Keeping the cost of living in check

Dear *|FNAME|*,

Another month, and cost of living is still top of mind. Petrol prices swung up another 10% in the past month, though the Budget’s extension of the fuel tax cut to August moderates the pain a little.

Speaking of the Budget and living costs, it also saw a cost of living payment going to about 2 million people from 1 August, and caps being removed on First Home Loans and lifted on First Home Grants.

The OCR has also raised to 2 percent. The Reserve Bank’s prediction is it will need to reach 3.4% by the end of this year to counter inflation. And that could see further rises to mortgage interest rates.

But in slightly brighter news, the Government is taking stronger action on two of the Commerce Commission’s recent recommendations to help keep supermarket prices in check. Will that result in more affordable cheese in your trolley sooner rather than later? Read on...

Government announces grocery sector action

As we noted in April, the Commerce Commission recently released a study of the grocery sector. And while it made a number of recommendations, many people felt they didn't go far enough.

The Government appears to concur with that perspective, at least in part. Minister of Commerce and Consumer Affairs David Clark announced yesterday the Government would accept 12 of the Commission's 14 recommendations, and take stronger action on the other two.

These two recommendations were for:

• the existing major grocery retailers to offer wholesale supply of groceries to other retailers on a voluntary basis

• the sector to be reviewed again three years after the Government implements any changes.

The Minister has indicated the sector will need to take more urgent action on this front, and that any review of action would need to be sooner.

So, cheaper cheese? Hard to say, but we may well see other retail players in the market soon.

Succession law changes that might be on the horizon

Back in January’s edition, we talked about the Law Commission’s recent review of succession law, which covers what happens to a person’s property when they die.

The topic has hit the headlines again recently, with both 1 News and the NZ Herald highlighting some of the more controversial points raised by the Commission.

So how might things change, if the Government acts on the Commission’s recommendations?

Disinherited family members may be unable to contest a will

Under the proposed changes, children over 25 years of age who have been cut from a parent’s will would be unable to contest it. There could be an exception where children and grandchildren could claim if they were able to prove inheritance money was required to maintain a reasonable standard of living.

Stepchildren could contest wills

Reflecting changes in New Zealand society and families since earlier laws were written, the Law Commission recommended that stepchildren could have the power to make claims on a stepparent’s estate. If adopted, that might see more contests come up over wills between biological children and stepchildren.

Trust assets could be subject to claims

Trusts are often used to house and protect assets. Currently, in situations where assets sit outside a deceased person’s estate, they cannot be made subject to estate claims.

This could change, allowing claims to be made against trusts where it can be proven the deceased used a trust to hide assets to prevent someone inheriting them.

Separated partners could make claims against their partner’s estate

In the case of separated couples where one partner dies, the Law Commission recommended that the surviving partner may claim against the estate for up to two years from the date the couple separated. Courts could extend this period to five years under certain circumstances.

None of these recommendations are law yet, but the changes could be on the horizon.

If you want to make sure you put your assets and affairs in the best possible arrangement, or would like advice on how the changes might affect you if they are put in place, please contact us.

Sunset clauses in a buyers’ market

In our last edition, we looked at some of the perils that can face purchasers buying off the plan. One of these perils was developers drafting agreements for sale and purchase to allow for increases in price, or with sunset clauses that might allow them to cancel the agreement and try to obtain a higher price in a rising market.

But now that the market might have turned, does this mean buyers can use similar tactics to their benefit?

Potentially, yes. This can include renegotiating the price downwards, or getting out of the contract if they paid more than the property is now worth.

In a buyers’ market, new purchasers also have stronger bargaining power to help ensure sunset clauses that favour the vendor are either removed, or adjusted to prevent developers cancelling to on-sell for a higher price.

Where possible, if you’re buying off the plan, register a caveat. These can give you more leverage, and help you protect your interests if a developer tries to invoke a sunset clause. This can also help you avoid needing to pursue an injunction, which can prove expensive.

Otherwise, our advice from our last edition remains the same: if you’re buying off the plan, make sure to get some solid legal advice before signing an agreement for sale and purchase. In fact, when purchasing any property, it’s good to get your lawyer involved as early as possible. We’re happy to help at any stage.

Restraint of trade changes could be on the cards

Restraints of trade are a common feature of employment contracts. They aim to protect employers by restricting employees from working in the same industry immediately after they end their employment, or contacting customers, clients or other employees of that employer about their new business or employment.

A high profile example was Tova O’Brien being delayed by her former employer from starting a new radio role.

Such agreements are not always enforceable, if they are found to be unreasonable. And if a new private members’ bill finds its way into law, their application may be restricted even further.

Labour MP Helen White has drafted an Employment Relations (Restraint of Trade) Amendment Bill, which has entered the private members’ ballot. Such bills, if drawn from the ballot, can be considered by Parliament to enter the legislative process.

If accepted, it would amend the Employment Relations Act 2000 to:

• give no effect to restraints of trade on employees who earn less than three times the minimum wage (which would equate to $2544 or less for a 40 hour week)

• limit restraints to situations where employers have proprietary interests to protect

• require employers to pay a former employee half their weekly earnings for each week the restraint of trade is in place

• limit restraints of trade to periods no longer than six months.

Employees would still be under common law duties of confidentiality and fidelity.

We’ll keep you updated if the bill progresses.

Monthly Housing Update

As we noted above, it feels like a buyers’ market. But according to landlords.co.nz, quoting a Colliers International report, land values could pick up in the near future.

This comes as councils introduce more housing intensification under the Government’s National Policy Statement on Urban Design and medium density residential standards, both of which need to be implemented by August in Auckland, Tauranga, Hamilton, Rotorua and Christchurch. The changes will increase the development potential of a lot of land, leading to increased interest and competition.

And whatever state the market might be in, almost all sellers right now are seeing gross gains on what they paid. CoreLogic’s latest “Pain & Gain” report showed 99.1 percent of properties sold in Q1 2022 sold at a profit, down only slightly from 99.3 percent in the previous quarter. 99.5 percent of Christchurch properties sold for a gross profit, unchanged from the previous quarter.

As always, if you are considering buying or selling property, contact our conveyancing team.

Thanks *|FNAME|*.

We appreciate you reading. As always, we’re just an email or phone call away for any questions, help or advice. Otherwise, we look forward to chatting with you next time.

Regards,

Clive, Grant and the Team at Canterbury Legal