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When The Neighbour Goes Up

When The Neighbour Goes Up

Specific legal advice may well be needed if you hear three-storey units are about to be built next door.

By: Sally Lindsay

15 June 2023

Q. We own a property and have just heard the neighbour has been granted resource consent to build four units, three-storeys high. This will block our north sun and view. Is there any way we can stop this development?

A. Once a resource consent has been granted there are very limited ways in which it can be challenged. When processing a resource consent application, the relevant council is required to consider whether there are any adverse effects on the environment that are more than minor, or adverse effects on a person that are minor, to determine whether anyone should be notified of the resource consent application (and to have an opportunity to voice their concerns about the proposed activity).

If the application was processed by the council on a non-notified basis, this means the council had determined that no person was affected to a minor extent, so as to require notification. Sometimes rules in district plans can also preclude notification. If a resource consent is processed on a non-notified basis, there are very limited abilities to challenge the granted consent.

One of the only ways to intervene to prevent such a development once resource consent has been granted is through a judicial review challenge. This involves an application to the High Court for a review of the relevant council’s decision to determine whether to notify the application. A judicial review application only considers whether the council has applied the correct law, rather than assessing whether the decision it made was correct on the merits.

A judicial review application could be accompanied by an application for an injunction to prevent the development starting, although this also requires a relatively high bar (and may have further consequences in terms of liability for damages in the event the judicial review claim is unsuccessful). Ultimately, if this is a course of action that you would like to consider, we recommend seeking further specific legal advice to review the council’s notification decision and determine whether there are any legal errors which could provide the foundation for a claim, and the likely strength of such a claim.

It is also worth noting that in many areas, following the introduction of the Medium Density Residential Standards by the government last year, developments of this type may be permitted by the council (and not require resource consent at all). The standards require certain territorial authorities (in greater Auckland, Hamilton, Tauranga, Wellington and Christchurch) to incorporate these standards into their district plans, largely enabling development of three homes of up to three storeys on each site (subject to some controls). We expect to see these types of developments becoming more common as they are further enabled through district plans.

- Shane Campbell

Q. I have a tenancy agreement with two tenants named on it. I have discovered that those two people have moved out of the property, and two other people who are not named on the agreement currently live there. These individuals are relatives of the named tenants who have moved out. I conduct an inspection of the house every six months, but as no-one was home during inspections I hadn’t become aware of the change in occupants. I have noticed a drop in the condition of the house and the property isn’t being well kept. I am not comfortable with the current occupants living there and I’d like to know my options for evicting them. What is the legal standing regarding eviction in this situation?

A. When tenants vacate a rental property without the landlord’s consent, this is known as a “parting with possession”. This act is considered unlawful and can lead to legal action against the tenants.

In order to address the issue of unauthorised occupants in your rental property, there are specific steps that you, as the landlord, can take. Firstly, you can issue a 14-day notice to the tenants, requesting they return to the property as per the terms of their tenancy agreement. It’s important to check if the tenants have returned and are staying at the property, and if they leave again you can issue a new notice. If the tenants fail to return to the property at all, or leave a second time, you can take further action by applying for termination.

It’s important to follow the correct procedures and requirements outlined in the RTA to ensure the termination of tenancy is lawful and effective. The application for termination is based on section 56 of the RTA, which identifies the breach of a 14-day notice. Section 44 of the RTA establishes legal authority for the “parting with possession”.

- Ryan Weir

Q. I bought a section in February 2021. I had a house built on it and the CCC was finalised in February this year. This was going to be our beach home/holiday home and then retirement home. I’m now looking at heading offshore and want to know:

a) Is bright-line tax on the section or new build?

b) Does it start from the beginning of the build or the handover?

c) Is it proportional on years I have had it, or do I have to pay the whole five years?

I looked at the government’s website on bright-line tax, but found it confusing.

A. I am not surprised you found the bright-line rules confusing. In short, that is because they are. Hopefully, I can provide some clarity.

If you sell the property within the applicable bright-line period, then tax will be payable on any gain you realise on selling the property as a whole.

If you bought the section “off the plans” on the basis that title was to be issued, then the bright-line period starts from the date on which you entered into the agreement to buy the land. This could be a critical point because the date you enter into the agreement also dictates what bright-line period applies (noting that the bright-line period has progressively increased from two years to five years, then 10).

On the other hand, if you bought the property in a conventional purchase arrangement, the bright-line period starts on the date of settlement. It is not clear from your message whether you entered into the agreement in February 2021 or if that is the date you settled, nor if you bought off the plans. If this is the date you entered into the agreement, then the five-year bright-line period applies, and the five years will either run from the date you entered into the agreement (if you bought the property off the plans) or from the date of settlement (if not).

If caught by the bright-line rule, the tax you pay is based on the gain, which is the difference between sale price and cost. The only time apportionment can arise is when the property has been used as a main home for some of the bright-line period, which does not appear to be the case here.

As we have both noted, these rules are complex, and you should seek tax advice from a suitably qualified adviser.

- Matthew Gilligan

Q. If I sell my house, which is mortgage-free, and buy another rental property from the sale proceeds and it does not have a mortgage, but I go and stay at one of my other rentals which has a mortgage on it, am I able to claim an interest deduction on my new rental or do I need to transfer the mortgage from the rental I am staying in first.

A. No, there is no deduction, and moving the mortgage from the property you are moving into onto the freehold rental will achieve nothing either. Interest deductibility is not determined by the security for the mortgage, it is determined by the use to which the borrowed money was put. The borrowed money must be used to buy a property that derives a rental income for there to be any prospect of deductibility. An alternative may be to use the proceeds of your home sale to repay the mortgage on the rental property that you propose moving into. That leaves you free to borrow to buy another rental property. The interest will then be deductible if the new rental meets new build criteria.

- Mark Withers

Q. What are the questions you most want answered by clients when you are either arranging a mortgage for them or re-fixing a mortgage?

A. It really comes down to what the client is wanting to achieve and also what relevant factors need to be taken into consideration. There may be a different mortgage set up for a client who has an aggressive growth strategy versus someone who is more conservative. Another example would be when re-fixing is the client about to list the property or about to come into an inheritance and would look to pay the mortgage off. Obviously this information would have an effect on the advice as in most cases in this situation you would leave the mortgage floating.

- Kris Pedersen