Lease Agreement versus Tenancy Agreement - What is the difference?
We regularly see clients interpreting lease agreements and tenancy agreements as being the same document. However, while both agreements are similar, it is important to understand the differences.
 

Lease Agreements ("Lease")
A Lease is a contract between a landlord and a tenant for a commercial building. Leases are typically very detailed in regards to the conditions of the tenancy so that there are no discrepancies or issues during the term.

Leases cover the responsibilities ("warranties") of both the tenant and landlord in detail. Some warranties given by the landlord are in compliance with the Health and Safety at Work Act 2015 and to act reasonably when considering an assignment of the lease to a third party during the term.

Leases will typically include details such as the term of the Lease, its expiry date, the monthly rent payments, rent reviews and rights of renewal. There is an inherent benefit of including rent review dates and rights of renewal because this ensures that the landlord cannot arbitrarily raise the rent or cancel the Lease. However, it also ensures that the tenant cannot leave the property before the end of the term without repercussions.

If the existing lease reaches its expiry date, the lease is at an end. If the tenant does not leave the premise, under the Property Law Act 2007 they will be considered to be on a month to month tenancy. Therefore, if the tenant(s) wish to remain in the property, both parties must enter into a new Lease. The landlord has the option to renew the terms of the old lease or is free to change the terms and rental amounts as they see fit.

If you are in a commercial setting, in order to ensure the long-term letting of your premises, we recommend that you enter into a Deed of Lease.

Tenancy Agreements
A tenancy agreement is used for tenants of residential properties and is subject to the Residential Tenancies Act 1986 ("Act"). Where tenancy agreements include the obligations of either party, they are generally not as detailed or stringent as the warranties included in Leases. Some key responsibilities of landlords are maintaining the property in reasonable condition and allowing the tenant quiet enjoyment of the property.
 

There are two types of tenancy: periodic tenancy (lasting longer than 90 days) and fixed term tenancy. This article will focus on periodic tenancies.
Like a Lease, at the end of the periodic tenancy agreement term, the landlord can alter the terms of the tenancy agreement. However, if a tenant does not intend on renewing the tenancy agreement they have to give the landlord 21 days' notice prior to the expiration of the tenancy agreement in accordance with the Act.

We note that a periodic tenancy typically requires that the landlord give 90 days' notice for the tenant to vacate premises in accordance with the Act.
Tenancy agreements are suited to short term tenants such as people who are transitioning and are often used in residential rental properties.

Pros and Cons
Both lease and tenancy agreements have their advantages and disadvantages.

Rental agreements allow landlords to rent properties that might not be desirable to long-term renters. It is advantageous when rental amounts can rise quickly, allowing the landlord to renegotiate the terms of the agreement more regularly than a lease.

A Lease, on the other hand, is advantageous to a landlord by providing the stability of guaranteed, long-term income. It is advantageous to a tenant because it locks in the rental amount and length of lease and cannot be changed even if property or rent values rise.
When drafting a Lease or tenancy agreement, we recommend you seek the services of lawyer.
 

Alternative Dispute Resolution ("ADR") methods are an alternative option to going directly to court. Using ADR methods instead of pursuing the matter in court is commonly more cost effective for the parties involved, ADR may also take less time to resolve the dispute. ADR relieves the court of cases which they believe can be resolved without court assistance. This article is the third and final article in our ADR article series and will focus on negotiation.

Negotiation is usually the first method of dispute resolution used when a dispute occurs. This is because negotiation has the ability to be quick, inexpensive and provide a binding resolution.
There are two types of negotiating methods commonly used, unassisted negotiation and formal negotiation. The difference between formal and unassisted negotiation is the involvement of lawyers. Unassisted negotiation is when the parties involved in the dispute negotiate directly with one another. In formal negotiations all correspondence will go through the parties' respective lawyers.
Unassisted Negotiation
Unassisted Negotiation is an inexpensive option in comparison to formal negotiation as all it costs the parties is their time. Occasionally, lawyers have the ability to polarise the matter and cause the other party to be defensive. Therefore, depending on the nature of the dispute, attempting unassisted negotiation has the potential to be more beneficial than immediately sending the correspondence through a lawyer. However, we do recommend seeking the advice of a lawyer to find out your entitlements in any dispute.
In most cases, we find that parties can resolve the issues themselves via unassisted negotiation. However, if the parties are entrenched in their views or have a sense of grievance, this type of dispute resolution can become ineffective. At this point, it becomes necessary to turn to other types of ADR options, one being formal negotiation.
 

Pros and Cons of Negotiation as a dispute resolution method
 

Pros
Negotiation in general gives the parties a higher degree of control to create their own process and craft their own agreement that is not required to be dependent on each parties' entitlement under the law. It can be more time effective than any of the other dispute resolution methods, is generally more informal, and typically less stressful.
A benefit of involving a lawyer and engaging in formal negotiation is the introduction of an objective third party which may improve communication between parties and preserve or enhance the relationship.
 

Cons
One issue is that negotiation, formal and unassisted, is far from guaranteed to succeed before it is necessary to resort to some other more formal and structured method of dispute resolution. This may take the form of mediation or arbitration which are discussed in our previous two articles.
Any type of negotiation regularly requires the parties to compromise. This can cause issues if both parties are uncompromising in their approach. If this is the case, usually another method of ADR is required.
Formal negotiation incurs legal costs. Furthermore, if the formal negotiation does not work, the parties may see it as a wasted cost and time.
 

Conclusion
We recommend that, if possible, the parties attempt unassisted negotiation first as this will save the parties legal costs. If unassisted negotiation does not resolve the issue(s), we recommend seeking legal advice as to which ADR method would be best suited to your dispute.

A If you are considering purchasing land with the intention of subdividing or if you are simply looking to increase the value of your existing property by adding an additional house, there are a couple of things that you will need to understand before taking the leap, so to speak.
A subdivision involves the conversion of one large property, whether it be a parcel of land or a building, into two or more parts, to enable those parts to be sold or split into separate ownership.
To do this, a specific kind of resource consent, called a "subdivision consent", is required from the relevant local Council.
The statutory requirements governing subdivision are contained in the Resource Management Act 1991 (the Act). This Act enables the district and city councils to oversee and manage all subdivisions through district plans and resource consents, thereby controlling any adverse effects on the community and environment that the subdivision may have.
A range of different subdivisions are possible: fee simple, unit title or cross lease. A fee simple subdivision creates a new allotment from an existing allotment. A new certificate of title is created for this new parcel of land and this is independent of the original parent title. This is the most common form of subdivision and will be the focus of this article.
Anyone that is thinking about subdividing should be aware of the length of time involved in the subdivision process, whether it be in a rural or urban area. The length of time depends on the size and complexity of the subdivision project. The council, surveyors, Land Information New Zealand, and lawyers are each required to provide their input and sometimes this means that the length of time required is longer than anticipated.
Below is a summary of the stages involved in a subdivision process. The times indicated will vary depending on the complexity and size of the subdivision but as general rule of thumb, the process could involve around one month per party. In other words, a typical subdivision process can take some 5-6 months in total: sometimes, more. It is essential that whoever is undertaking a subdivision project plans well in advance for matters such as interest rate changes, holding costs, and the need for certificates of title to be issued before mortgages and sales of the new titles can be secured.

 

Before the election, the Labour Party laid out a plan with 18 key goals to achieve within their first 100 days in office ("100-day Plan"). This 100-day Plan was adopted and implemented by the Labour-led coalition Government ("Labour"). This article aims to provide an analysis of the progress of some of the key goals as well as touching on some future policies that Labour intends to implement that may affect you.
Goal number three: Pass Healthy Homes Guarantee Bill ("HHGB")
The HHGB was passed in December 2017 and requires that any new tenancy from 1 July 2019 must be either properly insulated or contain a heating source able to make the home warm and dry. All tenancies must meet the new standards by 1 July 2024.

While the exact requirements are not in the HHGB, they will be set by Labour before the start of 2019. Grants of $2,000.00 will be available for eligible landlords to upgrade.
If you are a landlord who will be affected by this change, you will need to inquire as to whether you are eligible for a grant. If you are not, you will need to personally fund the upgrade.
We note that all foil insulation is now illegal and will need to be replaced.
Goal number four: Ban overseas speculators from buying existing houses
New Zealand's residential property will no longer be for sale to buyers who are considered an "overseas person".
Under the bill, an "overseas person" would be someone who is not a New Zealand citizen, or is not "ordinarily resident" in New Zealand. A person would be classified as "ordinarily resident" if they hold a permanent resident visa and have been in New Zealand for 183 days in the past year. The New Zealand Law Society have expressed concerns that people may innocently enter into sale and purchase contracts not realising that they are classified as an overseas person. Under the current Sale and Purchase template this would present contractual issues.
If you have any doubt as to whether you would be classified as an overseas person and you are planning to buy a residential property, please seek legal advice first.
 

Goal 17: Set the zero carbon emissions goal and begin setting up the independent Climate Commission
This goal has been partially executed. James Shaw, Minister for Climate Change, has announced a goal of net-zero emissions by 2050; however has not set up an independent Climate Commission. The Government has already made progress on the 2050 goal as they have stopped issuing new permits for offshore drilling. Prime Minister Jacinda Ardern, has stated that "it is important to get ahead of a change that would inevitably happen as the world moves to combat climate change."
Labour has compromised by stating that the existing off-shore mining permits which cover an area the size of the North Island will continue to permit further exploration. Additionally, Labour has opened a new round of applications for onshore exploration.
Labour has reported that the industry is not at immediate risk but that New Zealand has signed up to international obligations under the National Government that it needs to meet.
 

Future policies that may affect you
Regional fuel tax: Aucklanders will pay a nine to twelve cent fuel tax. However, the fuel tax combined with Auckland Council's regional fuel tax could see Aucklander's paying upwards of 20 cents more per litre for fuel compared to the rest of New Zealand.
Secondary Tax: Although Labour does not plan to implement its tax plan until 2020, meaning that it will have to win a second term, as part of the tax plan they state that they will remove secondary tax which will mean significant savings for people who have two or more incomes.
Tourism and Infrastructure Fund: This won't affect citizens or New Zealand residents; however, it will affect foreigner visitors. The Labour government will charge a $25.00 levy on international visitors which is expected to equate to an extra $75 million each year. The Mayor of Rotorua, Steve Chadwick Faafoi, said there was no evidence that the levy would hurt tourism. However, National Campaign Manager had some reservations. We note that visitor taxes are a growing trend globally. Countries such as Australia, United States, Italy and Bhutan already impose such taxes to help grow the infrastructure that tourists use.
 

Conclusion
Economists have stated that because it is early in Labour's term, it is difficult to predict any kind of result. Therefore, it seems that New Zealanders are just going to have to wait to see how Labour performs in the coming months.
 

Proposed Bright-line Amendments
Historically, the "Bright-line Test" required gains on the sale of residential property (excluding main homes) within two years of purchase to be treated as income and accordingly created an income tax liability on the gain.
However, the Bright-line Test was amended under the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Act 2018 ("Act") on 29 March 2018. The Act states that the Bright-line period is extended from two to five years and any profits will be taxed regardless of intention when the property was acquired. Residential properties acquired before 29 March 2018 will remain subject to the two-year Bright-line Test.
This amendment was expected given Labour's pre-election campaign on reducing property speculation. Revenue Minister, Stuart Nash, is of the view that this extension will make homes more affordable for owner-occupiers and deter property speculators and hopefully result in a fairer tax system.

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