During these unprecedented times with COVID-19, the term mortgage free holiday has been heard more now than ever. As many New Zealanders' incomes have been negatively affected, which can make it difficult to meet mortgage payments (amongst other payments), a mortgage free holiday may be an option worth considering.
The mortgage free holiday has always been an option for mortgagors even before COVID-19. Its purpose is to offer some reprieve during unexpected events that come up through life such as a change in income, death of a loved one, an injury etc. In the normal course, each bank has their own application process and criteria that is required to be met to be eligible for a mortgage free holiday. If you are approved in the normal course, a mortgage free holiday is usually for 90 days in length. During COVID-19 the banks have worked with the government to create a mortgage free holiday that is for a length of 6 months, with the only criteria required to be met is that you have been affected financially by COVID-19.
It is important to keep in mind when considering a mortgage free holiday that the interest payable will still accrue on the loan amount. This simply means that the principal payments are deferred for the length of the holiday, but since interest is still accruing, your loan amount will increase through the mortgage free holiday, which means that it will take longer to pay back your loan.
There are potential alternatives to a mortgage free holiday such as:
 1. Make interest only payments. This would mean that the principal amount of your loan would remain the same but the interest would not accrue as you would be making this payment.
2. Extend the term of your loan. This would likely make the loan payments less than what you have been previously paying, but again this will potentially mean that you will be paying the loan back over a longer amount of time.
3. Discuss lowering payments with your bank. Many banks will consider the possibility of lowering your payments for a period of time.
 

It is worth remembering that banks must act in a responsible manner and treat mortgagors fair and reasonably, which includes when mortgagors are experiencing financial hardship. With that said, if you are experiencing financial difficulty and making your mortgage payments has/will become difficult, the first action you should take is to contact your bank and discuss all your options in full.
In these times of hardship and uncertainty that have come with COVID-19, a mortgage free holiday is a way to relieve some of the financial stress from life at the moment. However, as illustrated in this article, it is important to understand the repercussions of a mortgage free holiday in the long term.

In 2020, it would be hard to come across a New Zealand household who has not either had a member of the household claim ACC for an injury or at least known someone that has had to. Statistics New Zealand reports that in 2018 alone, there were just short of 240,000 work place injury claims across the country. With so many people relying on ACC to maintain a livelihood, what do employees and employers need to know about their rights in the process?
If an employee is injured in their workplace and meets the ACC pre-requisites to receive compensation for their wage/salary, under the Accident Compensation Act 2001 ("the Act") the employer must account for the first week of the employee's wage (of up to 80% of their normal weekly wage) if they are incapacitated due to the workplace injury.
This provision further encompasses employees with multiple jobs, whereby if the injury has incapacitated the employee, resulting in them losing the opportunity to earn a wage in their other jobs also, the employer of the job on which the employee was injured must also cover the wages for the employee's other jobs for the first week of the employee's injury leave.
As an employer, if your employee obtains a workplace injury, you are entitled to complete due diligence investigations to ensure their injury and leave is justified. For example, you may pay for the employee to go to a medical or health professional to be assessed and require a medical certificate is provided that reiterates the state of the injury and
medical recommendations.
 

In recent years, many employers have tried to make employees take their sick/holiday leave whilst on ACC. This cannot be enforced and is a breach of the Act. However, if an employee cannot work because of an injury obtained outside of work, under the Act, an employer can make the employee use any unused sick leave in that first week of incapacity.
Whilst on leave for a workplace injury, the Act and the Human Rights Act 1993 provide protections for employees from being dismissed during their injury leave. An employer is permitted to dismiss the employee only if through a thorough process of medical examinations/evidence and professional advice it is determined that the employee will not be able to return to the job or an adapted version of the job at any point. The case of McKean v the Board of Trustees of Wakaaranga School ([2007] ERNZ 1) sets out a series of factors which should be seriously considered and investigated prior to dismissal by an employer on medical grounds. These factors, amongst others, include the length of employment, type of employment, nature of the injury and probability of recovery.
In many cases, whereby the injury leave is more than a week, the employer and employee can agree that the employer will top the employee's ACC compensation wage up to 100% by using existing sick leave available to the employee. There is no obligation on either party to do so however.
If you are an employer where a workplace injury has occurred, and you are unclear on your obligations, it is advisable that you contact ACC and/or an ACC legal professional as soon as possible.
 

Redundancy can be defined as a situation where an employee loses their job because their position is no longer needed or useful to the employer. As in all employment affairs, the employer must act in good faith and follow a fair process during the redundancy process.
The process of redundancy can be an emotional time and cause uncertainty for many employees and this is one reason why the redundancy option, from an employer's perspective, should be a last option. Redeployment should always be considered in the first instance, where applicable.
To start the redundancy process, the following steps must be followed:
1. Employers are to document their proposal in writing. This document needs to clearly explain the changes that will be made to the business, an outline of how the employer will be making their decision, and timeframes for the employer's decision making process.
2. The employer then gives this written proposal to all employees in a similar category of employment and is required to allow employees the ability to meet with the employer to discuss further and to invite the employees to provide their feedback.
3. The employer then gathers the feedback and considers all responses received.
4. After considering all the feedback, the employer will confirm the new structure of the business. This should be given to all employees in writing followed by a meeting with the employees.

 

The Trusts Act 2019 was passed into law in the same year and becomes operative on 30 January 2021. The time in between remains critical as we all review the changes outlined. Existing best practice around trust law, together with the thinking and documentation dovetailed into the mix, is currently in the process of being updated around the country.

The last statutory rethink around trusts was in 1956. Both the use of trusts and how they have been judicially interpreted, has been major and influential during the period since then. What trusts have been used for, what they have been used to protect and how they have affected the structure of corporate life along with family succession planning - these are the contributions trust law have made.

The new Act updates current thinking while requiring greater transparency with beneficiaries regarding basic trust information, thereby satisfying current decision making norms and trends. Whether trust busting had been necessary for fairness and equity, or judicial and other forms of the decisions and administration, our relationship with trusts has evolved markedly.

A trust has three main players: the Settlor, the Trustee and the Beneficiary - and multiples of each of these. As each individual trust is reviewed in the light of the new Act, important questions need to be asked again by and of each 'player' to ascertain its relevance. A Settlor will ask whether the underling objectives and reasons for setting up the trust remain relevant. The Trustee will ask whether the true role is being carried out with independence of thought along with rigour of decision making. Linked to that is whether the liability associated with the future scrutiny of what the trust does, is worth the risk of being a trustee at all. The Beneficiary muses on whether he or she has the right to seek and receive information as the trust progresses on, bearing in mind whether they are discretionary or final beneficiaries.
 

Many of the changes made are linked to either common law or statutory rights in the trust law arena being challenged or examined. Accordingly, as at the operative date of the Trust Act, each trust must be revisited to reach an upgraded level of compliance and equity. Documentation must include reasons, timely interventions to maintain asset values, and accurate directions to best guide the assets entrusted to a trustee's care. Personal agendas, conflicts and prejudices surrender to the common objects and objectives. Failure to do that will embarrassingly come to light if there is a delving into the workings of the trusts down the track.

A trust may no longer gather dust. All assets must be examined for relevancy and value. These principles require at least an annual meeting followed by a suitable vehicle and process for reporting to all interested parties. Without a doubt a trust is driven by its trustees. Often a trustee could wear the hat of a settlor and/or a beneficiary. There is a strong common law duty of care which falls on to the trustee's shoulders. The key parameters are set out in the updated Act.

Your professional advisors are critical to any overview you may now undertake. Often their trustee companies may provide an independent decision making avenue. It is worth a visit to explore with them how your trust can be transparent and relevant with its operations in 2021, while carrying out in good faith its intended purposes.

 

Residential tenancy requirements revisited

In response to the Covid crises, from 26 March 2020 the Government announced a freeze to residential rent increases and greater protections for tenants against having their tenancies terminated.
The rent freeze is initially for six months. Allied to that, landlords cannot evict tenants over the three months from then, except in exceptional circumstances. Tenants may exit tenancies in the usual manner and under the existing timeframes. Extensions to these dates may be enforced by government regulations at a later date.
Covid-19 aside, there have been changes to landlord/tenant law that you should be aware of by now. The Tenancy Tribunal information updates the underlying position together with amendments, while cross referencing to Healthy Home Standards. Your legal advisor is also able to outline the rights that both landlords and tenants have in the current environment.
Under the relevant legislation in place, more consideration and notice needs to be provided when a tenancy is being terminated. In general, more health and safety issues around insulation, smoke alarms and dry warm houses are being required, and where premises are substandard, known as unlawful residential tenancies, tenants are allowed to exit with only two days' notice.
In this complex area, advice is paramount for both sides of the tenancy equation.

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