Hobec x Lysaght Event – Cross Lease to Freehold

When purchasing a property, buyers often focus on the title, LIM report, building inspection and finance arrangements. However, in many modern subdivisions there is another layer of ownership and responsibility that can be just as important: the residents\' society. Residents\' societies have become increasingly common in New Zealand subdivisions, particularly for townhouse developments. Developers commonly use residents\' societies for practical and legitimate reasons. They may be required to satisfy council or resource consent requirements. They also provide a structure for managing shared infrastructure, landscaping and communal areas or facilities, and offer an alternative to body corporate structures in developments that do not sit comfortably within a unit title model. Membership is usually tied to ownership of a lot within the development and continues for as long as the property is owned. Before committing to a purchase, it is worth understanding how the residents\' society operates and what responsibilities come with membership. Not All Residents\' Societies Are the Same Many purchasers assume residents\' societies operate much like a body corporate. In reality, they are governed by their constitution, land covenants, encumbrances and related documents. Incorporated societies legislation may also apply to some residents’ societies. As a result, the rights, responsibilities and costs can vary significantly from one development to another. The quality of the governance arrangements often depends on how well the documents have been drafted. What works well in one development may create practical difficulties in another. Questions Every Purchaser Should Ask 1. What Communal Assets Am I Responsible For? One of the first questions a purchaser should ask is what assets the society owns or manages. Some societies may be responsible for little more than a landscaped entranceway. Others may own or maintain substantial infrastructure such as roads, drainage systems, lighting, access lots or recreational facilities. Understanding what is owned by the society, and what maintenance obligations exist, is critical to understanding the true cost of ownership. 2. How Much Will I Be Required to Contribute? Most residents\' societies collect levies to fund maintenance, administration and future capital expenditure. Not all societies allocate levies equally. Some constitutions contain different levy arrangements for different categories of owners or properties. Purchasers should understand: •how levies are calculated; whether all owners contribute equally; what current levies are; whether there are any planned increases; whether there is a long-term maintenance fund; whether major expenditure is anticipated in the future; and whether owners are keeping up with levy payments. A society that has not set aside enough for future maintenance may simply be pushing costs onto future owners. Unpaid levies can also place financial pressure on other members. 3. Is There a Professional Manager? One issue that is often overlooked is who is actually responsible for the day-to-day operation of the society. A poorly run society can be a major source of frustration. Some residents\' societies engage a professional manager to arrange maintenance, collect levies, organise meetings, maintain records and generally ensure that the society operates effectively. Others rely entirely on volunteer owners. The existence of a professional manager and the operation of the committee are important matters to consider. Owner-run societies can work well, but they can struggle if there are insufficient owners willing to organise maintenance, enforce rules, collect levies or manage disputes. Deferred maintenance and poor administration can become significant issues over time. Purchasers should also consider the term and flexibility of any professional management arrangements. Long-term management agreements can provide continuity and stability during the development and early ownership phases, particularly while shared infrastructure is being established and responsibility is transitioning to owners. At the same time, if service levels decline, fees increase or concerns arise regarding independence, owners may want to understand what ability exists to review or appoint a different manager. Understanding the terms of any management agreement is therefore important. 4. Is the Developer Still in Control? In developments that are still being completed, it is not uncommon for a developer to retain certain rights while construction and sales continue. These are often referred to as \"developer control\" or \"controlling member\" provisions. These arrangements often exist for legitimate reasons. In a staged development, the developer may need to complete future stages, maintain design and operational standards across the development, coordinate shared infrastructure, and ensure ongoing compliance with resource consent requirements while the development is still being delivered. A purchaser should understand: whether the developer retains special voting rights; whether the developer can override decisions of members or the committee; whether the developer can appoint committee members or managers; when any special rights expire; and whether the developer\'s interests remain aligned with those of existing owners. Such provisions are not necessarily problematic in a staged development, but purchasers should understand who controls the society, why those rights exist and how decisions are made before committing to the purchase. 5. Incorporated or Unincorporated? Not all residents\' societies are structured in the same way. Some are incorporated societies with a formal legal structure. Others rely on private governance arrangements contained in land covenants, encumbrances, easements or contractual agreements between owners. Both structures are commonly used in subdivisions and can work well where the governance documents are clear and suited to the particular development. For unincorporated arrangements, the underlying documents are especially important because there is no dedicated legislative framework sitting behind the arrangement. The governance documents therefore need to set out clearly how decisions are made, how obligations are enforced and how the structure will operate over time. They also need to be sufficiently future-proofed. What appears to work when a subdivision is first established may need to operate in different circumstances 10 or 20 years later. If the society’s constitutional documents require changes in the future, purchasers should understand how amendments can be made and what level of owner approval is required. 6. Is the Society Financially Healthy and Functioning Well? Purchasers should look beyond the legal documents and seek to understand how the society operates in practice. Questions worth asking include: Is there a functioning committee? Are levies being collected and paid on time? Are adequate funds being set aside for future maintenance and renewal? Are there any ongoing disputes between members? Is there a long-term maintenance or asset management plan? Meeting minutes, budgets and maintenance plans can often provide more insight into the health of a society than the title documents alone. 7. What Happens if the Society Is Wound Up? Although winding up a residents\' society may be unlikely in most developments, it is still worth understanding the position where a society owns land or communal infrastructure. Many purchasers assume that those assets will automatically pass to the owners if the society is ever wound up. However, for an incorporated society, that position is influenced by legislation. At present, that legislation is problematic and may require distribution of the society’s assets to another not-for-profit entity. This is unlikely to be a day-to-day issue for most purchasers, but it is one of the matters that can be relevant to understanding what happens to society-owned land and assets if the structure were ever brought to an end. Documents to Request Before Buying Before purchasing a property that is subject to a residents\' society, purchasers should consider obtaining: the society constitution and rules; all relevant land covenants, encumbrances and consent notices; the relevant resource consent conditions affecting the development; current levy information and recent financial accounts; maintenance plans, asset management plans and budgets; minutes of recent committee and member meetings; any management agreement with a professional manager; and confirmation of any levies or other amounts outstanding against the property. These documents often provide a much clearer picture of the practical operation of the development than the title itself. Final Takeaway A residents\' society is not simply an administrative formality. It determines how communal assets are maintained, how decisions are made, what costs owners must contribute towards and what obligations continue long after settlement. Understanding the residents\' society is just as important as understanding the title itself. Talk to Us If you are considering purchasing a property in a development with a residents\' society and are asking, “What am I actually signing up to?”, we can help you understand the governance arrangements, ongoing obligations and potential risks before you commit to the purchase. A clear understanding of the residents\' society before you go unconditional can help avoid unexpected costs, disputes and surprises after settlement.

From 15 January 2026, New Zealanders can build one small, standalone, single‑storey dwelling up to 70 m² (often called a “granny flat”) without a building consent, provided every condition of the new national exemption is met and the required process is followed. At the same time, a new National Environmental Standard allows one detached minor residential unit per site in most zones without a resource consent, if standard planning criteria are met. These two regimes operate side by side and you must comply with both. What changed in 2026? Two separate legal changes now apply. 1. Building consent exemption (Building Act 2004) You may build a small, standalone dwelling up to 70 m² without a building consent if: the design and construction meet all exemption conditions; and the work is done or supervised by licensed building professionals (“LBPs”), and licensed plumbers, drainlayers, gasfitters and electrical workers. Before work begins, you must obtain a Project Information Memorandum (“PIM”) from your council. When the build is completed, you must submit final documentation to the council for its records. Councils do not inspect exempt work and do not issue a Code Compliance Certificate, but they will hold your documents on the property file. 2. Planning rules: National Environmental Standards for Detached Minor Residential Units (“NES DMRU”) The Resource Management (National Environmental Standards for Detached Minor Residential Units) Regulations 2025 make one detached minor residential unit per site a permitted activity in most residential, rural, mixed use and Māori purpose zones, provided national standards are met. These national standards cover: maximum size (≤70 m²); boundary setbacks; site coverage; and compliance with relevant district and regional plan rules (for example, natural hazards or infrastructure constraints). Councils may be more lenient than the national standards, but cannot be stricter. If any national standard or district/regional plan rule is not complied with, a resource consent is required. Why this matters? MBIE estimates that the 2026 changes can: save around $5,650 in direct consenting costs; and reduce build timelines by approximately four weeks. However, owners and professionals now carry greater responsibility for Building Code compliance, documentation and quality assurance. Councils may still collect development contributions at the PIM or notification stage. The essentials you must meet to be eligible for the exemption 1. Form & size The dwelling must: be new, detached and single storey; be no more than 70 m² internal floor area (an internal garage is allowed); not have a mezzanine floor. 2. Siting & placement (planning rules) Under the NES DMRU, one unit per site is permitted if the national standards are satisfied. These typically include: a maximum size of 70 m²; site coverage caps (often no more than 50% in residential zones); and boundary setbacks (commonly at least 2 metres in residential zones). District Plans may allow more generous rules, so always check your council’s website and your PIM for site specific requirements, overlays and hazards. 3. Structure & materials Construction must be simple and lightweight (e.g. timber or light gauge steel framing, lightweight roof, wall claddings within weight limits). Heavy, complex or experimental systems will usually trigger the need for a full building consent. 4. Building Code still applies The NZ Building Code applies in full. There are no waivers under the building consent exemption. All restricted building work must be carried out or supervised by LBPs, and designers must provide a certificate of work and builders and trades must provide records of work. 5. Process & paperwork Before construction: Apply for and receive a PIM using Form 2AA (a new prescribed form). During construction: LBPs must build to the plans and specifications, supervise unlicensed workers and keep records. On completion: Within 20 working days, submit final plans, certificates of work, records of work and trade certificates to the council. These documents are added to the property file and LIM. No code compliance certificate is issued for an exempt build. Where do people go wrong? Skipping the PIM: starting work without one disqualifies you from the building consent exemption. Failing NES DMRU standards: breaching setbacks or coverage rules means a resource consent is required. Failing to meet Council standards: compliance with the NES DMRU permitted activity standards on its own is not enough. You need to ensure compliance with district/regional plan rules. Over‑complex design: features such as wet‑room tiled showers, level‑entry detailing or solid‑fuel burners may fall outside the “simple build” intent and trigger consent. Poor documentation: missing certificates or records of work can affect insurance, financing, valuation and resale. Unexpected fees: councils may still charge costs at the PIM or notification stage. How can we help you with this process? 1. Site due diligence (before design) We review titles, easements, covenants, encumbrances, cross‑leases and unit titles to identify restrictions on a second dwelling. We also check LIM notices and assess NES DMRU standards alongside district plan rules, including natural hazard constraints. 2. Planning strategy and NES DMRU compliance If a proposal does not meet a national standard or a rule in a district plan (for example, a boundary setback), we advise on options. 3. Contracts with designers/builders (and LBPs) We review contracts to ensure risk is allocated appropriately and ensure: quality assurance checkpoints; delivery of all certificates and records of work; insurance, warranties and variation controls; and contract terms reflect the no inspection exemption pathway. 4. Wider advice: tax/tenancy, ownership, asset planning For family occupation, we can document occupancy arrangements and advise on trusts, companies, co‑ownership or future subdivision pathways (noting subdivision rules are separate).

What happens when a mortgagor defaults and when can a mortgagee exercise a power of sale: In circumstances where a loan advance is secured by a mortgage over land and the borrower (Mortgagor) defaults in their payment or other obligations owed to the lender (Mortgagee), the Mortgagee’s right of action against the Mortgagor becomes exercisable, entitling the Mortgagee to take steps to enforce its mortgage security to recover the outstanding loan amount. The exercise of a Mortgagee’s rights and powers against a Mortgagor in default are governed by strict requirements under the Property Law Act 2007 (Act) and are subject to the terms of the underlying loan agreement and/or security documentation (together, the Loan Agreement). Importantly though, any term of a Loan Agreement that conflicts with certain provisions of the Act is considered ineffective and unenforceable – these provisions of the Act cannot be contracted out of and will prevail over any inconsistent terms in a Loan Agreement. Notice Requirements When a Mortgagor is in default of the terms of their Loan Agreement, the rights and powers conferred on the Mortgagee are considerable and can have a significant impact on a Mortgagor. Therefore, a Mortgagee may only exercise its powers of enforcement after giving valid and effective notice to the Mortgagor of the default, or defaults, (Default Notice) and the Mortgagor has been given an opportunity to remedy the default(s) within a specified period of time from service of the Default Notice (the Remedial Period). Thus the Act provides statutory safeguards against arbitrary enforcement action by a Mortgagee against a defaulting Mortgagor, whilst preserving and codifying a Mortgagee’s rights and powers. The Act specifies that a Default Notice must “adequately inform” the Mortgagor of: the nature and extent of the default; the action required to remedy the default (if it can be remedied); the timeframe in which the default must be remedied, being not less than 20 working days (or 60 working days in certain circumstances) after service of the Default Notice on the Mortgagor; and the consequences that will follow if the default cannot be or is not remedied within the timeframe specified. Mortgagee’s Powers If a Default Notice has been issued, and following expiry of the Remedial Period the default remains unremedied, the Mortgagee becomes entitled to exercise its “powers” by doing any or all of the following: selling the mortgaged property or any part of it (commonly known as a mortgagee sale); entering into possession of the mortgaged property; appointing a receiver to manage the mortgaged property and recover income from the mortgaged property; and/or calling up as due and payable all amounts secured by the mortgage prior to the term expiry date (in circumstances were the term of the loan has not yet expired). Any attempt by a Mortgagee to exercise such powers prior to issuance and expiry, without remedy, of a Default Notice will be unlawful and can expose a Mortgagee to a claim for damages and/or injunctive relief by the Mortgagor. For this reason, a Mortgagee seeking to exercise its powers against a Mortgagor in default must take care to ensure strict compliance with the notice requirements in the Act. Acceleration Most standard form loan agreements contain an “acceleration clause” providing that on default by the Mortgagor all amounts secured by the mortgage become payable, or may be called up as payable, earlier than would be the case if the Mortgagor was not in default. So, for example, a Mortgagee and a Mortgagor have agreed that the term of a loan is 20 years from the date of advance of the principal sum, meaning the Mortgagor has 20 years to make scheduled repayments of the principal sum plus interest, costs and any other charges. The Mortgagor agrees to make fortnightly repayments to the Mortgagee during the term of the loan. However, five years into the 20 year term, the Mortgagor defaults in their obligations by failing to make the agreed fortnightly repayments when due. This means the Mortgagee is contractually entitled to “accelerate” the repayment of the loan by requiring the Mortgagor to repay the full principal sum (together with interest, costs and other charges) immediately, without having to wait for the 20 year term to expire. However, before a Mortgagee can rely on an acceleration clause, a valid and effective Default Notice must first be issued to the Mortgagor and have expired without remedy. Extended Remedial Period In most cases, the minimum Remedial Period will be 20 working days after the date of service of the Default Notice. However, in situations where the Mortgagor has defaulted in repayment of the principal sum on the term expiry date but has continued to pay interest, and the Mortgagee has accepted those interest payments, for a period of three months or more after the term expiry date (and so long as there are no other defaults existing) then the Default Notice must allow a Remedial Period of at least 60 working days after service, before the Mortgagee may exercise its powers of enforcement. Service A Mortgagee will be expected to prove that it has formally served the Mortgagor with a Default Notice, which has expired without remedy, before the Mortgagee is entitled to exercise any of the powers. In addition to service of the Default Notice on the Mortgagor, the Act requires that other specified parties be served with a copy of the Default Notice, but only if the Mortgagee as actual knowledge of those parties’ names and addresses. The parties required to be served include any former mortgagor, covenantor/guarantor, subsequent mortgagee, any holder of any other subsequent encumbrance, caveator or any person who has lodged a notice of claim under the Property (Relationships) Act 1976. Because a Mortgagee’s right to exercise its powers only becomes available following service of a Default Notice and expiry of the Remedial Period, the Default Notice must be validly and effectively served on the Mortgagor (and any other person required to be served). Compliance with the service provisions of the Act is mandatory and failure to adequately serve a Default Notice has the potential to restrict or delay the Mortgagee exercising its powers. Such a failure also allows scope for a Mortgagor to challenge the Default Notice and/or seek to prevent or injunct the Mortgagee’s exercise of the powers. Such steps can result in a Mortgagee having to restart the process of serving a Default Notice, costly delays, Mortgagee liability and/or litigation. A Mortgagor served with a Default Notice should contact the Mortgagee and seek legal advice without delay. Usually by the time a Mortgagee issues a Default Notice the Mortgagor has been in default of its obligations under the Loan Agreement for some time and the Mortgagee’s previous requests for remedy have been ignored. In our experience, proactive engagement by a Mortgagor is much more likely to lead to the parties being able to find mutually acceptable solutions. Holland Beckett can provide advice and assistance to Mortgagees and Mortgagors in respect of their rights and obligations under the Act.