Hilary Anderson joins Holland Beckett as Special Counsel 

Land covenants are very commonplace in modern subdivisions and often impose significant restrictions on the way a property can be developed and used, now and into the future (sometimes indefinitely). While usually intended to promote and protect the amenity of subdivisions and preserve property values in the years to come, covenants can stymie development, prevent neighbourhoods from moving with the times and create difficulties for owners trying to renovate and extend or sell their properties. Common issues are: Requirements that the developer or other third party approve in writing any plans and specifications for construction of buildings on the land. Often these requirements are overlooked, and approval is not actually sought or there is nothing in writing to show that this requirement was complied with. This causes issues when the property is sold as a purchaser inherits (and could be required to fix) any covenant compliance issues when they buy a property. These requirements can also be written in such a way that it’s not clear whether approval has to be obtained for the initial construction of buildings on a property, or whether the obligation is ongoing and approval must be obtained for any new additional buildings (like a tiny home or extra garage) or changes to original buildings - which would cause further issues if the developer no longer exists. Prohibitions on subdivision or the number of dwellings that can be constructed. It is very common for covenants to specify that only a single dwelling can be constructed on a property, which can prevent an owner from redevelopments such as converting their property into a home and income and inhibits intensification of residential land. Inflexible material requirements, like obligations to use only certain types of cladding, which have become obsolete or problematic over time. These requirements can also prevent the use of new superior materials and building innovations. It is possible to put a time limit on covenants and to update or remove them, but the process of doing so (if not provided for in the original registered covenants) can be painful. Updates or removal can be done by: Obtaining the consent of all owners in the affected subdivision - but often this is simply not practical due to the number of impacted owners or the risk of one or more owners refusing to cooperate or requiring some sort of payment to do so. Making a Court application for an order under sections 316 and 317 of the Property Law Act 2007. Court proceedings can be costly and lengthy, with no guarantee of success. To be successful, an owner would have to convince the Court that: There has been some relevant change (such as the use of the land or in the character of the neighbourhood) which means that the covenant should be modified or removed; The continuation of the covenant as is would impede the reasonable use of the property; and There is no-one who will be substantially detrimentally impacted by the modification or removal of the covenant. If you are considering buying, selling, developing or redeveloping a property that you know or suspect is affected by covenants, it is prudent to check the property’s title and understand the impact the covenants may have on your plans and what your options. Our property team can assist with this, please get in touch.

To complete a Kiwisaver First Home Withdrawal you need to have been a member for at least three years. These funds must be applied toward the purchase of a residential property which you intend to live in for at least six months. If eligible, you can withdraw all your Kiwisaver savings other than $1,000 which you must keep in your Kiwisaver account. The funds from your First Home Withdrawal may either be applied towards the payment of a deposit where you have entered a conditional agreement or towards the balance required to purchase the property on the settlement date. A withdrawal application cannot be completed until you have a signed agreement to purchase a property. Most Kiwisaver providers take between ten to fifteen working days to process a withdrawal on receipt of your fully signed application. The amount of days your particular provider requires is set out on their respective first home withdrawal form which can be found online. Depending on whether you are wanting to use Kiwisaver funds for the deposit on the unconditional date or on the settlement date, you need to ensure that you give your provider enough time before your required date to complete the withdrawal. This can catch out first home buyers wanting to use their Kiwisaver funds to pay a deposit on a property going to auction, as at auction the deposit is usually payable the same day you sign the agreement upon your winning bid. The withdrawal forms include a statutory declaration to be signed whereby you declare that you are eligible to make the withdrawal. Only certain people can witness signing of the statutory declaration including a Solicitor, Justice of the Peace or Notary Public. These forms also include a letter to be signed by your Solicitor. It is important that you factor in these signing arrangements when determining the timeframes required to withdraw funds. Once your application is processed by your provider, your Kiwisaver funds are paid to your solicitor. Your solicitor will then use these funds to either make payment of the deposit or towards the purchase price on settlement. We are well experienced at dealing with Kiwisaver providers. If you have any questions or would like any assistance with buying your first home, please get in contact with one of our property solicitors.

It is a bright day for some property owners this July with the relaxing of the Bright-line Test requirement. What is the Bright-line Test The Bright-line test sets a out a timeframe where if a sale of a residential property occurs, the profit gained may count as income and therefore be taxable. However, some exceptions or rollover reliefs may apply that sidesteps the Bright-line rule. The Bright-line Test Historically From its inception in 2015, the Brightline test was set for a period of 2 years. A first amendment extended the period to 5 years if residential properties were purchased between 29 March 2018 and 26 March 2021. A further amendment was then made for residential properties purchased between 27 March 2021 and 30 June 2024 to have the Brightline period for 5 years for qualifying new builds or 10 years for other residential properties. Bright-line Latest Changes As of 1 July 2024, the Bright-line period is reduced back down to 2 years. So, residential properties sold on or after 1 July 2024 that is outside the 2-year period from when it was purchased will not be subject to the new Bright-line test. However, other tax obligations may still apply particularly to those who make a living out of buying and selling residential properties.  Tax obligations may also apply if caught by the “intention test”, the idea being that if you buy a property with the intention of re-selling it to make a profit, you can be taxed. Some Exceptions to the Bright-line Test The Bright-line test does not apply if you are selling your main home. However, the main home must have been used “predominantly, for most of the time” during the period you own it. The test also does not apply to residential properties transferred to the executors, administrators or beneficiaries of a deceased estate. Rollover Relief A rollover relief may also apply. This is when a transferee to whom the residential property is transferred is deemed to have acquired the residential property at the same time as when the transferor acquired the residential property. Rollover reliefs may apply between transferors and transferees who are associated persons such as transfers between certain family members, some transfers of trust property, transfers of relationship property or transfers resulting from separations. However, the associated persons must have been associated for at least 2 years prior to the date of the transfer of residential property. Conclusion Only so much can be said in this article regarding the tax implications in selling a property. It is always prudent to seek legal and tax advice from a qualified professional when doing so. But at least the time frames for Bright-line which was resulting in profits from many rental property sales being taxed have been reduced from 1 July 2024.  Please feel free to contact us for specific advice on your rental property sales.