RETIREMENT VILLAGES – LEGAL TITLE
Retirement villages are becoming an probably include re-sale restrictions which or house upon a resident, together
increasingly popular choice for older New will in turn restrict the resident’s ability to with the right to use services and shared
Zealanders who wish to take advantage borrow. facilities in the village.
of the security and flexibility of the lifestyle
on offer. Cross Lease In addition, the Act provides that with
A cross lease title is one whereby the effect from 1 May 2007, each retirement
If you are considering purchasing a home ownership of the freehold is shared by all village must have a Code of Residents
in a retirement village, then you need to be of the residents who then grant leases to Rights. This code summarises the basic
aware of exactly what it is you are buying each other to live in the units and/or houses rights which all retirement village residents
and in particular the sort of legal title that for a token rent. are entitled to and covers matters such as
you will purchase when you acquire your consultation, dispute resolution and the
new home. Lease for Life right to be provided with services and other
The retirement village owner grants a lease benefits promised in the Occupation Right
The most common types of legal title used Agreement.
for retirement villages are: in a unit or house in the village which
continues on until the resident either dies
or leaves the village. The Act makes it mandatory for intending
Licence to Occupy residents of a retirement village to receive
A licence to occupy entitles the resident new law independent legal advice before signing
to live in the unit but ownership of the unit The Retirement Villages Act 2003 (the “Act”) an Occupation Right Agreement. This
is retained by the retirement village. For introduced new compliance procedures for means the resident’s signature has to be
that reason, it is usually not possible to retirement village operators, which are in witnessed by a lawyer who must certify that
borrow funds from a bank or other financial the process of being phased in. These he or she has explained the general effect
institution secured against a licence to procedures include a requirement for the of the agreement and its implications in
occupy. following documents to be provided to all such a manner which is easily understood
intending residents: by the intending resident. An agreement
Unit Title that has not been properly certified may
A unit title is issued under the Unit Titles • a Disclosure Statement, which includes not be enforceable by the retirement village
Act 1972 and confers legal ownership of information about the type of legal title operator.
the unit or house upon the resident. It offered and the ownership and
is therefore technically possible for the management structure of the village, and In summary, the new compliance procedures
resident to borrow against the value of introduced by the Act should afford greater
the property. However, the occupation • an Occupation Right Agreement, which
confers the right of occupation of a unit protection and security to retirement village
agreement with the retirement village will residents.
legal definitions (trust deeds)
Below are some of the terms commonly person(s) who establish the trust and Vesting Date: The date upon
used in trust deeds: transfer assets to it. which all assets held on trust by the trustees
must be distributed to the beneficiaries. A
Trustee(s): The person(s) who are Trust Fund: The assets that are vesting date cannot exceed eighty years
responsible for ensuring that the trust is transferred to the trust by the settlor and from the date the trust is established.
administered correctly and who hold the held by the trustees for the beneficiaries.
trust fund on trust to be applied for the Appointor: The person who has the
benefit of the named beneficiaries. Beneficiaries: The persons or power pursuant to the trust deed to appoint
entities who are entitled to benefit from the a new trustee or advisory trustee and/or to
Settlor(s): The settlor(s) are the trust fund. remove any or all of the trustees.
Contact the Galbraiths Team at:
Units 1-3 • Fencible Chambers • Fencible Drive • Howick • P O Box 38 345 • Howick • Auckland
Telephone: 09 535 4190 • Facsimile: 09 535 4191
Email: firstname.lastname@example.org • www.galbraiths.co.nz
This newsletter is produced by Galbraiths. It is intended to provide general information in summary form on legal topics current at the time of printing. The contents do
not constitute legal advice and should not be relied on as such. Specialist legal advice should be sort in particular matters.
june 2007 ISSUE 6
WELCOME TO ANOTHER EDITION OF LAW2DAY
You will find another wide ranging selection of articles and we are sure that you
will find some that are of interest to you. If you know someone who would be IN THIS ISSUE
interested in receiving their own copy of Law2Day, then let us know and we will thinking about renting P1
send out a copy to them. It’s free!
Reverse mortgages P2
If you would prefer to receive Law2Day in an electronic form we can arrange that
for you, just email email@example.com. Trusts - the paperwork is crucial P2
Happy reading. economic disparity claims P3
retirement village-legal title P4
If we can help you in any way please do not hesitate to contact us.
legal definitions (trust deeds) P4
The team at Galbraiths
THINKING ABOUT RENTING OUT YOUR HOME
OR INVESTMENT PROPERTY?
The purchase of a residential property with a the tenant must agree that the Act will not must be given. In the case of a landlord, 90
view to letting it out is a popular investment apply. days notice must be given but only 42 days
choice for many New Zealanders. is required if the landlord:
If you are considering such an investment, The Act permits the landlord to require a • Requires the premises for his or her
or indeed already rent out a property, then prospective tenant to pay up to four weeks own use or that of his or her immediate
you need to be familiar with the provisions rent as a bond in advance. The money is family;
of the Residential Tenancies Act 1986 (the held by the Tenancy Tribunal and is only
“Act”) which sets out the requirements for • Has entered into an agreement to
refundable once both parties sign a form sell the property and the terms of that
many residential tenancies. agreeing on the amount to be allocated to agreement require vacant possession;
Some of the main points are as follows: the tenant and/or the landlord. The landlord
is entitled to deduct from the bond the cost • Requires the property in order that
Tenancy Agreements to of any repairs that are the responsibility one of his or her employees can live in
be in Writing of the tenant but cannot use it to recover it so long as the landlord has previously
The Act provides that all residential tenancy costs associated with fair wear and tear. If notified the tenant that the premises
agreements must be in writing. However, the parties cannot agree upon the amount are normally used for that purpose.
an agreement is still enforceable even if it of bond to be refunded, then the matter All notices to terminate a tenancy must be
is not in writing. will have to be referred to the Tenancy
Tribunal. in writing.
Term of Tenancy Disputes
The Act recognises two types of tenancies: Form of Tenancy
Agreement The Tenancy Tribunal deals with all disputes
• Fixed term tenancies that are for a The Act prescribes a simple form of tenancy arising out of residential tenancy agreements
specified term; agreement; a copy can be downloaded regardless of the issues involved. Either
from the website of the Tenancy Tribunal: party can make an application to the
• Periodic tenancies that are not for a www.dbh.govt.nz. Tribunal either during the tenancy or after
defined term but continue until terminated it has ended.
by either party. Terminating a If you are a landlord, it pays to fully familiarise
The Act does not apply to fixed term Residential Tenancy yourself with the responsibilities and duties
residential tenancies that are for less than Either the landlord or the tenant can give imposed upon you by the Act. It could save
120 days or for five or more years. However, notice to bring a tenancy to an end. In the you a lot of time and trouble in the future.
in the latter situation, both the landlord and case of the tenant, at least 21 days notice
For many New Zealanders, the family The interest rate will usually be higher than to live in your home. However, if you wish
home is their most valuable asset. For an average bank loan. There may also be to sell your home then the mortgage will
some people this can mean they are asset fees payable in addition to interest and these be repayable and you may find that the
rich but cash poor. It is such people who can include a valuation fee, commission amount that you receive after repaying the
are being targeted in marketing campaigns (e.g. to a broker), early repayment charges loan is insufficient to enable you to buy
for reverse mortgages. These mortgages and other costs which may be payable in another home of an equivalent standard.
are relatively new in New Zealand and can the event that the home owner decides to
have serious implications for the home sell the home. SEEK ADVICE
owner. If you are contemplating taking out a
BE AWARE OF THE reverse mortgage, it is absolutely vital that
WHAT ARE THEY? DOWNSIDE you obtain independent advice from your
Reverse mortgages usually involve a loan Advertising for reverse mortgages is often lawyer, and fully understand the terms of
borrowed against the equity in the home presented in attractive terms, which suggest the loan and the long term implications
owner’s property. Generally, the loan is that money can be made available to fund for you. Reputable companies offering
repayable on the sale of the property or things that most people desire, such as reverse mortgages will require you to take
upon the owner’s death, whichever occurs holidays, home renovations and travel. independent advice before proceeding.
first. They are particularly attractive to
people who have retired and whose home While reverse mortgages can make it Although the Government has indicated
is mortgage free. possible to obtain money from the family that a code of practice is to be established
home for these purposes, the cost is for reverse mortgage schemes, it is not yet
HOW MUCH DO REVERSE significant. in place. Home owners should be wary of
MORTGAGES COST? Most importantly, the increasing value of any reverse mortgage scheme which does
Reverse mortgage schemes are often your home may not keep pace with the debt not state that it is mandatory for the home
advertised on the basis that there are owed under the terms of the mortgage. owner to obtain independent legal advice
no regular repayments. Whilst this is true, before proceeding.
interest and fees are still charged for so Interest may compound. The amount
long as the loan continues and are added owing will continue to increase the longer
to the balance, which will ultimately have the loan remains unpaid. This will not
to be repaid. present a problem so long as you continue
TRUSTS – THE PAPERWORK IS CRUCIAL!
Trusts are a popular choice for people trustees are frequently both trustees and which are held by them personally and
who are concerned about protecting their beneficiaries of the trust, it is all the more those which belong to the trust.
assets for themselves and for their children.
However, the formation of a trust by the ESSENTIAL PAPERWORK
execution of a trust deed and transfer The administration of a trust will depend
of assets to the trust is only the start. A very much on the nature of the assets
successful trust is one that is regularly which make up the trust fund. A trust
monitored by the trustees and where there fund that consists of the family home
is a clear paper trail evidencing the ongoing in which the beneficiaries reside will not
administration of the trust by the trustees. require the trustees to do a great deal
for so long as that situation continues. If
Why the need for there is a debt owing by the trust to the
paperwork? settlors of the trust (i.e. the persons who
If the trust is not properly administered, originally set up the trust and transferred
there is a risk that it may be seen to have assets to it) then the debt should be gifted
either “lapsed” or that it is simply a “sham”. by the settlors in annual increments of
This usually occurs where the assets which $27,000.00 (for each settlor) until
form part of the trust fund are treated by the the entire debt has been forgiven. As
trustees as if they are their own personal house prices continue to rise, the
property held for their own benefit rather gifting process is taking longer and
than assets held by them for the benefit of important that a clear distinction exists in trustees should be vigilant in ensuring
the beneficiaries of the trust. Given that the minds of the trustees regarding assets that gifting continues as this will
maximise the benefit of the asset for the properties and shares), the matters which decisions taken concerning investment
beneficiaries of the trust. trustees should attend to include: of trust funds and distributions to the
In addition to gifting, trustees should meet • Regularly reviewing the performance of
at least once a year to review the trust investments. Conclusion
fund and the manner in which the trust In summary, the advantages of keeping the
fund has been applied for the benefit of the • Preparing and filing a tax return. paperwork for your trust up to date cannot
beneficiaries. There may be no need for be overstated. A trust which is properly
the trustees to make any decisions but the • Ensuring that the trustees meet at least administered will provide a much greater
important point is that: annually and possibly more frequently, degree of protection than one which is
depending on the nature of the effectively dormant because the trustees
a) the trustees have turned their minds to investments which they are monitoring. have not turned their minds to their duties
their duties and responsibilities, and and responsibilities under the terms of the
• Ensuring that any new investments and trust deed.
b) a trustee resolution records how those or transactions that the trust may enter
duties have been discharged over the into are properly documented and If you have any doubts as to whether your
previous 12 month period. supported by appropriate resolutions. trust is being properly maintained, consult
In the case of trusts that hold income Minutes of trustees’ meetings should be
producing assets (such as investment kept and particular care taken to record
ECONOMIC DISPARITY CLAIMS
The amended relationship property the Court has discretion as to whether rather than any real need for her to remain
legislation introduced in 2002 signalled a it considers an award to be just in the at home. The case was appealed to the
shift in the way the law viewed relationships, circumstances and if it does, then the High Court and the much awaited decision
by recognising that the contributions made amount of compensation will need to be was released recently.
by parties in a relationship are equal, determined.
particularly in the area of earning capacity. On appeal, the High Court agreed that
This resolution may sound straight forward the division of roles within the marriage
Where a relationship ends and one spouse in theory. However, Court decisions was a choice. However, the Court did
earns considerably more than the other, regarding economic disparity claims have not consider it appropriate to suggest a
section 15 of the Property (Relationships) proved to be inconsistent. Even in cases different choice could or should have been
Act 1976 allows for the disadvantaged where claims have been successful, made. It found the division of roles within
spouse to make a claim for compensation awards have typically been conservative. the marriage was the primary reason for
as a result of this “economic disparity”. As a result, it can be difficult to establish the disparity in income. The Judge stated:
the grounds for economic disparity as it is “It is the classic case of a man being given
GROUNDS FOR ECONOMIC unclear how much weight will be attached full rein to develop his career and maximise
DISPARITY to any particular factor. his earning potential while his wife puts her
The initial challenge is making out the career on hold. The causal link between the
grounds for an economic disparity claim. CAREER OR FAMILY? economic disparity and the division of roles
Firstly, the living standards and income of The decision to advance one’s career in the marriage could not be clearer.”
one spouse must be significantly higher or take a more domestic role is one that
than the other. What constitutes ‘significant’ many people face when having families The case is currently being appealed to the
is unclear as Court decisions vary. – but what are the consequences upon Court of Appeal; however the High Court
separation? judgment sends a clear message that the
Secondly, the living standards and income decision to take a domestic role or advance
must be due to the effects of the division of In a recent Family Court case, a wife one’s career is a choice. However, just
functions during the relationship. In most brought a claim for economic disparity for because one spouse chooses to remain in
cases this has arisen due to one spouse $686,000 on the basis that had she not a domestic role, despite other opportunities
sacrificing career advancement to remain given up work to care for the children she being available, does not mean they should
at home to care for the children thereby would be earning a similar income to her be treated as the author of their own
allowing the other spouse to advance his husband. The claim was initially rejected misfortune. After all, the purpose of the Act
or her career. by the Family Court on the grounds that is to recognise equal contributions made by
the economic disparity was caused by her parties in a relationship and every type of
Once the grounds have been made out, own decision not to return to the workforce, contribution must be considered.