Hobec x Lysaght Event – Cross Lease to Freehold

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.

Significant reforms to New Zealand’s overseas investment regime came into force on 6 March 2026, marking a shift toward a more streamlined, risk‑based approach to overseas investment. The changes are intended to reduce processing times for low‑risk investments, while retaining appropriate scrutiny of transactions that may affect New Zealand’s national interest. Key changes include a revised purpose statement, a new national interest test and consent pathways, and a new ability for certain investor visa holders to purchase high‑value (>$5m) residential property. Revised purpose statement The purpose of the Overseas Investment Act 2005 has been updated to more clearly recognise the role overseas investment can play in increasing economic opportunity in New Zealand, while reaffirming that overseas ownership or control of sensitive New Zealand assets remains a privilege rather than a right. This change signals a more facilitative policy stance, particularly for lower‑risk investments, without reducing the Government’s ability to manage risks to New Zealand’s national interest. $5 million‑plus house pathway for qualifying investor visa holders From 6 March 2026, holders of certain investor‑class residence visas may apply for Overseas Investment Office (OIO) consent to buy or build a single residential property in New Zealand valued at $5 million or more. This pathway is available to holders of: Active Investor Plus visas Investor 1 visas  Investor 2 visas Key features of the pathway include: OIO consent must be obtained before acquiring the property (or the agreement must be conditional on consent). The pathway can only be relied on to acquire one residential property. Eligible visa holders can only purchase land that is categorised as ‘residential’ or ‘lifestyle’ under the district valuation roll, and not ‘sensitive’ for any other reason. This would exclude, for example, rural lifestyle blocks over 5 hectares, residential land on certain islands, or residential land adjoining the foreshore. The Overseas Investment Act does not restrict how the house is used, and it may be lived in, used as a holiday home, or used for business purposes. The property may be purchased through a company or a trust, but there are limits on who can hold ownership or control interests. Applications will be assessed under a streamlined process, and LINZ aims to assess most low‑risk applications within 5 working days. Application fees are inexpensive, currently ranging from $2,040 to $3,500 (depending on whether you buy existing or build new). This change represents a targeted easing of the foreign buyer restrictions for investors who commit significant capital to New Zealand. Primary consent pathway and the new three‑stage national interest process A central feature of the reforms is the introduction of a single national interest test, replacing the previous combination of the ‘benefit to New Zealand’, ‘investor’, and national interest tests for most overseas investments. Most applications will now proceed under the Primary Consent Pathway, which applies to significant business assets and most categories of sensitive land (excluding residential land and farmland). The new process operates as a three‑stage, risk‑based assessment: Risk identification stage: the OIO assesses whether the investment gives rise to national interest risks. If no risks are identified, consent will be granted at this stage. The statutory timeframe for decisions under this stage is 15 working days, but the OIO has indicated it aims to assess most low‑risk applications in around 5 working days in practice. Risk assessment stage: if risks are identified, a more detailed assessment is undertaken and consent may be granted with conditions. If the OIO have reasonable grounds to consider that a transaction may be contrary to New Zealand’s national interest, it will refer the application to the Minister of Finance for a decision. Where this stage applies, the timeframe for review increases by 55 working days. Under the current Ministerial Directive Letter, the OIO is expected to complete 80% of applications within half this time. Ministerial decision stage: only the Minister may decline consent, and only where the Minister considers the transaction is contrary to New Zealand’s national interest. The Minister may exercise judgment in this regard but must consider certain factors. The Minister may impose conditions on any consent granted at this stage. There is no fixed statutory timeframe for a Ministerial decision. The current fee for primary consent application is $22,800 for stage one assessment. If the application requires a national interest assessment a further fee of $83,700 applies. Other changes In addition to the headline reforms: New and amended consent pathways have been introduced for different asset types, including a dedicated production forestry pathway. The Overseas Investment Amendment Regulations 2026 support the new regime by defining qualifying investor visas, updating application categories, and making technical amendments to administrative and forestry‑related provisions. A new Ministerial Directive Letter confirms that the OIO must take a risk‑based, proportionate approach, focusing regulatory effort on higher‑risk transactions and aiming for much shorter timeframes than those prescribed for the majority of applications. Important reminders for investors and developers Agreements for sale and purchase involving overseas persons must be expressly conditional on obtaining OIO consent. A general due diligence condition is not sufficient to protect the purchaser and may expose the purchaser to enforcement action or penalties. While statutory timeframes have been reduced and processing is expected to be faster for low‑risk investments, this assumes that applications are complete, accurate, and well‑supported. Incomplete or poorly prepared applications risk rejection, requests for further information, or delays that can undermine transaction timelines. Investors should take legal advice before signing an agreement, submitting a tender or bidding at auction. Land status should be assessed early to avoid unintentional breaches of the regime. Holland Beckett can help with your investment needs including sensitive land assessments and advice on how the overseas investment regime might affect your transaction.

Taking over a commercial lease is not the same as signing a new one. An assignment places you into an existing legal relationship with all its history, obligations, and risks. Assignments commonly arise during business sales or relocations and are often completed under time pressure. However, both incoming and outgoing tenants need to understand that lease obligations do not simply disappear or reset. The legal framework for lease assignments is found in Part 4 Subpart 5 of the Property Law Act 2007 (“PLA”). In summary: The assignee becomes the tenant and assumes the lease obligations. The outgoing tenant remains liable unless formally released. Certain covenants are implied in every assignment. Against that backdrop, here are five key risks every commercial tenant should understand. 1. “Sleeper Rent” – Don’t Assume the Current Rent Is Market Incoming tenants often assume that the rent currently being paid reflects market value. That assumption can be costly. There is usually no warranty that the rent has not been discounted. If the outgoing tenant negotiated a concession, the next market rent review could result in a significant increase. Before taking an assignment, confirm: The review mechanism (market, CPI, fixed increase). When the next review occurs. Whether any side agreements or concessions exist. Never assume the current rent tells the full story. 2. Alterations and Reinstatement – You May Inherit the Bill Most commercial leases allow alterations with landlord consent. However, many also allow the landlord to require reinstatement at the end of the lease. An assignee steps into the tenant’s position. That means you may inherit reinstatement obligations, even for work you did not carry out. Before signing: Review all alteration approvals. Confirm whether reinstatement has been waived. Request photographs or a report showing condition of the Premises as at commencement date of the lease (if available). Clarify the landlord’s expectations at lease expiry. Dormant reinstatement clauses can become expensive surprises. 3. Maintenance – When Did the Clock Start? Repair obligations do not reset on assignment. While a tenant is not generally required to put premises into a better condition than required under the lease wording, broad “good repair” clauses can impose significant obligations especially where no schedule of condition exists. As an incoming tenant, you should: Inspect carefully. Review maintenance records. Confirm what condition the landlord considers acceptable. If structural or building services issues exist, you do not want to discover them at your cost. 4. Suitability and Compliance – The Lease Is Not the Whole Story Most ADLS leases state that the landlord gives no warranty that the premises are suitable for the tenant’s intended use. Responsibility for due diligence sits with the tenant. This includes compliance with: The Building Act 2004. Health and Safety at Work Act 2015. Fire and access requirements. Seismic strengthening requirements. Industry-specific licensing obligations. If compliance issues prevent you from trading, rent will generally continue to be payable. The cancellation provisions in the PLA (ss 245-246) allow landlords to cancel for breach, including non-payment of rent. A premises that “looks fine” may still be commercially unsuitable. 5. Guarantees and Continuing Liability – Assignment Is Not Always a Clean Exit One of the most misunderstood aspects of assignment is continuing liability. Under s 241 of the PLA, the outgoing tenant remains liable unless released. Directors who have given personal guarantees may also remain exposed until the end of the current term. This means: You may remain financially responsible long after selling your business. Liability can continue for years. Release should be expressly negotiated as part of the assignment. Without it, assignment does not equal freedom. Consent to Assignment Landlords cannot unreasonably withhold consent to assignment (under ss 224 and 226 of the PLA). However, what is “reasonable” depends on the circumstances, including the financial standing and experience of the proposed assignee. Early engagement and full disclosure usually smooth the process. Practical Takeaway Assignments of lease can be straightforward but only when approached methodically. Before signing, confirm: The true rental position. Rent review timing. Reinstatement exposure. Repair obligations. Compliance and suitability. Whether outgoing liability will be released. A lease is not simply a commercial document. It creates an ongoing legal interest in land. Stepping into that relationship without proper review can expose you to unexpected cost and stress. Careful due diligence at the front end allows you to focus on running your business not resolving avoidable lease disputes.