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26 www.lawyer-monthly.com Leaky Buildings throughout New Zealand As funny as it may sound this disturbing issue is very much an area of growth in NZ with current estimates for repair work ranging from NZ$10-20B. Considerable long term litigation has taken place of behalf of the ‘victims’ of affected properties and recent settlements with local government are now including the appointment of approved contractors, architects and construction lawyers. This Marcus Beveridge july 2011
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www.lawyer-monthly.comqueen city law26
july 2011
Construction Law and the Property Sectorin the Antipodes – New Zealand
Christchurch’s recent earthquakes
In terms of the property sector, the cost of repair to
property is currently expected to be NZ$10B. I
would not be surprised to see this figure escalate
and notes that the funding for this work will come
from the New Zealand Government, insurance
companies internationally and the private sector. I
believe that Christchurch very much needs the
urgent input of visionary developers and planners to
get Christchurch back on its feet quickly with as
little bureaucratic interference as possible. In
circumstances such as Christchurch finds itself it
is critical that all stakeholders work in as
collaborative development manner as possible and
get the job done.
Leaky Buildings throughout New Zealand
As funny as it may sound this disturbing issue is
very much an area of growth in NZ with current
estimates for repair work ranging from NZ$10-20B.
Considerable long term litigation has taken place of
behalf of the ‘victims’ of affected properties and
recent settlements with local government are now
including the appointment of approved contractors,
architects and construction lawyers. This
Marcus Beveridge owns New Zealand-based, award-winning
boutique law firm, Queen City Law, based in Queen Street,
Auckland. This firm has won New Zealand’s Boutique Law Firm of
the Year several times over the last few years and has also won
awards as New Zealand’s top Construction Law firm in 2008, 2009
and 2010. In late 2010 Queen City Law won New Zealand’s
combined Construction and Property Law Firm of the year award.
The firm has acted for developers of a significant number of high
rise projects in Auckland with associated capital expenditure in the
vicinity of NZ$1B. The firm enjoys an extremely loyal client base
and has a reputation for getting intricately involved in property
projects from the very commencement of a project and adding
bottom line value. This month, Lawyer Monthly asked Marcus to
share his thoughts on Construction and Property in New Zealand
in July 2011.
Marcus Beveridge
july 2011
www.lawyer-monthly.com queen city law 27
predicament reflects badly on all and in some caseshas had tragic results. The High Court in Aucklandis back-logged with claims and it is hoped that asubstantial number of properties will be repairedover the next couple of years and that such repairswill not form the basis of second generation claims.
Developers / Global Credit Crunch
A significant number of New Zealand’s best knowndevelopers and leading finance companies offeringmezzanine funding and other products have becomeinsolvent over the last three years, resulting inbillions of dollars of investors funds being wipedout. Our trading banks (virtually all Australian-owned) have also taken some big hits in theproperty sector but continue to make huge profit.This has created a plethora of civil litigationwinding its way imperceptibly through our Courts –however most of the capital is gone and there areunlikely to be many pecuniary winners. In such a climate new projects thereforenecessitate basic discipline to have any chance ofgetting off the ground and currently requiresignificant developer equity (NZ banks currentlylike their property developer clients to be in a 30per cent LVR position), a robust due diligence bythe mortgagee and in any event, as much certaintyas possible of a clear exit for funders. In Aucklandcity itself, the number of cranes on our landscape iscurrently very low but some change is imminent.However, retail banks are now lending up to 95 percent on residential properties (again) and it isexpected the residential market will become moreactive, particularly as 100,000 new homes will berequired in Auckland to accommodate its growingpopulation.
Rugby World Cup - October 2011
I am pretty confident the All Black’s will bringhome the bacon this year, as they are of course welloverdue. In a sense, the Rugby World Cup is but ablip on the long-term radar but the construction ofnew stadia throughout the country has been one ofthe good things in the construction sector and therewill of course be positive off-spins in terms oftourism, immigration and direct investment.Assuming the AB’s do win the World Cup, it islikely that the National Party will again form thegovernment in this year’s election.
Legislative Framework
New Zealand enjoys a very sophisticated legalsystem and the legal framework relating to propertyand construction law is constantly being refined andupdated and the case law is fluid. The ConstructionContracts Act 2002 and the Building Act 2004 arenow very much the law of the land and there are amyriad of regular changes to property lawsimpacting on taxation, regulation of building
practitioners, constant changes to standard form
sale and purchase agreements, specific fast-track
laws for Christchurch, the imposition of the new
Super City in Auckland, changes to the Resource
Management Act 1991 and other planning changes,
heritage and earthquake strengthening issues and a
myriad of other considerations, all impacting on
property lawyers knowledge baskets almost on a
daily basis. The disciplines of property and
construction law are of course a science all unto
their selves like other disciplines of the law and
2011 has, to date, proved to be a whirlwind of a
year.
The Future
New Zealand enjoys one of the most deregulated
economies in the OECD and there are very few
barriers for foreign investment in NZ. In the
property sector Singapore, Hong Kong and
Australian companies have traditionally invested
heavily in NZ.
More recently, significant capital flows have come
from China and found a home in NZ’s property
sector and there is currently considerable focus on
our farming sector.
Given the ravaging and insolvency of a large
number of NZ’s most well-known developers over
the last few years, an almost perfect storm scenario
exists for those bold enough to actively invest in the
property and construction sectors.
I am very confident that Queen City Law will
continue to be at the forefront of major property
developments in Auckland. The firm is
well-positioned to exploit the unusual shape of NZ’s
property sector, including very recent legislative
changes allowing NZ’s 11,000 lawyers to act as
agents on property transactions. The firm has
cleaned up so many of NZ’s law awards because of
its client-centric approach to the business of law and
has continued to expand during recessionary times.
These are not the times for the faint-hearted, but
unlike the crash of the late 80’s where local
companies had no money, this cycle is different. The
property market is after all about timing and for
those who are cashed up and able to exploit
distressed asset scenarios and pick the bottom of the
cycle, the results could well be spectacular. A
number of NZ’s smartest property commentators
think that time has now come. LM