration and expert insight. Tools like property valuation reports and market analyses can be invaluable in this process, however, interpreting these tools and understanding their implications can be challenging. Our experienced agents and property managers at Cowdy have in-depth knowledge of the market in Christchurch and can help you navigate the complexities of property selection. Whether it’s understanding the local market trends, identifying potential investment properties, or just seeking general advice about real estate investment, don’t hesitate to reach out to our team.
Managing Your Investment
Effective management of your property is crucial for maximising investment returns, and this often involves more than just maintenance and tenant relations. One key aspect is ensuring your property yields the highest possible rent in line with market rates. This is where professional property management becomes invaluable.
Property managers possess the expertise to evaluate market conditions and set rental prices that attract tenants while maximising your income. Our team of experienced property managers are not only skilled in handling day-to-day operations but also in strategising for higher rental income and long-term property value appreciation. With Cowdy, you have access to a wealth of knowledge and resources to ensure that your investment is well taken care of and reaches its full earning potential. If you have any queries about property management or need expert assistance in managing your real estate investment, our team is ready to help. With Cowdy managing your property, you can rest assured that your investment is in capable hands, positioned to yield the best possible returns.
Investing in real estate can be a rewarding venture if approached with the right knowledge and strategy – it’s not just about buying property; it’s about making informed decisions that align with your financial goals and market conditions. Take the time to understand the market, consult with professionals, and be prepared for the dynamic and ever-changing nature of real estate investment. With careful planning, research, and the right advice, you can make the most of the opportunities that the market has to offer.
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