On 2 April 2012, a draft of the Credit Contracts and Consumer
Finance Amendment Bill (‘the Bill’) was released by the then Consumer Affairs
Minister, Hon. Chris Tremain. The Bill seeks to amend the Credit Contracts and
Consumer Finance Act 2003 (‘the CCCFA’) by introducing the new principle of
“responsible lending” in an effort to strengthen the legal rights and
protection of consumers when they borrow money.
REASON FOR REFORM
An impressive 250 distinguished members of the community, financial and
business organisations joined forces during a Financial Summit last August to
consider ways of addressing irresponsible lending. Law reforms were considered
necessary in a bid to prevent unscrupulous lenders preying on desperate
borrowers who are often further disadvantaged as a consequence of borrowing.
On 31 October 2011, calls for reform were agreed to by the Cabinet.
THE PRINCIPLE OF RESPONSIBLE LENDING
The principle of responsible lending will create a duty on lenders to take
into account the circumstances of their customers and the effect the borrowing
will have on their lives. The overall objective of responsible lending is to
improve the standard of lending practices within the finance industry.
Proposed key changes to the CCCFA include:
* Making it illegal to lend money to someone whose loan repayments would be
likely to result in substantial hardship. The responsibility of assessing
whether hardship would ensue will be left to the discretion of the lender,
* Requiring more timely and complete disclosure of loan terms – lenders will
be required to make all of their loan terms and fees readily available on
their websites and in their business premises. The change is aimed at allowing
borrowers to make informed decisions,
Inside this edition
cHANGES TO CREDIT
ABOLISHMENT OF GIFT DUTY AND IMPACT ON TRUSTS
THE DARK SIDE OF MORTGAGEE SALES
JOINT TENANTS VS TENANTS IN COMMON
AND NAME CHANGES
* Extending the ‘cooling-off’ period for borrowers to cancel
their loan from three working days to five working days after signing,
* Better controls to prevent misleading, deceptive or confusing advertising,
* Introducing a new, mandatory Code of Responsible Lending under the CCCFA.
This code will set out responsible lending principles,
* Extending the limitation period under the CCCFA on challenging fees as being
unreasonable from one year to three years,
* Obligating lenders to properly consider applications by borrowers for
hardship relief, and provide reasons for their decisions.
Section 41 of the CCCFA currently provides that credit and default fees must
not be unreasonable. The Bill in its current form would further define the
term “credit fees” along with proposing a new test for unreasonableness.
Separate tests are proposed for determining what will constitute unreasonable
credit fees and default fees.
According to the former Consumer Affairs Minister, the terms of the Bill will
result in “the biggest changes to consumer credit law in a decade.” It is
anticipated that the new laws will come into force by mid-2013.
have been a topic of interest lately with high profile figures such as Chris
Cairns and Judith Collins taking legal action against attacks made on their
reputations. A brief summary of defamation law in New Zealand and the main
points that are needed to pursue or defend a defamation claim are set out
WHAT IS DEFAMATION?
Defamation in New Zealand is governed by the Defamation Act 1992 and an
entrenched body of case law. It is an area of law that is designed to protect
a person's reputation against unjustifiable attack. Providing such protection
requires a fine balance between the protection of reputation and the freedom
of expression as contained in Section 14 of the New Zealand Bill of Rights Act
A defamatory statement can be in either written or verbal form. To be
successful, the plaintiff must prove they have been defamed by proving the
following three elements:
1. a defamatory statement has been made,
2. the statement was about the plaintiff, and
3. the statement has been published by the defendant.
Publication is a crucial aspect of this test. It must be proven that the
defamatory statement was published to at least one person other than the
plaintiff. If the statement was published to the plaintiff alone then the test
for publication will fail. Publication of defamatory statements includes the
making of verbal statements.
The four defences in a defamation case are:
1. Honest opinion - the defendant must provide the factual basis on which
their opinion is based. This defence will not succeed if the defendant simply
got the information wrong,
2. Truth - a complete defence is provided if the defendant can satisfy the
court that the defamatory statement was true, or not materially different from
3. Privilege – privilege provides immunity to certain groups of society for
statements or reports made by them. “Absolute privilege” will serve as a
complete defence; an example is where politicians often defame each other in
parliament but are protected by parliamentary privilege. “Qualified privilege”
however can be defeated if the plaintiff is able to show that the defamatory
statements were motivated by malice. Qualified privilege usually attaches to
the requirement for fair and accurate reporting by, for example, the media or
someone with a social, moral or legal duty or interest to report something,
4. Consent - a complete defence is available if it can be established that the
plaintiff consented to the publication of the defamatory material.
DEFAMATION AND THE INTERNET
Given the prevalence of the internet in our daily lives, caution must be taken
to ensure that statements made online are not defamatory. The recent English
case of Chris Cairns against Lalit Modi was the first of its kind in England
where a ‘tweet’ made on the social networking site Twitter was held to be
defamation. The resulting award in damages was equal to approximately £3,750
per word for a 24 word publication. Although this case was decided in England,
it provides a valuable lesson in terms of publications on social networking
sites. (At the time of writing, it was reported that Mr Modi would be
appealing the decision).
The abolishment of gift duty in October last year has changed
the nature of asset and estate planning by making it possible to gift
unlimited amounts directly to a trust in one transaction. There are however,
certain consequences that donors (people making a gift) need to be mindful of
when considering the amounts they wish to gift. Some of these are discussed
RESIDENTIAL CARE SUBSIDY ENTITLEMENT
Despite the changes to gift duty, the eligibility requirements for a
residential care subsidy have remained the same. One of the eligibility tests
for a means assessment is that the donors do not deprive themselves of assets
for the purposes of qualifying for a residential subsidy. Deprivation of
* gifts in excess of $6,000 per year in the five year period prior to applying
for a residential care subsidy, and
* gifting that exceeds $27,000 in any 12 month period prior to the five year
If you wish to avoid jeopardising your eligibility for a residential care
subsidy, the amount gifted per year will need to be calculated carefully.
SOLVENCY AND CREDITOR PROTECTION
The ability to gift unlimited amounts at any time provides donors with a
greater degree of creditor protection than before. However, donors should be
aware that any gifts that are made with the intention to defeat creditors can
be set aside at any time under the Property Law Act 2007.
Assessing the solvency of a donor at the time of gifting is
also important in the event of a donor becoming bankrupt.
Under the Insolvency Act 2006, a gift may be cancelled if it was made within
the two years immediately prior to the donor’s bankruptcy (Section 204). If a
bankrupt donor is unable to pay their debts, any gifts made between two and
five years immediately before bankruptcy may also be cancelled (Section 205).
A donor wishing to preserve their entitlement for a residential care subsidy
who also desires to protect their assets faces a tricky conundrum. Gifting
large amounts/assets to a trust may jeopardise a donor’s entitlement for a
residential care subsidy. Certain balances must therefore be struck to achieve
the intended outcome.
ACCESS TO TRUST ASSETS
Under the previous gifting regime, transferring an asset to a Trust usually
created a debt which was written off over a period of time. The debt was an
asset of the transferor, and could be called upon at any time by the donor if
they needed access to funds. Gifting an asset in its entirety on the other
hand has the effect of a donor relinquishing complete control over that asset.
You cannot simply ‘unwind’ the gift. In this regard, adhering to traditional
gifting regimes and leaving a loan outstanding in relation to the asset may
give some donors greater leverage and will assist in ensuring that there are
monies available to the donor personally if needed.
There are numerous other considerations that a donor should be aware of before
any significant amounts are gifted. The impact of gifting on relationship
property and family protection for example, are two such considerations. It
may be wise to discuss your goals with a lawyer and accountant to assess how
best to achieve them.
While our economy recovers from the recent global recession,
signs of economic lags continue to make its presence felt through increasing
numbers of mortgagee sales. Figures reveal that by November last year, 1,535
properties were brought to market as mortgagee sales compared to just 571 in
2007. The prevalence of mortgagee sales provides an opportunity for some
buyers to potentially “grab a bargain”. However, buyers should remain vigilant
as the risks attached to mortgagee sales are significant.
DIFFERENCES IN AGREEMENTS
Agreements used in mortgagee sales usually differ from standard Sale and
Purchase of Real Estate Agreements whereby amendments are made to greatly
favour and protect the mortgagee. For mortgagee sales, vendor warranties that
are contained in standard agreements are usually removed, as is the obligation
to provide vacant possession. There have been cases where previous owners or
tenants have refused to vacate the property even though it has been sold. In
such situations, the issue of removing unlawful occupiers becomes the new
REMOVING UNWANTED OCCUPIERS
The options for removing unwanted occupiers include obtaining and enforcing a
trespass notice pursuant to the Trespass Act 1980 and/or a possession order
pursuant to the Residential Tenancies Act 1986 (‘the Tenancies Act’). Section
65 of the Tenancies Act provides that a legal owner of a property can apply to
the Tenancy Tribunal for a possession order that can then be enforced to evict
unlawful occupiers. While in theory the process seems straightforward, the
reality remains that whilst the buyer is obtaining a possession order, the
risk of the property being damaged by the unlawful occupants is significant.
PROTECTION AGAINST DAMAGE
Mortgagee sales often leave behind disgruntled mortgagors (previous owners)
and it is not uncommon for properties to be vandalised after the mortgagee has
sold the property and prior to possession. Obtaining insurance cover for the
property upon signing the agreement for its purchase is therefore highly
recommended. If purchasing at auction, insurance should be arranged before
bidding so that insurance cover is effected immediately upon the sale taking
It is important to note that chattels (such as stoves, light fittings,
curtains and carpet) are not included in mortgagee sales. This means that the
previous owner is well within their rights to remove such items from the
property, as they retain ownership of the chattels despite the mortgagee sale.
The lesson here is simple - know the terms of a mortgagee sale well and be
aware of the risks. There are numerous other matters that a buyer should be
conscious of beyond those discussed above. It would be wise to consult a
lawyer prior to signing the purchase agreement - particularly when dealing
with unit titles or cross leases. Doing so may prove a worthy investment
considering the potential headaches it could save in the future.
In New Zealand, when purchasing a property personally with
another party you can choose to own the property as Joint Tenants or Tenants
in Common. Property can also be registered under the Joint Family Homes
regime, however a Bill is currently before Parliament to repeal the Joint
Family Homes Act 1964, so this option may no longer be available.
Deciding which form of ownership to use depends entirely on your personal
circumstances. The differences between Joint Tenants and Tenants in Common are
explained briefly below.
Joint tenancies arise when two or more people (‘joint tenants’) buy a property
together and their shares in the property are undivided and undefined.
One important feature of a joint tenancy is the right of survivorship. This
means that when one of the joint tenants dies, their share in the property
will transfer to the surviving joint tenant(s). The interest in the property
therefore is not available for disposal under a Will or under an intestacy.
Joint Tenancy ownership is most commonly seen in purchases by a husband and
wife who intend on owning the property equally and passing their share to the
survivor in the event of death.
TENANTS IN COMMON
Tenancy in Common allows for owners to hold a distinct share of a property.
There is no requirement that a Tenancy in Common must result in equal shares
of ownership. The amount of a person’s interest in the property will most
likely be recorded on the title, for example: "Mark Smith as to a 1/3 share
and Jane Brown as to a 2/3 share”.
One major advantage of owning property as a Tenant in Common is
that the owners are able to dispose of their share in the property in
accordance with the terms of their Will. If a person does not have a Will,
their share in the property will be distributed in accordance with the
provisions of the Administration Act 1969. It is therefore important that
owners have a valid Will in place that clearly sets out how the property is to
be dealt with after their death.
A Joint Tenancy can be severed unilaterally to become a Tenancy in Common.
This may be opportune in the event of bankruptcy of one of the joint tenants
or the breakdown of a relationship. Where a relationship ends, it is often
crucial that an existing joint tenancy is severed to prevent a share of the
property being transferred to an ex-spouse in the event of either spouse’s
death prior to resolution of relationship property matters.
For couples wanting to buy a property together, it is important to consider
the effect each type of ownership will have on them. Relationship property and
family protection implications are significant. It may be an option to enter
into a contracting out agreement under the Property (Relationships) Act 1976
or a property sharing agreement to set out more detailed terms and provisions
regarding the ownership of the property.
CHANGES TO BUILDING LAWS
A comprehensive review of
the Building Act 2004 during 2009-2010 resulted in the enactment of the
Building Amendment Act 2012 (‘the Act’). The Act received royal assent on 12
March 2012 and is aimed at lifting the overall performance of the building and
construction sector. Some provisions that immediately came into effect on 13
March 2012 include:
* new provisions (sections 90A - 90D) that relate to Owner-Builder Exemption
from Restricted Building Work,
* new provisions (sections 14A-14F) that clarify the responsibilities of the
parties involved in building work,
* changes to the compliance schedule and Building Warrant of Fitness regimes
that affect councils and building owners, and
* a clarification of some aspects of the Licensed Building Practitioners
Further provisions of the Act will come into force at a later date to be
appointed by the Governor General. For more information please visit
AND NAME CHANGES
Individuals are able to assume a partner’s name immediately
after getting married without any formal procedures. It is not necessary to
register a name change. In such situations, both the maiden name and new name
of a person will be recognised.
When changing names on bank statements for example, a marriage certificate
will be sufficient evidence to validate the change. Passports can remain
unchanged and carry a maiden name.
However for those wanting to record a name change officially, an application
can be made to Births, Deaths and Marriages by making a statutory declaration
and completing a name change form. If you were born in New Zealand, changing
your name by this method will result in your birth certificate being amended
to record the new name.
For more information, please visit
or call 0800 22 52 52.
If you have any questions about the newsletter items,
please contact me, I am here to help.
Scannell & Co - 122
Queen Street East, Hastings
(06) 876 6699 Fax: (06) 876 4114 Email:
information in this newsletter is to the best of the authors' knowledge true
and accurate. No
liability is assumed by the authors, or publishers, for any losses suffered
by any person relying directly or indirectly upon this newsletter. It
is recommended that clients should consult Simon Scannell before
acting upon this information.
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