Property Quarterly (June 2013)

In this issueImproving property management

in the public sectorRent reviews – which hat am I wearing?

Dunedin’s earthquake strengthening

Vol 3, Issue 2June 2013

www.simpsongrierson.com

Greg Towers – Partner P. +64 9 977 5051 M. +64 21 963 653 [email protected]

Mike Scannell – Partner P. +64 4 924 3416 M. +64 21 437 644 [email protected]

Michael Wood – Partner P. +64 9 977 5329 M. +64 21 772 974 [email protected]

Greg Allen – Partner P. +64 9 977 5164 M. +64 21 534 464 [email protected]

Phillip Merfield – Consultant P. +64 9 977 5096 M. +64 21 935 407 [email protected]

WE PROVIDE EXPERT NAVIGATIONSimpson Grierson’s national team of property specialists represent the interests of

developers, vendors, purchasers, landlords, and tenants of all kinds of property.

We are unique – our property team focuses on property issues exclusively while other aspects of the law are tended to by experts in their field.

Publication CommitteeDonn Armstrong Daniel Miles Ah-Lek Tay Gwendoline Callaghan Ian Campbell

Contact detailsDavid Clark Property Institute of New Zealand PO Box 11 380 Manners Street Central Wellington 6142

Phone: 04 382 7621 [email protected]

EditorJulian Bateson

Assistant EditorHelen Greatrex

Bateson Publishing Limited PO Box 2002 Wellington Phone: 04 385 9705 [email protected]

Advertising managementJulianne Orr Bateson Publishing Limited Phone: 09 406 2218 [email protected]

PublisherProperty Institute of New Zealand

Property Quarterly is published four times a year and a copy goes to every member of the Property Institute.

Property Quarterly articles are not peer reviewed. Articles in the magazine represent the unaudited views of the relevant authors. If you have any questions about the content of an article please contact the Editor or the relevant author.

ContentsCEO’s comment David Clark ..................................................................................................................... 2

Feature articlesFor what we are about to receive – Property from an insolvency perspective Brendon Gibson and Grant Graham ........................................................................ 3

Banking Ombudsman Scheme Deborah Battell .............................................................................................................. 8

Improving property management performance in the public sector David White ..................................................................................................................12

Valuing Maori land – A rating valuer’s perspective Mark Grinlinton ...........................................................................................................17

How will New Zealand’s ageing population affect the property market? Kim Dunstan .................................................................................................................29

Rent reviews – Which hat am I wearing today? Brian Stafford Bush ....................................................................................................34

Dunedin’s earthquake strengthening Glen Hazelton ...............................................................................................................36

Profile – Richard Lawson ..........................................................................................42

Legal casesAgent Anna and the real estate agent’s code of conduct Niven Prasad ................................................................................................................ 25

Unsigned, sealed, delivered – When is an oral agreement enforceable in a leasing context? Niven Prasad .................................................................................................................27

Life Member Robert McGough ................................................................................44

Vol 3, Issue 2June 2013

www.simpsongrierson.com

Greg Towers – Partner P. +64 9 977 5051 M. +64 21 963 653 [email protected]

Mike Scannell – Partner P. +64 4 924 3416 M. +64 21 437 644 [email protected]

Michael Wood – Partner P. +64 9 977 5329 M. +64 21 772 974 [email protected]

Greg Allen – Partner P. +64 9 977 5164 M. +64 21 534 464 [email protected]

Phillip Merfield – Consultant P. +64 9 977 5096 M. +64 21 935 407 [email protected]

WE PROVIDE EXPERT NAVIGATIONSimpson Grierson’s national team of property specialists represent the interests of

developers, vendors, purchasers, landlords, and tenants of all kinds of property.

We are unique – our property team focuses on property issues exclusively while other aspects of the law are tended to by experts in their field.

Vol 3, Issue 2, June 2013 Property Quarterly 1

CEO’s comment

Things are continuing to move quickly, both within the Property Institute and the environment around us. As you would have read in the last edition of Property Quarterly, the results of the 2012 members’ survey provided an excellent foundation for the building of our Property Institute strategy. The review confirmed which things we are doing right, as well as highlighting some concerns which we need to fix.

During February and March the Board and professional councils undertook exercises to refine our strategic direction. The outcomes from these meetings have been documented in the 2013 strategic plan, which is available to members through the Property Institute website. Twenty-four key projects and initiatives were identified, and a number of them are already under way.

The strategy identifies a number of building blocks which will lead us to achieve our strategic goals. These building blocks include, among other aspects, a transparent and credible disciplinary process, well run branches and communities, support and training for committee chairs, quality education services and the new young leadership programme.

In my view, the most significant change is in our overall objective, which is that ‘Registered Members are seen as the go-to people for property advice’. This has redoubled our focus on you, the membership, and recognises that our members are the beneficiaries of our endeavours.

An important, but under the radar initiative in the strategy, is to gain an exemption for our registered members from the obligations imposed on some of our members by the Real Estate Agents Act 2008. Recent activity on this front has seen the Institute of Chartered Accountants of New Zealand and the NZ Institute of Forestry apply for exemptions for their members. We are well under way with the projects and members will see these implemented over the next 12 months.

Once again the June publication of Property Quarterly has some excellent articles which make great reading. Brian Stafford-Bush has answered a question I have grappled with for some time − why is a tenant’s rental valuation always less than the landlord’s? Brian provides the answer on page 34.

Sadly we lost another life member in March. Bob Mcgough was a prominent and well respected member of the NZIV and latterly the Property Institute. Thanks to Tony Culav and others for highlighting Bob’s professional and personal lifetime achievements on page 44.

Niven Prasad again provides a couple of interesting articles, one which outlines a case which goes against the traditional property law doctrine of ‘no signature, no deal’. The other is a commentary on the new code of conduct for the Real Estate Agents Authority. David White, Director of the Government Property Management Centre of Excellence, outlines moves to improve the effectiveness and efficiency of government offices. Five government agencies are seeking around 70,000 square metres of office space in Wellington which will surely provide a shot in the arm for the commercial property sector.

The joint Australian and New Zealand Property Institute’s conference is happening in the winter tourist mecca of Queenstown and registrations are picking up steadily. The early bird registration closes on 10 June. In addition we are promoting early registrations by offering a number of spot prizes drawn at regular intervals. It is a no brainer, register early to win.

The snow has arrived early in Queenstown and at the time of writing we hear that primary schools in the town will be closed until lunchtime. The theme for the conference dinner will be White Christmas and it’s looking like it will be. Dress up accordingly and enjoy the mulled wine, turkey, Christmas pudding and brandy sauce.

CEO’s comment

2 Property Quarterly Vol 3, Issue 2, June 2013

CEO’s comment

For what we are about to receiveProperty from an insolvency perspective

With the worst excesses of the 2008 global financial crisis behind us, it is a good time to explore the property market black box to shed some light on exactly what caused the crash. As with any catastrophic event, the root cause is often difficult to pinpoint and can be traced back to more than one failure. The last five years have presented KordaMentha with a unique insight into those failures within the New Zealand business environment. We believe our observations, coupled with the considerable benefits of hindsight, provide useful lessons for all industry participants.

Brendon Gibson and Grant Graham

Property from an insolvency perspective

Emergence of specialist property finance companiesIt would be overly simplistic to blame all the property market’s difficulties on the activities and failures of the finance company sector. However, there can be little doubt that the finance companies had significant influence on events leading up to the global financial crisis and this has continued since. In the mid-1990s, the development cycle moved upwards from earlier in the decade when the only available funding sources for property developers were trading banks or equity.

At this point only one of the big five trading banks had a specialist property funding team. Property finance was mostly done via the branch network or business banking teams. The opportunity and demand for second tier funding was emerging. This funding filled the gap between the level of lending the trading banks would comfortably offer and the limitations of developer and equity funding.

The first real deals of notable size were undertaken in 1995 and 1996. By comparison with later standards, these early deals were relatively conservative.• Theyusuallyfeaturedsomedeveloperequity,whichremaineduntilalllending

was repaid• Developmentsweremainly,ifnotfully,pre-soldtoNewZealandbuyersand

pre-sales covered all debt and a margin



• Development margins were generally in excess of 25 per cent, including all costs• Projectswereundertakenbyprovendeveloperswithestablishedtrackrecords

and quality building contractors• Theendproductpricepointsweremostly$150,000to$250,000.

While the 1997/98 Asian economic crisis caused problems for some, we did not see the dramatic results we witnessed in the latest meltdown. By early 2000 there were only 10 or 12 finance companies of any size, with three or four specialising in property finance. It is worth noting the names of the major players − • EldersFinancelatertobecomeHanover• SalisburySecuritieslatertobecomeStrategic• Bridgecorp• NationalMortgageTrustlatertobecomeCapital+Merchant• DominionFinance.

It is also worth noting that several of these companies had, in fact, evolved from contributory mortgage companies, which had themselves been train wrecks in the late 1980s. The foundations of these companies in some cases went back 50or60years.Forexample,Dominionwasfirstregisteredin1954andEldersFinance/Hanoverfoundationsweresimilar.

Property finance companies The heady combination of a growing economy, limited opportunity for fixed interest investments, and reduced government regulation and control, including a move from the need for a full prospectus to investment statements, saw a massive increase in finance company formations. As a result, the sector went through enormous growth and expansion. At the peak in early 2006 there were more than 80 finance companies with investment statements on offer. Over 50 per cent of these promoted themselves as specialist property financiers.

Between2000and2006,financecompanyassetsgrewfrom$6billiontonearly$17billion.Asanexample,whenHanoveracquiredEldersinDecember1999,theloanbookwasvaluedataround$140millionbutthenpeakedat$1.1billion in late 2006. By the early 2000s, the finance company mezzanine model had developed and evolved. While there were still some reasonable checks and balances, competition and total focus on growth started to distort the picture. There were few, if any, barriers to finance market entry.

In addition, the property finance model relied heavily on significant debt to equity levels with comparatively small amounts of shareholder equity. Added to this most of the sector was privately owned with a relatively small number of shareholders. As a result, business growth was built on the profits from entities which in turn relied on the carrying value of the assets they were lending on. The proverbial house of cards was beginning to take shape.

In reality few, if any, of these entities had significant real capital invested as a number of companies’ equity involved financial structuring and relying on the value of assets held by them. During the most significant growth period from 2002 to 2005, liquidity was not a problem as the sector became awash with cash. Investors sought a return two to three per cent better than the



trading banks. At this stage the overall economy and property prices were improving and the perfect storm was brewing.

The beginning of the endWith investor funds in pocket and property prices booming, propped up and possibly created by leveraging both within the banks and finance companies, the finance company sector went shopping. The shopping list was long and not focused on quality purchases, with the sector funding the risky end of developments. The types of property especially favoured were apartments, beachfront subdivisions, holiday homes, residential sections in tourist fringe areas and leasehold land structures.

Financecompanyprofitsreliedonhighinterestreturnsandfeeincome.Thisincome was, in general, only ever paid if the property was finished and sold on time and at forecast prices.

As is now apparent, increasing competition between the emerging finance companies resulted in lowered lending standards as everyone competed for limited opportunities. Loans went from being fully repaid from pre-sales to carrying residual debt of over 50 per cent. If pre-sales failed to settle, this quickly became 100 per cent or worse.

The competition trapIn some examples, trading banks also fell into the competition trap and increased the levels of lending and reduced lending criteria. Developers quickly realised the opportunity.Financecompanyduediligencewasofteninadequateinanefforttobeatthecompetitiontothedeal.Financecompanylenderslostsightofthedangers of individual deal size as deals got much bigger.

Too much lending was directed to assets where there was no certain exit strategy. This proved especially true in funding of land banks which required granting of resource consents before development could commence. A prime example of this would be an Auckland residential subdivision which started the consent process in 2002 and obtained resource consent in 2011.

Ultimately, however, the finance companies fell victim to the classic mistake of borrowing short and lending long. The average time for most small developments from start to finish was 12 to 24 months or more. Larger deals often took three to five years from consent to completion. This sort of lending was on assets not suited to finance company funding. Too many transactions were done which should have been long-term equity funded transactions.

By mid-2006, the first of the company collapses had occurred and retail depositinvestmentratesweredeclining.Financecompaniesneededtorealiseloansin order to maintain cash flow, but too much lending was concentrated in loans that could not be quickly cashed up. Once the ability to refinance these debts disappeared, then as we now know, the demise of the finance companies became a self-fulfilling downward spiral.

Then came the world market realignment known as the global financial crisis. In December 2012 total finance company deposits in companies with solvencyproblemswere$9.2billion,withestimatedlossesofover$3billion.


The receiver’s role is not a fire sale


Realising distressed property The starting point for any assignment is to realistically analyse and understand the current position with the property. Does the property offered meet the demands of the market? The next step is to identify the true value and risks. Our approach is to fix what can be fixed and identify the market problems.

If it is necessary to re-market the property, then real estate agency selection is vital. We look for an agent with credibility and experience in the local area or segment, a strong database of likely buyers, and an ability to give detailed sales reports because understanding buyer feedback is critical.

Our advice is to trust the process, sell at the right time, but do not delay the inevitable. Sometimes that is a difficult balance to achieve. We also ensure we do not flood the market all at once, but take a sample to the market in order to understand the price at which the market values the product.

Land banks or partly completed developmentsAny asset which requires a further injection of funds is clearly the most impaired in a market squeezed for cash. However, a decision to complete such a project requires a hard review of the economics.

Discounted cash flow values go out of the window in these situations. Cash is king and if an asset is not income producing, or is cash negative, then there can be little or no ability to borrow. Buyers with sufficient cash to transact in these situations are rare. Our approach has been to resolve as many of the outstanding problems as we can, subject to the commercial economics. The strategy is therefore to remove as many of the problems as possible before offering to the market.

As soon as many barriers to sale have been removed, the selection of a real estate agency is vital. The focus is on finding a credible agent who will fully expose the property to all potential buyers. In our experience, a well-marketed and managed sales campaign will generate enough buyer competition to produce a realistic sale price.

It is worth noting that many assets in this class require a structured solution, with the financier

maintaining an exposure at some level. In short, sometimes it is about improving the quality of the borrower rather than achieving immediate repayment.

Ignoring the fundamentalsForthepastfiveyearsthepublic,eggedonbythemedia,have speculated as to whether we actually experienced a property bubble. The answer is a bit of yes and no, but the question should be − Why were the fundamentals ignored?

There were three property classes which together brought down the finance companies – beachside subdivisions with holiday homes, managed and serviced accommodation investment properties, and development land banks. Much of the beachfront market was funded by borrowing against the family home. That was fine if you picked the right location, but some fundamentals were ignored in many cases.

We question whether there was ever sufficient real demand in areas such as Coromandel/Eastern Bay of Plenty, Northland, Gisborne/Mahia and Queenstown, and yet the investment did not stop until it was too late. As a result, some geographic locations may now have more than 10 years of supply, based on realistic absorption rates.

Serviced accommodation investment properties were also popular without any real analysis of demand. Too many developments were undertaken and driven by developers with only an eye for a profit rather than industry fundamentals.

Questions that should have been askedGiven this extraordinary growth serious questions can rightly be asked about the quality of lending and decision-making in many of these companies –• Howmuchofthelendingwasreallyaboutgrowing

the loan book for growth’s sake?• Wasproperduediligenceundertakenoncomplex

property developments?• Howwastheirfundingsourcedandforwhatterm

or what led to borrowing short and lending long?• Whatrolesdidfinancialcompanieshaveinseeding

deals and therefore creating the growth in property values?

The receiver’s job is to obtain the best economic result for the security holder who has appointed us. The role is often misunderstood. It can on occasion provoke conflict with those who have vested interests or those who want to stake a claim to the disadvantage of the competitive market process. In an effort to demystify our role and to explain our approach with regard to valuation, we outline a few examples of how we set about achieving a successful outcome for different classes of property.



At the last count, more than 60 finance companies were in receivership, liquidation or wind-down.

Role of professional advisers Were it not for the credibility lent to the finance company sector by valuers, quantity surveyors and other property professionals, it is unlikely the initial success would have occurred.Financecompanyownersanddirectorswereacutely aware that information provided by a raft of qualified professionals would be relied upon at various stages in the development − • Internallyinthecreditprocessandforloan

management in terms of providing valuation advice and market evidence for progress payments and costs to complete

• Byauditorsandotherwatchdogsreviewingcompanyprospectus information

• Mostimportantly,forpublicconfidence,toensurethe company could continue raising funds via the debenture market.

In some cases that KordaMentha has been privy to, not all valuations were robust and too many lost sight of market reality and economic fundamentals. In our view, too much reliance was placed on market evidence which was tainted in one of two ways. Either it was not genuinely independent, or it was based on unsettled pre-sales evidence presented by developers.

Poor professional standardsThe valuer’s duty must be to present commercial reality. In practice, we have seen reports that fall short of a professional standard. Some valuers, individuals and companies, have opened themselves up to accusations of compromised objectivity, integrity and professionalism by −• Writingreportsbasedsolelyondevelopers’

assumptions without testing their accuracy and credibility

• Havingcloserelationshipswiththeowners,directorsand senior managers of finance companies

• Relyingonaverynarrowclientbaseforbusinesssurvival

• Takingonworktheywerenotqualifiedfororhadthecapacity to do

• Producingreportswhichwerevagueandmisleadingabout the state and potential of a property

• Agreeingtofeesthatdidnotreflectthescaleofjobrequired.

While by no means largest in terms of dollar loss, one of the most glaring examples we encountered was a Wellington coastal property land valuation. This was based on a hypothetical subdivision without resource consent or analysis of underlying development feasibility. The propertywaspurchasedasafarmfor$2millionandtheborrower developed a subdivision scheme based on sales to high net worth offshore investors.

The property had no resource consent, limited access and no pre-sales had been done. A complete valuation was quotedat$17million.Intheend,itwassoldundevelopedfor$2.5million.Thefinancecompanywhichlentonthepropertywasultimatelyowed$13million,sothelosstothedepositorswasinexcessof$10million.

Our advice Hindsight may well be 20/20. However, having dealt with a number of finance and property company failures, we believe the property profession, and for that matter the financial profession, can benefit from what we have learned and protect themselves against the reputational risks posed by a few bad apples.• Maintainprofessionalindependenceandexpertise

adequate to perform the work required.• Clearlydefinethescopeofworkandtheintendeduse

of any professional reports or valuations• Marketschange,sodonotbeafraidtoidentifythese

problems and avoid valuing in order to justify the previous valuation

• Chargefortheworkrequired• Unrestrainedgrowthgenerallycomeswithnegative

consequences somewhere in the economic cycle• Makesurevaluationsandreportsrepresentcommercial

reality and market fundamentals in terms of the current and future market supply and demand. There is no point in valuers assessing values on a willing buyer and willing seller basis when the demand and supply formula is broken.

Brendon Gibson and Grant Graham are Partners at KordaMentha in Auckland. KordaMentha is an advisory firm specialising in corporate recovery, turnaround and restructuring, real estate advisory and forensic services.


Banking Ombudsman Scheme

Over the years the Banking Ombudsman Scheme has dealt with a number of people caught up in the aftermath of agreeing to guarantee finance – often for a family member, business associate or friend. The problems arise when the banking service provider as lender calls up the guarantee, seeking funds from guarantors when the borrower has not met repayment commitments.


Deborah Battell

Often problems around finance guarantees relate to property, either from lending or the effect bad debt has on the guarantor’s own property, and even when their own lending is not in default or has been repaid. Some guarantors have been surprised at the extent to which the lender has access to their funds and the effect it has on their finances and livelihoods. This indicates they may not have fully appreciated the implications and obligations of being a guarantor, even when these have been pointed out at the time.

Other guarantors have come to us believing the lender’s interpretation of guarantee commitments is wrong. While there has not been a substantial increase in the number of complaints about guarantees, they consistently feature in our statistics.

We are concerned enough to have just issued a quick guide which spells out what people need to take into account when considering guaranteeing finance. Our main recommendation is that anyone considering becoming a guarantor should read the guarantee document carefully, and they should also find independent legal advice as guarantees can be complex.

Guarantees in a nutshellSometimes a lender will only provide credit to a customer if someone else provides a guarantee. Once a person has agreed to be a guarantor for a borrower, the lender can require them to pay the borrower’s debts if the borrower defaults on repayments.

Some guarantees are unlimited and referred to as being ‘all obligations’. This means the guarantor guarantees all the borrower’s obligations to the lender on a continuing basis. The guarantee is not just for lending that exists at the time it is provided, but also for future lending. It is possible to ask the guarantee to be limited to a specified amount, but the lender does not have to agree to this.

If the borrower defaults on their lending, the lender has the right to call on the guarantor to meet the borrower’s obligations. Depending on the wording of the guarantee, the lender may not even have to require the borrower to pay first before doing so.

If a guarantor has provided security to a lender, such as a mortgage over a property for their own lending, the bank may be entitled to sell that property to repay the borrower’s debts. This is even if the guarantor’s own lending is not in default or has been repaid.

Checklist for guarantorsFirst, at the risk of being repetitive, if you or your client is thinking of becoming a guarantor, get independent legal advice and think carefully before agreeing.





BOS

BOS

BOS

BOS




BOS

BOS

BOS



If a lender has asked for a guarantor, this usually means the borrower does not meet the provider’s usual lending criteria, or the provider thinks the borrower may be at risk of defaulting on the lending.

Anyone considering becoming a guarantor should ask the following −• Doesthepersonaskingyoutoguaranteetheirloan

have the ability to service and repay the loan?• Doyouknowwhattheircredithistoryislike?• Doyouknowiftheborroweralreadyhasother

obligations to the lender or to other lenders? • Doyouknowtheextentoftheirobligations?• Istheborrowerlikelytoletyouknowiftheystartto

find it difficult to keep up with their obligations? • Istheborrowerlikelytokeepyouinformediftheir

obligations increase, for example, if they take out further lending?

• Couldyouaffordtomeetalloftheborrower’sobligations if they default?

• Canyouhelptheborrowerinanotherway?Is it possible to walk away from a guarantee? The

short answer to this is no. While guarantees generally allow the guarantor to withdraw the guarantee at any time if requested, this only ‘freezes’ the liability on the guaranteed debt at the date of the withdrawal. We recommend seeking independent legal advice on this.

The rights of a guarantor A guarantor has limited rights. They can ask the lender to advise the amount of the guaranteed debt at any time, but not necessarily to be advised when the lender provides further credit to the borrower. This is even though the lending would be covered by the guarantee.

The guarantor also does not have the right to ask the lender if the borrower is meeting their obligations to the bank. Similarly, the lender does not have an obligation to warn you if it becomes aware the borrower is likely to default on their lending.



Lending guarantee case noteMr A and a group of friends formed a company to purchase investment properties. They approached the bank for lending. The bank agreed to provide a loan to the company on condition that the loan was secured by a mortgage over the properties and that there was an unlimited deed of guarantee. The deed of guarantee listed the company and each of the shareholders as both customers and guarantors. This meant each of the guarantors was liable for each and any of the customer debts to the bank.

When Mr A signed the guarantee he acknowledged that he understood the nature and extent of his obligations under the guarantee and that he had signed it voluntarily. He also acknowledged that the solicitor executing the guarantee had recommended he take independent legal advice before signing it. Mr A declined to take independent legal advice and signed a ‘waiver of independent legal advice’ confirming this. Mr A later told us the solicitor told him not to sign the guarantee, but Mr A assumed he was just being cautious.

Many years laterSeveral years later, unknown to the other shareholders, a couple who were shareholders took out a personal loan with the bank so they could buy a rental property. Soon after they got into difficulty with repayments on that loan and it went into arrears. The bank then wrote to all of the guarantors to advise that the company’s accounts had been transferred to the bank’s recoveries department because of the problem with the couple’s loan. The letter warned that the bank could look to the guarantors to clear the couple’s debt if it remained unpaid.

Mr A was unhappy with the situation and complained to us. He believed the bank could not rely on the guarantee because it had not provided proper disclosure to him when he signed it. Specifically, he said he was not told he could be liable for future lending of any of the customers. He also said the bank could not rely on the guarantee because it failed to advise the guarantors about the couple’s loan. He said he would never have agreed to the bank providing the couple’s loan had he been told about it.

Clear liabilityOn the face of it Mr A was clearly liable under the guarantee, along with the other guarantors, for the other couple’s debts to the bank. We first looked at whether the bank had complied with its obligations in respect of the guarantee, that is, whether it had met the disclosure requirements when he signed the guarantee. We also considered whether the bank had an obligation to advise the guarantors about the couple’s loan.

We found the bank had clearly complied with its disclosure requirements when the guarantors signed the guarantee. The Credit Contracts Act 1981 applied at the time and the solicitor’s certificates certified that disclosure had been made in accordance with that Act. We found the bank was entitled to rely on those certificates.

We also found there was no obligation on the bank to advise the guarantors about the couple’s loan. At the time it was taken out, the Credit Contracts and Consumer FinanceAct2003applied.UnderthatAct,whichstillapplies, the bank was only required to provide information about that loan to the guarantors if it was a consumer credit contract as defined in the Act. As the couple’s loan was being used to buy a rental property it was not a consumer credit contract.

We noted that even if the bank did have an obligation to advise the guarantors about the couple’s loan, they would not have had the right to veto it. We confirmed the bank could rely on the guarantee and did not uphold the complaint.

Proceed with cautionAfter reading how guarantees work and how easily they can result in a negative financial situation for guarantors, I am sure you will agree that a prospective guarantor should enter into a guarantee arrangement with a great deal of caution. In a perfect world, the guarantor merely provides the lender with reassurance. However, in reality, a guarantee arrangement can put guarantors in a perilous financial situation.

Deborah Battell is the Banking Ombudsman based in Wellington.


If you are involved in the property sector - be at the Millemnium Hotel, Queenstown from the 10th to 12th July for the joint New Zealand and Australian Property Institutes’ “Transforming Property” conference.

The 2013 joint Property Institute & Australian Property Institute conference will be on the 10th, 11th and 12th July in Queenstown, New Zealand. Delegates will get a glimpse of where our professions are heading around the theme of transforming property - transforming our professions, transforming our housing, transforming our industry and transforming ourselves.

This is without a doubt the biggest and best conference the Institute has been involved in. From the welcome cocktails atop Bob's Peak, overlooking Queenstown and Lake Wakatipu, through to the conference "Mid-Winter Christmas" dinner, out at Moonlight Country, this promises to be the highlight of the Institute's annual calendar. Come along and hear from speakers such as Demographer Bernard Salt, Ngai Tahu's Mike Sang, Westpac's Dominick Stephens, ex-All Black Buck Shelford, Michael Hill Deputy Chair Emma Hill - as well as many more. One of the headlines sessions in this year's joint Property Institute & Australian Property Institute conference is the tourism industry session, where delegates will get the chance to learn more about the property, facilities and operations of Queenstown's award-winning tourism industry. You'll even get the chance to try their services out for yourself, going jet boating with the Kawarau Jet, 4WD safariing with Nomad Safaris, or enjoying a ride on the TSS Earnslaw atop the beautiful lake.For more information on this event, visit our website at www.transforming.property.org.nz

2013 CONFERENCE

10-12 July 2013

Millennium Hotel,

Queenstown

Queenstown 2013 Conference

If you are involved in the property sector - be at the Millemnium Hotel, Queenstown from the 10th to 12th July for the joint New Zealand and Australian Property Institutes’ “Transforming Property” conference.

The 2013 joint Property Institute & Australian Property Institute conference will be on the 10th, 11th and 12th July in Queenstown, New Zealand. Delegates will get a glimpse of where our professions are heading around the theme of transforming property - transforming our professions, transforming our housing, transforming our industry and transforming ourselves.

This is without a doubt the biggest and best conference the Institute has been involved in. From the welcome cocktails atop Bob's Peak, overlooking Queenstown and Lake Wakatipu, through to the conference "Mid-Winter Christmas" dinner, out at Moonlight Country, this promises to be the highlight of the Institute's annual calendar. Come along and hear from speakers such as Demographer Bernard Salt, Ngai Tahu's Mike Sang, Westpac's Dominick Stephens, ex-All Black Buck Shelford, Michael Hill Deputy Chair Emma Hill - as well as many more. One of the headlines sessions in this year's joint Property Institute & Australian Property Institute conference is the tourism industry session, where delegates will get the chance to learn more about the property, facilities and operations of Queenstown's award-winning tourism industry. You'll even get the chance to try their services out for yourself, going jet boating with the Kawarau Jet, 4WD safariing with Nomad Safaris, or enjoying a ride on the TSS Earnslaw atop the beautiful lake.For more information on this event, visit our website at www.transforming.property.org.nz

2013 CONFERENCE

10-12 July 2013

Millennium Hotel,

Queenstown

Queenstown 2013 Conference

Improving public property management

In November 2012, the government gave the go-ahead for a property deal for five public sector agencies in Wellington seeking around 70,000 square metres of office accommodation. The government Property Management Centre of Expertise was required to negotiate office accommodation for the Ministry of Education, the Ministry of Health, the Ministry of Business, Innovation and Employment, the Ministry of Social Development and Crown Law.

Taking a coordinated approach has resulted in significant savings, including the consolidation of fragmented sites into larger sites and a reduction in agency footprint by a third. Some people in the sector might be wondering if this announcement signals a return to the era of the lumbering centralised Public Works-style property management.

Decentralised approachForaquickhistoryrecap,thereformsofthelate1980sandearly1990ssawamove away from the centralised property management which had existed for the century since central government was established in New Zealand. This centralised era ended with the sale of Government Property Services and the disestablishment in the early 1990s of the government office accommodation board and the government office accommodation taskforce and committee – affectionately known as Goat.

Fromthattime,agencieshaveindividuallyundertakenpropertymanagement with limited oversight or direction from the centre. Government property managers have, however, maintained an informal network that has seen a healthy level of cooperation and discussion of relevant issues.

This decentralised approach has inevitably resulted in a decline in consistency of practice and a lack of a portfolio-wide view or approach. Even the best property management practices within agencies will fall short of the potential performance achievable when there is no wider portfolio management structure in place. Many agencies have property which serves the same function or the same geographic population, but with limited coordination this has become quite fragmented and duplicated.

The government portfolio In terms of scale, the government occupies around 1.7 million square metres of commercial space across New Zealand – a million square metres of office and around 700,000 square metres of other commercial types. As is to be expected,

Improving property management performance in the public sector David White




most of this space is in the metropolitan areas but of course there are points of representation in most towns and cities.

The government is generally a leasehold occupier of office space, particularly in the metropolitan areas. The owner occupied accommodation is generally not office accommodation, but is commercial space with government-specific functions such as police stations, courthouses and service delivery.

By far the largest concentration of office accommodation is in Wellington. Here the government occupies around 520,000 square metres, or approximately 40 per cent, of the available space in the CBD at 20.5 square metres per person. There is also a further 140,000 square metres of commercial space in Wellington used for non-office purposes.

Auckland is the second largest property holding, with nearly 400,000 square metres across the region. At first glance this is similar in scale to the Wellington portfolio but the composition is almost the opposite. There is a minority of 140,000 square metres of office space occupied at approximately 22 square metres per person, with the remainder and majority being non-office commercial space.

The overall efficiency of space use is low when compared to the private sector and overseas governments. In the United States, the central government targets per person space allocations of 10 to 12 square metres and the Australian Commonwealth Government targets 16 square metres.

Coming into line with best practice In 2009, the Treasury began an annual benchmarking exercise known as Better Administration and Support Services, which benchmarks non-frontline functions with the aim of identifying opportunities for improvement. Office accommodation was an area recognised as having the potential to improve from an efficiency perspective, especially occupancy density. Measurement for effectiveness was not well developed, but there was evidence to suggest that property was not as effective as it could be within agencies and across government.

The Government Property Management Centre of



Expertise was established in April 2011 to provide a coordination function, but without changing accountability for property decisions. The centre’s first year was mainly in establishment mode, developing the guidelines and portfolio information and creating a community of practice among government property managers.

Improving efficiencyFollowingtheestablishmentphase,thecentrebecomeactivelyinvolvedin procurement strategies and business cases for Wellington and Christchurch. This resulted in market involvement for multiple agencies within an all-of-government context. Auckland is also likely to see its share of government procurement activity during the coming years, with more than 60,000 square metres of leased accommodation expiring in the next two years.

Early results from these activities have shown that a significant improvement in efficiency is possible, with occupation densities being achieved of 13 to 16 square metres a person. This is particularly where allowances are made for shared facilities across agencies.

As with other agencies and private sector organisations, we are looking at opportunities and new ways of working in Christchurch. A centrally coordinated approach to property will help us to explore these new options around office accommodation, such as the increased use of hot desks.

Centralised approachIn October 2012, the government extended the role to include −• Developmentofpropertyprinciplesandstandards• Undertakingallgovernmentproperty-relatedprocurement• Agreementbythefunctionalleaderontenuredecisions• Agreementbythefunctionalleaderonbiennialpropertyplans• Provisionofacommonpropertymanagementinformationsystem.

This more centralised approach is expected to increase the level of potential property-related savings and how quickly they will be achieved. This is due to −• Coordinationbetweeninformationandcommunicationstechnology

and property decisions which provide integrated workplace solutions • Decisionsonco-locationandsharingofresourcesnowbeingona

basis for all of the government, rather than agency-by-agency • Standardisationtoreducethecostofimplementationallowingfor

economies of scale and flexibility• Moreefficientandeffectivedecisionsandperformancemonitoringvia

centrally-held information.It is anticipated that this centralised approach to property planning

and purchasing office-related goods and services will reduce the



government’s occupied footprint by around 25 per cent over the next three to four years. It should also provide more productive workspaces.

Since its establishment in April 2011, the centre has been working with agencies to identify efficiency and effectiveness gains by improving the performance of individual agency management practices and encouraging the sharing of resources and the scale in contracting.

However, these gains are limited by the extent to which the individual agency assets are managed as an overall portfolio. Agencies can individually adopt best practice, but the larger gains will be due to better property sharing between agencies via permanent co-location or by occasional sharing.

Portfolio management The government expects agencies to look at how they can work smarter and closer together. To help enable this, a consistent approach to location decisions, premise layouts, furniture and technology is needed. As with a comparable private sector portfolio, the first step to moving to a portfolio approach is the development of a national property strategy, currently being developed.

The strategy need not be prescriptive and granular to the level of individual properties, of which there are approximately 1,100 across New Zealand, as this would not be particularly practical or desirable. Agencies are still best placed to understand their own activity types and customer needs. However, there will need to be a level of commonality to enable economies of scale and shared use. A standardised approach can therefore be adopted without compromising individual agency requirements.

Management principles and productivityThe national property strategy will be underpinned by portfolio management principles. These will outline how agencies can ensure government portfolio requirements are integrated into individual agency plans, while supporting the individual requirements of each. Examples include responsiveness to changing government priorities, where property must support the government by being efficient and adaptable to provide inter-agency flexibility. Another example is allowance for co-location and sharing. Opportunities to share facilities must be considered and


implemented. Co-location may be formed with functional groups such as call centres, or by location.

Performance is more than simple efficiency. The workspaces need to contribute to the productivity of the agencies, the occupants and external stakeholders such as customers. There is a growing acceptance within the property industry which suggests that office accommodation can enable or resist productivity in the workplace. Where agencies, or parts of them, are co-locating the physical environment can be critical in encouraging the effective sharing of spaces and ideas.

Workplace principlesThe development of common workplace standards will provide economies of scale in the provision of furniture systems and professional services such as architects. This will also give consistency between agencies and allow for sharing and re-use of facilities. As well as portfolio management principles, we are developing workplace principles to ensure that wherever practical accommodation maximises productivity, there is the potential for flexibility, co-location and re-use, and cross-agency collaboration.

Consistency in design is where people and teams within an agency move while the furniture stays in place. Fixedgenericlayoutswillmaximisetheefficiencyofthefloor plate, while allowing teams to be structured around projects and activities. Supplying a mix of quiet individual and active teamwork areas is vital.

Open plan working environments are flexible when designed to allow for work in both formal and informal, as well as quiet and active, settings. Using technology to allow mobility can allow staff to use the whole building as their work point, not just their desk.

The use of collaborative and multi-use spaces can be maximised by creating shared communal spaces which can be used for multiple functions and purposes. Groups within one organisation or multiple agencies in a co-location scenario will tend to own amenities less frequently because team space can be shared communal space.

David White is Director of the Government Property Management Centre of Expertise hosted by the Ministry of Social Development in Wellington.


Valuing Maori land

IT’S ALSO A WAY OF SAVING POWER

www.eecabusiness.govt.nz

EEC2799

When you are responsible for managing a commercial building, you want no surprises. Whether it’s the size of your energy bill or the operation of key systems such as lighting and heating, ventilation and air conditioning, you want everything running smoothly. An energy monitoring and targeting system can provide you with real time information on energy use in your building and give you early warning when things aren’t working as they should be. Once you understand how you are using energy and what changes to make to your systems, it is easy to save 20% on your annual energy bill.

Take Fletcher Building Limited for example, with the help of energy specialists Energy NZ, they installed a monitoring and targeting system at their head office complex in Auckland.

The system has helped Fletcher Building Limited to identify and deliver annual energy savings of 34% from one building alone, with more improvements planned across the site.

To find out how a monitoring and targeting system could be good for your business, talk to an EECA BUSINESSTM programme partner. They can provide expert advice and unlock any funding that may be available to you.

Peter Walkinshaw, Property Portfolio Manager, Fletcher Building Limited says “Our monitoring and targeting system has been critical for discovering ways that we can reduce our energy consumption.”

IN BUSINESS, INFORMATION IS POWER

To find a programme partner in your area visit eecabusiness.govt.nz/commerical-buildings

EEC2799 Bus MonitorTarget Property Quarterly Ad 3_0.indd 1 29/04/13 2:21 PM

Valuing Maori landA rating valuer’s perspective

Valuing Maori land is often controversial. Trying to justify a rating value to Maori owners who perceive they can never sell their land and feel the only appropriate value should be zero is never easy. This is because some of the principles of law that a valuer must adhere to are often misunderstood. Specifically are the principles of having to assume a notional sale, adhering to highest and best use, and ensuring any discount allowed essentially reflect the difficulties likely to be faced by a potential hypothetical purchaser for onward sale. This takes much of the focus away from the current owner’s situation.

Valuing Maori land

Mark Grinlinton

It is often worth remembering that a valuer has no choice but to work within the given framework of the law. When valuing Maori land for rating purposesthisinvolveshavinganunderstandingoftheRatingValuationsAct 1998, the Te Ture Whenua Maori Act 1993 and relevant case law, in particular the Mangatu judgments which set the initial groundwork for valuing Maori freehold land.

The Mangatu judgmentsThese judgments consist of the −• OriginalLandValuationTribunaljudgment• HighCourtjudgmentonappeal• CourtofAppeal’sdecisiononappealfromtheHighCourt• SubsequentjudgmentoftheLandValuationTribunalapplyingprinciples

identified by the Court of Appeal.The Court of Appeal (1997) judgment always appears most prominent

andisregularlyquoted.However,itisthefinalLandValuationTribunaldecision in 1998 which provides the best reference to valuing Maori freehold land. It sets out the principles outlined by the Court of Appeal, summarises the evidence and provides a clear method. These methods are well summarised by the Court in Taheke Paengaroa Trust v The Western Bay of Plenty District Council [2008] under the appropriate heading ‘The Law’ stating:

[22] In Mangatu Inc v Valuer General[1996]2NZLR683theHigh Court dealt with a suitable methodology for valuation. The Court held that:

‘In practical terms this will very likely mean starting with a valuation as if the land could be bought on the open market and then allowing a deduction for the alienation restrictions. The deduction will vary in amount depending on the extent of the restrictions, the likelihood of Maori Land Court approval for the sale, and the nature of the property.’

IT’S ALSO A WAY OF SAVING POWER

www.eecabusiness.govt.nz

EEC2799

When you are responsible for managing a commercial building, you want no surprises. Whether it’s the size of your energy bill or the operation of key systems such as lighting and heating, ventilation and air conditioning, you want everything running smoothly. An energy monitoring and targeting system can provide you with real time information on energy use in your building and give you early warning when things aren’t working as they should be. Once you understand how you are using energy and what changes to make to your systems, it is easy to save 20% on your annual energy bill.

Take Fletcher Building Limited for example, with the help of energy specialists Energy NZ, they installed a monitoring and targeting system at their head office complex in Auckland.

The system has helped Fletcher Building Limited to identify and deliver annual energy savings of 34% from one building alone, with more improvements planned across the site.

To find out how a monitoring and targeting system could be good for your business, talk to an EECA BUSINESSTM programme partner. They can provide expert advice and unlock any funding that may be available to you.

Peter Walkinshaw, Property Portfolio Manager, Fletcher Building Limited says “Our monitoring and targeting system has been critical for discovering ways that we can reduce our energy consumption.”

IN BUSINESS, INFORMATION IS POWER

To find a programme partner in your area visit eecabusiness.govt.nz/commerical-buildings

EEC2799 Bus MonitorTarget Property Quarterly Ad 3_0.indd 1 29/04/13 2:21 PM


Valuing Maori land Valuing Maori land

[23] On the basis of those remarks, approved as they were in the Court of Appeal, the valuation community has adopted a two-step approach to valuation in these circumstances. The first step amounts to an assessment of the land value of the land upon the open market as if it were a sale of a freehold estate of general land. This is normally done by determining the highest and best use of the property applying comparable sales data, to obtain the freehold equivalent value of the land. The second step is to determine on a case by case basis a percentage deduction for the restrictions that Maori freehold status imposes upon the owners’ estate as compared with the freehold equivalent, and that requires an assessment of the factors relevant to the piece of land, including those specified by the Court of Appeal, and any other relevant factors.

Determine freehold equivalent valueAt this stage there are clear rules a valuer must follow. The Taheke Paengaroa Trust judgment condenses these principles set by the Court of Appeal.

[19] …The legislation requires the Court to accept a statutory premise that the owner will sell that estate or interest in the land as a bona fide seller, willing but not anxious to a fully informed, willing but not anxious buyer.

[20] A sale to a hypothetical purchaser is thus statutorily presumed, and the difficulty inherent in obtaining agreement from a widespread ownership, quorum difficulties, or difficulties in getting Maori Land Court approval for sale cannot be taken into account at that stage of the process.

The longstanding valuation principle of assuming a notional sale still applies to Maori freehold land. However, it was recognised by the Court in Mangatu Inc v Valuer General [1998] ‘… that from the point of view at least of the present Maori owners, such an assumption of a notional sale is very much a legal fiction.’

To emphasise, the Court went on to say − … We remind ourselves that we are positing a situation where an agreement is assumed. By that we understand that we assume for the purposes of our assessment, that all the substantial quorum concerns etc., have in some way been overcome and that an agreement has been reached, be it with a person within the preferred class of alienee, or Maori outside the preferred class of alienee or non-Maori.

Given a notional sale with a willing seller, the other longstanding fundamental concept of highest and best use also applies. This is always that use which would produce the highest value for a property regardless of its actual current use. The concept does not, and should not, take into account the existing ownership structure or the


Valuing Maori land

economic situation of the seller. This was reinforced in the Taheke Paengaroa Trust judgment.

When assessing freehold equivalent value, consideration should also be given to identify areas of special cultural and historical significance, such as pa and battle sites. These areas should be separately valued based on the view that currently there would be few or no purchasers who would do anything other than respect the identified pa or battle sites as being tapu land and would probably preserve its existing state without development or commercial use. In economic terms, a hypothetical fully informed purchaser would consider that portion of land likely to be of little or no value. The freehold equivalent value should therefore reflect this.

Restricted alienabilityThe second stage is where the restrictions on alienation imposed by the Te Ture Whenua Maori Act must be taken into account. The Mangatu judgments made it clear that the subject of the valuation is the owner’s estate or interest, not just the fee simple. The valuer’s task is to determine what the hypothetical purchaser would pay to obtain the owner’s estate or interest in the land.

The Act ‘imposes a significant barrier on alienation’ and ‘…the implications of that are that a valuer must assume that alienation of Maori land would present significant practical difficulties in the future for any purchaser.’ It directs −

… the assessment of land value must remain

on a case by case basis. The effect of restricted alienability will be affected by such factors as the nature and size of the property, the historical connection of the owners with the land, membership of the preferred classes of alienees and the resources available to farm the purchase, the statutory role of the Maori Land Court in relation to the property and the prospect of obtaining confirmation of an outside sale from the Court. In the absence of further guidance in the legislation valuers will have to weigh the considerations in a sensible and practical way to arrive at what may well be a robust and imprecise judgement.

A common mistake is considering the above factors based purely on the existing owner’s situation, which could be more restrictive compared to that of a potential purchaser. The correct method is outlined in Mangatu Inc v Valuer General[1998]supportingtheValuerGeneral’sapproach.

… which is that in light of the Court of Appeal decision, there must be a discount allowed, essentially reflecting the difficulties likely to be faced by a potential hypothetical purchaser for onward sale or disposition.

A purchaser would consider it necessary to discount the price today for any impediments to a sale in the future. Weighing up the factors above, from the viewpoint of a prudent and informed purchaser, the greatest restriction


for anyone purchasing Maori freehold land is likely to be the expense, delay and difficulty of obtaining Maori Land Court approval for on-selling and mortgage. These obstacles form the bulk of any deduction. Other considerations listed by the Court of Appeal should therefore have little or no weighting.

Historic connectionsWhen considering the appropriate deduction, the nature and size of a property is already accounted for when determining the freehold equivalent value. Any further reduction would be erroneous.

Strong historic connections may be seen to complicate future sales, increasing the risk of delay. It may also affect the exclusive use of the property if visitors require access to sites of special significant. However, these cultural ties to the land could be seen as positive

when offering first right of refusal to the preferred class of alienees. They may be more willing to pay market price or even surpass market level.

Similar to historic ties to the land, a larger number of members within the preferred class of alienees may be perceived as raising the cost and complexity when on-selling. On the other hand, it could also be seen as increasing the pool of potential buyers.

Land resourcesOn the topic of resources, the Tribunal in Ongare Trust Maori Land Block v Western Bay of Plenty District Council [1998] had this to say.

[19] The issue of the resources for the preferred class of alienees is vexed. The nature, quality and quantity of evidence required to establish on the balance of probabilities the absence

Valuing Maori land Valuing Maori land


of individual resources by 227 owners is problematic, to say the least … In the view of the Tribunal, it is a practically impossible task for an objector dealing with multiple owners of Maori freehold land, where the number of owners runs into the hundreds or thousands, to establish that no individual within the preferred class of alienees could purchase land at a particular specified value. The cost of doing so would be enormous, and may well be beyond the resources of the owners concerned.

[20] In the present case, whilst the Tribunal accepts that the vast majority of owners are not wealthy, the evidence does not establish that a consortium of 10 or 20 of the wealthiest owners could not afford to purchase this land at the agreed land valuation, if they pooled their resources.

More importantly, discussed during the Ongare hearing but not included in the judgment, under the assumption of a sale and a willing seller, consideration must be given to the possibility of a sale outside the preferred class of alienee. This has the effect of limiting the relevance of resources within the class.

The Court of Appeal in Mangatu recognised that, ‘no one can be absolutely excluded as a possible purchaser of Maori freehold land.’ However, the sale process of Maori land involves providing first right of refusal to members of the preferred class of alienee. This does not mean accepting a price lower than market level from these members. They are simply being given the lawful opportunity to exercise their first right of refusal at market level. Outside interest must therefore be considered.

Another common perception is that a status change to general land would be sought in order to facilitate the sale or mortgage over Maori freehold land. However, a hypothetical purchaser assumed to be fully informed would be aware of the hardening of attitude and difficulties of achieving a status change, especially if outside the preferred class of alienee. When considering the deduction for Maori land, a status change is therefore not assumed.

Often debated is the difficulty of getting mortgage finance on land with the status of Maori freehold. The Taheke Paengaroa and the Ongare Trust Block involved

valuations in the millions of dollars. Hypothetical purchasers at this market level will most probaly have the funds and abilities to secure mortgage finance without status change on the land.

Quantifying the deductionFollowingtheMangatujudgments,theValuerGeneralissued guidance notes to help valuing Maori freehold land. These cover a range of percentage adjustments covering discounts for multiple ownership and additional adjustments for sites of special significance. The range is in keeping with the Tribunal’s decision for the two Mangatu properties represented, applying a five per cent and 15 per cent discount to freehold equivalent value.

These guidelines have no force of law and are facing increased scrutiny. With concerns about the comprehensiveness and continued validity of the assumptions underlying the guidelines, it is now difficult for valuers to strictly adhere to these guidelines without supplying further justification. Analysing case law is a way of justifying the discount applied.

RestrictionsOne main consideration with this analysis is whether any Act of Parliament restricts the actual or potential use of the land. The Te Ture Whenua Maori Act does not limit the use of Maori freehold land. Bearing this in mind, comparison can be made with case law dealing with heavier restrictions, helping set an upper limit of discount. AgoodexampleistheRiverheadcase(Carter Holt Harvey Forests Limited v Rodney District Council and LINZ [2003]), which dealt with the heavier restrictions imposed by CrownForestLicencesandtheCrownForestAssetsAct1989, and where a discount was fixed at 20 per cent.

A brief summary of this case and other judgments are listed below providing useful justification towards an appropriate discount. The discounts applied to Maori freehold land have ranged between 3.5 and 20 per cent. Adjusting for outliers, most fall within five and 15 per cent.Fromavaluer’sviewpointitishopedthattheseLandValuationTribunaljudgmentsandfuturedecisionsshowsome consistency.

2008 Ongare Trust – 20 per cent. Owners attach an enormous historical and cultural significance to the land, well beyond that which may be found in some other cases. The occurrence of a battle in relatively recent

Valuing Maori land


historical times is relatively unusual and highly significant.2008 Taheke Paengaroa Trust – 15 per cent.

Greater discount applied reflecting additional delays and costs associated with obtaining Maori Land Court consent before any development work, such as conversion from forest to pasture, could begin. This was coupled with the urgency in 2005 of beating the Kyoto protocol deadline at the end of 2007. Noted also was the hardening of attitude both in the interpretation of the Te Ture Whenua Maori Act and among Maori generally against alienation of Maori lands.

2008 Whaoa No 1 Lands Trust – 5 per cent. Involved a valuation for rent review purposes. Judgment made reference to Taheke Paengaroa, but the discount adopted was considerably less. This is a scenario where proprietors are disadvantaged by having a large discount.

2006 Te Whaiti Nui A Toi Trust – 39 per cent. Maori land restrictions are 14 per cent and reserve status 25 per cent.

2003 Riverhead – 20 per cent. Heavy restrictions imposedbyCrownForestLicencesandtheCrownForestAssetsAct1989.Restrictionsonsale,restrictiononusewhere the licencee is effectively restricted to a forestry use, possibility of having the land returned to Maori, and the requirement to acknowledge and protect public access.

1998 Mangatu-Awapuni – 15 per cent. Complex ownership structure and high historic

significance.

1998 Mangatu-Mangamaia – 5 per cent. Typical pastoral block.

1998 Houpoto Te Pua Forest – 3.5 per cent. Valuationforfixingtheappropriaterent.Importanceoftrying to maintain some consistency with the Mangatu judgments was reiterated, albeit that the Maori interests involved were in opposing directions. Lower discount reflects the less cumbersome ownership structure and the commercial history of the land.

1998 Eyrewell and Mt Thomas – 13 per cent judgmentindicated.FivepercentforCrownForestLicences tenure restrictions and 10 per cent for restraint on sale. However, actual deduction was 13 per cent.

1995 Auckland Grammar School Board v DSLI – 6.8 per cent. Forrisksassociatedwithsection27Bmemorial.

1994 Christchurch Racecourse – 35 per cent. Heavy restrictions imposed by the Christchurch RacecourseReservesAct1878andtheReservesAct.Inability to sell due to restricted powers of disposition, restricted use to racecourse activities, and restricted rights of access of the public.

ConclusionUnder the current legislation anyone stepping into the rating valuation arena advocating discounts of more than 15 per cent for Maori freehold land is not likely to succeed. It has been tried many times. The objective of botharatingvaluerandtheLandValuationTribunalisto

achieve a correct valuation based on the legal framework in place. The fairness of that framework can be debated by others. Long standing principles of assuming a notional sale and an owner willing to sell still apply when valuing Maori freehold land.

The requirement to focus on the interests of a potential hypothetical purchaser rather than the current owner is still the same, which brings in the other fundamental concept of valuing based on highest and best use. Any time a higher and better use is considered more reflective of the market than the actual use, it is contentious, and this is not just limited to Maori freehold land.

Mark Grinlinton is Director of Landmass Technology Ltd in Tauranga.

Valuing Maori land


Agent Anna – code of conduct

Niven Prasad

Agent Anna and the real estate agents’ code of conduct

Legal cases

Such sensitivity towards Agent Anna can be traced to efforts in recent years to raise ethical and professional standards in the industry with legislative reform by putting in place rules, processes and regulations around such reforms and promoting awareness. It is a good time for the industry that such a show coincides with more reform around the corner, relating to improving ethical and professional standards for real estate agents in the form of a tweaked code of conduct.

Improving ethical and professional standardsOneofthemainareasoffocusoftheRealEstateAgents Act 2008 is to hold licensed real estate agents accountable for their actions. An important way to help this accountability is section 14 of the Act which provides that −

14 Code of professional conduct and client care

(1) The Authority may, by notice in the Gazette, make any practice rules to enable it to discharge the duty imposed on it by subsection (2).

(2) The Authority must have rules that include or provide for a code of professional conduct and client care, which will be a reference point for discipline and which will focus on, but need not be limited to, the duties of agents to their clients.

TheRealEstateAgentsAct(ProfessionalConductandClientCare)Rules2009becamethatreferencepointfor discipline. The code is the reference point used by the

ComplaintsAssessmentCommitteeandtheRealEstateAgents Disciplinary Tribunal when establishing if a real estate agent’s conduct has been unacceptable. The code of conduct came into force on 17 November 2009 and after morethantwoyears,theRealEstateAgentsAuthorityreviewed it via public consultation in late 2011 and early 2012.

What has resulted from that public consultation isanewcodeofconduct−theRealEstateAgentsAct(ProfessionalConductandClientCare)Rules2012(thenew rules). These rules come into force on 8 April 2013 and this article briefly sets out the content of the current code of conduct and the changes real estate agents, and those dealing with agents, should be aware of in the new rules.

The code of conductThe code of conduct is, perhaps necessarily, a broadly worded set of rules. They cover standards of professional competence and conduct and duties on real estate agents to report misconduct, and promote awareness of the rules with their clients or prospective clients.

The code is not meant to be an exhaustive list of actions that constitute unsatisfactory conduct or misconduct. As mentioned, it is a reference point for disciplinary action against real estate agents so that the ComplaintsAssessmentCommitteeortheRealEstateAgents Disciplinary Tribunal can gauge the level of offending by an agent and penalise or not accordingly.

Since its inception, the code of conduct has been wide enough to capture behaviour ranging from the practice of death knocking, where a real estate agent offers

Agent Anna, the new television comedy series, is a satire centred on Auckland real estate agents starring Robyn Malcolm in a world depicting ‘lying, back-stabbing, and cheating’ by agents. The criticism of the show from some members of the real estate industry has been less than positive. However, the show has certainly not prompted a reaction of fanfare from real estate agents in the same way as iconic American shows such as Mad Men has from marketing executives or Suits from lawyers. If a television series is an expression of public perception, then it is only fair that the real estate industry is concerned about this expression.


to help a new widow or widower sell their home – the agent was not sanctioned in that case – to out-and-out fraudulent behaviour. There have been cases where an agent used an associate to buy a property from a genuine vendor and then immediately on-sell it to a genuine buyer for a higher price. There have also been cases where real estate agents have advertised properties for sale without any authority from the owner.

Naturally, a large part of the code of conduct focuses on the interface between real estate agent and client or prospective clients. The areas of appraisal and pricing, conduct around being clear on agency agreements and contractual documents, and marketing are dealt with in detail by the code so that clients or prospective clients are not exposed to exploitation by real estate agents.

It is also worth noting that the code of conduct and the new rules apply not only to land but to transactions as defined in the Act and these include ‘the sale, purchase, or other disposal or acquisition of any business (either with or without any interest in land).’ Anyone reading the code of conduct or the new rules should read it together with the Act to ensure a consistent understanding.

Tweaks in the new rulesThe new rules do not bring about any radical changes to the code of conduct, but rather tighten, clarify and tweak it to reflect experience over the years since the code first came into being. Topics which received the most attention in the consultation document were definitions, appraisals, double commissions, disclosure of defects, and changes to the code for non-residential real estate sectors.

There are five main changes brought about by the new rules on 8 April 2013.• Inthenewrules,arealestateagentmustexplicitly

recommend that a client or prospective client obtains legal advice. This is a more express obligation than in the code of conduct, where a real estate agent was to simply ensure that a client or prospective client is aware that they may need legal or other technical advice.

• Thenewruleshelpprotectsellersfromtheriskofpaying two commissions by stating that a real estate agent must not act in a capacity which would attract more than one commission in the same transaction. This tightens the old rule which simply said that a real estate agent cannot act for both client and customer in the same transaction, but there was no express limit beyond that.

• Inthenewrules,whenanoticeofcancellationisgivento a licensee’s client, the real estate agent must explain to the client all customers from whom the agent would have claimed a commission if the transaction had gone ahead and concluded. This rule is being introduced to promote greater transparency from real estate agents throughout a transaction.

• Thenewrulesintroducerulesspecifictoabuyer’sagent which relate to what information must be explained before an agency agreement is signed, restrictions on working within the terms agreed with the client, submitting offers and record-keeping obligations.

• Thedisclosureofdefectsruleinthenewrulesmakesthe standard of disclosure on a real estate agent that of a ‘reasonable competent licensee.’ Currently in the code of conduct the standard is linked to the ‘licensee’s knowledge and experience of the real estate market.’ This change is a result of the submissions commenting on the ambiguity of the current standard.

Disclosing benefitsThe above are changes that stand out, but there are other tweaks in the new rules, such as − • Allowingarealestateagenttodiscloseinformation

confidential to a client if disclosure is consistent with the principles of the Privacy Act 1993

• Anewruleaboutexplainingtoaprospectiveclientthat how the client chooses to sell their property can affect the benefit the agent receives.

The rule about disclosing potential benefits to a prospective client has received some scrutiny as to what exactly it means. The understanding is that a real estate agent gaining a higher commission should not overshadow what is best for a prospective client. As with broadly worded provisions, rules such as this have the potential to impose greater obligations than intended.

It is notable that more sector-specific rules were not introduced because the rules are seen as adequate already. Submissions on this aspect commented on the specific nature of commercial real estate where long-term agency agreements are more prevalent and rural real estate, where price variations can occur with stock being valued only a few days before settlement, so that specific rules should be promulgated for these options.

Not all of the changes are related to substantive content. Some provisions remain exactly the same, but are re-ordered in different parts so that there is a better flow in the rules from higher level obligations to more detailed ones. While there is an emphasis on tightening the rules in favour of greater consumer protection and lifting the industry standard, there remains a focus on making the rules accessible to both real estate agents and those who encounter agents.

What these changes meanThe media has been positive in its response to the changes which see another step towards consumer-oriented legal changes.Fromanindustryperspective,theRealEstateInstitute of New Zealand welcomed the review when itwasfirstproposed.TheRealEstateAgentsAuthorityhas understandably been positive about the changes as

Agent Anna – code of conduct


Niven Prasad

Unsigned, sealed, delivered – when is an oral agreement enforceable in a leasing context?

Property law has traditionally adhered to the rule that no contract dealing with land will be enforceable unless it has been signed and delivered. This trusted doctrine is often relied on, particularly where relationships fall apart. Where agreements are called upon to be enforced a common plea can be heard – no signature, no deal. The case of Weine v Capital and Coast District Health Board [2012] NZHC 3617, however, sings a different tune. The Weine case signals caution to those who believe withholding their signature will withhold their responsibility.

Oral leasing agreement enforcement

This High Court decision from late 2012 held that, despite a lessee refraining from signing a renewal of a lease, the lessee’s conduct proved that they had entered into an oral agreement to renew. The Court further held that this oral agreement had been partly performed by the plaintiff landlord and that certain conduct by the defendant tenant confirmed this part performance.

The oral agreement was therefore considered enforceable because section 24 in the Property Law Act 2007, which requires all contracts for the disposition of land to be in writing, does not affect the law of partial performance. Parties to a lease must therefore tread carefully. Despite protection of written agreements and legislative safeguards on not enforcing oral agreement, the Weine case proves that actions can indeed speak louder than words.

BackgroundCapital and Coast District Health Board (CCDHB) entered into a lease with Mrs Weine in 2008 for a term of three years with two rights of renewal. The CCDHB was the tenant and Mrs Weine was the landlord. Towards the end of the lease term, the CCDHB did not give

notice to Mrs Weine within the prescribed timeframe to exercise its first right of renewal, but CCDHB remained in occupation of the premises. Mrs Weine and the property manager had a meeting nine months after the date the lease was meant to expire and two-and-a-half months before the next rent review was due.

Mrs Weine submitted that, in the meeting she had with the property manager, the parties agreed to renew the lease and that documentation could be delayed and included when the rent review was to be formalised. The property manager denied that such an agreement was made. The property manager argued that the CCDHB was operating as a monthly tenant holding over after the expiry of the lease.

The argument was that on the basis of a holding over tenancy, CCDHB was entitled to terminate the lease on 10 working days’ notice. The landlord argued that the lease was in force for the renewed term.

DecisionThe Court found in favour of the landlord, Mrs Weine. MacKenzie J for the High Court held that the oral agreement to renew the lease had been partly performed. Part performance of the oral agreement, by virtue of

they are useful in further defining the benchmark against which licensee behaviour is assessed. The new rules have also been made more consistent with the Act itself, for example, in the definitions section.

Whether more sector-specific rules will develop in the future will be an interesting area to keep an eye on. This was certainly something widely commented on, but no new changes were introduced. After 8 April 2013, when the new rules came into force, we will be able to note whether the tweaks will promote greater awareness and standards and lead to less complaints, or whether the rules will capture a greater range of offences not currently contemplated.

Whatever the result it will be interesting to see whether a series such as Agent Anna will pick up on any

changing standards and express a more positive image of the real estate industry than the one it has opened with.

Some would argue that real estate agents and executives simply fail to see the lighter side of such a show. However, you could also question whether those behind Agent Anna are fully aware of the efforts being made to strengthen professional behaviour in the real estate industry. Even another argument may be that Agent Anna, despite criticism and its loose depiction, may inadvertently in the long run be promoting public awareness to a wider audience than has previously been possible.

Niven Prasad is an Associate – Commercial Property at Simpson Grierson in Auckland.


Oral leasing agreement enforcement

section 26 of the Act, deemed section 24 of the Act irrelevant. The lease obligations were therefore in force between the parties for the renewed term of the lease. Remedywasreserved,however,forfurtherargumentbecause the traditional remedy of specific performance in a part performance situation was not appropriate in the circumstances.

Oral agreementThe conduct of the parties was significant in deciding whether there had been an oral agreement and whether this was partly performed. Three pieces of evidence supported the finding that an oral agreement to renew the lease existed. 1. A letter from the landlord immediately following

the meeting between her and the tenant’s property manager confirmed that the renewal documentation was simply being deferred so that it could be incorporated with the rent review three months following the meeting. MacKenzie J held that it was unrealistic that the landlord would have agreed to let the old lease run on for that period of time without negotiating terms for a new lease.

2. The CCDHB offered no reply to the landlord’s letter, despite the CCDHB’s evidence of the meeting being at such odds with its content. This omission by the CCDHB suggested that they agreed that the lease had been renewed in accordance with the landlord’s understanding.

3. A handwritten note beside the space to sign for renewal from the executive director of the CCDHB reading: ‘As per last conversation, we are going to try and exit this property rather than re-sign ….’ This showed a change of plan as to the continued occupation of the lease. This change of plan was after the meeting between the landlord and the tenant’s manager, suggesting that CCDHB’s stance at the meeting was to continue the lease.

MacKenzie J held that writing is not required to establish an intention to create legal relations. CCDHB had relied on Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd [1981]2NZLR385(CA),wheretheCourtheld that ‘… the normal inference in New Zealand is that the parties do not intend to be bound before the agreement has been drawn up and executed on both sides.’

MacKenzie J distinguished the Concorde case as being more complex. In contrast to that case the terms of the lease in the Weine case were already settled – the only agreement required was as to the renewal of those terms for a further period. The parties had orally agreed to do so. On this reasoning, it could be argued that a future court would find it more difficult to affirm the existence of an oral agreement where parties have not entered into a lease in the first place. Once there was a finding for an

oral agreement, for that agreement to be enforceable, the Court had to examine the doctrine of part performance.

Part performanceThe second consideration of the Court was whether the agreement had been partly performed and therefore enforceable. Section 24 of the Act would not restrict the oral agreement being enforceable if there had been part performance because section 26 of the Act says that the doctrine of part performance is not affected by the requirements in section 24 of the Act.

The Court turned to the case of TA Dellaca Ltd v PDL Industries Ltd [1992]3NZLR88forguidanceonpart performance. In that case, the Court said that part performance of an oral agreement meant ‘the doing of something which clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the agreement’ and ‘when viewed independently of the oral agreement was, on the probabilities, done on the footing that a contract relating to the land and such as that alleged was in existence.’

The Court found that there were two acts of performance in particular that supported an oral agreement to renew −• MrsWeinegaveinstructionstosolicitorstopreparethe

renewal documentation and incurred liability for costs and

• MrsWeineinvoicedtheCCDHBrentforthewholeperiod of the renewed term and not just one month.

In addition, the Court found that the CCDHB had made rates and insurance payments of six and eight months respectively. This act was not available to the landlord as an act of part performance because it was performed by the defendant. However, that act was relevant in finding that the ‘circumstances in which part performance took place made it unconscionable (fraudulent in equity) for the defendant to rely on s24 of the Property Law Act.’

ConclusionUltimately the Court held that parties in certain circumstances cannot hide behind an absent signature to excuse their inferences. People relying on the representations you make are entitled to do so.

So, reader beware – those entering commercial relationships should pay particular care to their representations, internal and external correspondence, and even their omissions. It may also pay to record those conversations and meetings which go without minutes so as to avoid conflicting stories such as these. Signatures, or lack of them, will not always protect you, but you can take extra lengths to protect yourselves.

Niven Prasad is an Associate – Commercial Property at Simpson Grierson in Auckland.


Kim Dunstan

How will New Zealand’s ageing population affect the property market?

Like many other countries, New Zealand’s population is ageing. This means more people and a higher proportion of the population will be in the older ages. An ageing population will dampen population growth, but there will be more households, partly because of the trend to fewer people in each household with more one-person and couple-only households.

Ageing property market?

In New Zealand the number of people aged 65 and over has doubled since 1980, and is likely to double again by 2036. The largest growth will occur between 2011 and 2036 as the baby boomers, those born between 1946 and 1965, move into the over-65 age group.

By 2036, we expect that between 21 and 24 per cent of New Zealanders will be aged over 65 compared with 14 per cent in 2012. By 2061, we expect that between 22 and 30 per cent of the population will be aged over 65.

Within the age group we expect the number of people aged 85 and over to increase significantly. By 2061, about one in four people aged over 65 will be over 85 compared with one in eight in 2012.

Slowing population growthOur population is likely to keep growing, but at a decreasing rate. Historically New Zealand has had many more births than deaths each year which has helped grow the population. An ageing population means more people in the older ages where most deaths occur. Therefore, even with further increases in life expectancy, deaths are likely to increase leading to a slower rate of population growth.

New Zealand’s birth rates and migration gains in most years will probably keep the population growing overall. But for some areas of New Zealand, particularly those with older populations, an ageing population means deaths will soon exceed births. This means static or declining populations in areas such as Thames-Coromandel, Horowhenua and Waitaki districts, unless offset by more people arriving than departing.

Population decline may mean some local services become unsustainable in terms of patronage such as schools and retail outlets and funding such as council rates. Population decline may also dampen housing demand, although our ageing population will help offset this.

Fewer people in each householdWe are seeing a general trend towards fewer people in each household, or smaller average household size. This trend may have slowed in recent years, with children remaining in the family home for longer as housing has become less affordable. However the ageing population will be the future trend. Overall, the average size of households is projected to slowly decline


between 2006 and 2031 from 2.6 to 2.4 people per household. This continues the decline seen in recent decades, with

the average household size falling from 3.7 people in 1951 to 3.0 in 1981. The average household size is shrinking due to the increasing proportion of one-person and couple-only households. Most of the couple-only households will be those reaching ages where their children have left the parental home.

One-person households are projected to grow particularly fast. Under a mid-range scenario they will account for 29 per cent of all households in 2031, up from 23 per cent in 2006. This growth will be mainly due to the increasing number of older people, with almost three-quarters of the growth occurring among those aged 55 years and over. A total of 12 per cent of the total population will be living alone in 2031, compared with nine per cent in 2006.

Conventional housing model changeThe conventional New Zealand housing model starts with living in the parental home, moving to rental accommodation, buying a first home, and then trading up homes as family and employment situations change. People may trade down homes as children leave home or retirement nears. At later stages, people may also sell their house to pay for their retirement.

This simple model is changing due to different patterns of family formation and dissolution, family size and lifestyles, with employment and financial instability. New Zealand’s ethnic make-up also adds an interesting dimension, with the growth of non-European populations which will probably mean more multi-generational families living together.

It is unclear how inter-generational transfers of wealth will affect home ownership rates. We also do not know how New Zealanders living overseas, including the 600,000 New Zealand-born people living in Australia, might influence the property market. They may return home or invest in property in this country either before or after retirement.

Increasing globalisation may also mean a more mobile older population and families spread around the world. Older people may move more frequently across national boundaries to care for family and grandchildren, or to receive care in later stages of their life.

Increasing demand for housing Demand for housing is the result of growth in the number of households. The baby boomers created an unprecedented demand for housing as they moved through the family formation stage of the life-cycle from the 1960s onwards. As a


Population aged over 85 years 1951 to 2061

Population aged over 65 years1951 to 2061

Percentage of population aged over 65 years and over 85 years

1951 to 2061


result, household growth rates have exceeded population growth rates for several decades.

Futurehouseholdgrowthwillprobablycontinuetooutstrippopulationgrowthfortworeasons.First,thereisthe trend towards smaller households due to the ageing population. Instead of having every 100 people spread over 38 houses, we might have 100 people spread over 42 houses. Second, demand for second homes, including second residences and holiday homes, is an important feature in some parts of New Zealand.

Population ageing also contributes to the projected large increases in the number of people living in more communal, non-private dwellings, including retirement homes. The number of people aged over 80 living in non-private dwellings is projected to almost double between 2006 and 2031 from 23,000 to 43,000. This is even allowing for increases in life expectancy and improved well-being, which would allow older people to live independently for longer.

Catering for older peopleBecause of increases in life expectancy and improved well-being there will be a continued emphasis on ageing in place, living in the community with some level of independence, rather than in residential care. As a result, you might expect strong demand for safe, warm and affordable housing. Increasing numbers of older people, many of whom will be women on their own, will require housing which is secure and easily maintained and with access to public transport, health and other services.

Appropriately sized housing is another aspect. However, having fewer people per household does not necessarily mean one and two-bedroom homes will be the norm. Older people often want an extra bedroom to cater for family and caregivers. Census data shows that houses with four or more bedrooms increased from 19 per cent of occupied private dwellings in 1991 to 28 per cent in 2006.

Over the same period, building consents show that the average floor area for new residential dwelling increased from 139 square metres to 191 square metres. We have been building larger houses despite there being fewer people per household.

The physical effects of ageing need to be taken intoaccountinhousingdesign.Forexample,LifetimeDesign advocates housing design standards for an ageing population.Featurestohelpolderpeopleincludesmartassistive technology and modifications to help mobility and they range from video entry phones and handrails to accessible driveways, ramps and street-level entrances. Some of these are easier than others to retrofit to existing dwellings.

Geographical differences Population ageing will affect all areas of New Zealand, but to different degrees because of different age structures and fertility and migration patterns. The proportion of the population aged over 65 already exceeds 22 per cent in the districts of Kapiti Coast, Thames-Coromandel, Horowhenua, Waitaki and Waimate.


Household type2006 to 2031

Thousand0 100 200 400 500 600300 700

Couple-only households

Two-parent family households

One-parent family households

Other multiperson households

One-person households


By the 2030s, when the rest of New Zealand reaches 22 per cent, those districts will exceed 30 per cent. Other areas where the over 65s share might exceed 30 per cent in the early 2030s include the Wairarapa and the districts of Hauraki, Buller, Marlborough, Timaru and Central Otago. Access to facilities and services, notably specialised health care, is an important requirement for older people. As a result, the very aged tend to be concentrated in larger urban areas.

Auckland’s contributionAuckland accounted for over half of the country’s population growth during the 1990s and 2000s, and is projected to account for about three-fifths to 2031. It is now home to one in three of this country’s people and households. Therefore Auckland is important demographically as well as economically, socially and politically. However, the city can also expect slower population and household growth than in recent decades because of population ageing.

Within Auckland, the fastest population and household growth over the next 20 years is projected in the outer local board areas. The over 65 population is projected to more than triple over the next 20 years in UpperHarbour,Franklin,WaitakereRangesandRodney,and at least double in other Auckland local board areas.

Auckland is most affected by the flow-on effects of migration on rental and real estate markets. This reflects the important contribution that migration from overseas makes to the city, including returning New Zealanders. It is said that immigration affects the rental market, while emigration affects the real estate market. What is more certain is that migration is selective in terms of migrant streams, ages and destinations, and its effects are also selective on local and regional housing markets.

Non-demographic factorsDemographic projections indicate the demand for housing from changes in populations, families and households. The housing market, however, is affected by a wide range of non-demographic factors including housing supply, interest rates, savings and investment patterns, and income. It can be affected at a local level by holiday homes which do not

usually have people living in them. Similarly people invest in housing in areas where they are not necessarily living, including overseas investment in New Zealand.

International evidence suggests that population ageing will have a negative effect on real estate prices, although whether this will apply to New Zealand is uncertain. Slower population growth may mean lower residential investment, slower growth in prices and less speculative volatility in the housing market. These are all likely to fluctuate with ups and downs in population growth as they have done historically.

House prices may also become more aligned with personal and household incomes as in other countries. With slower labour force growth, demand for labour may lift incomes, perhaps leading to higher house prices, assuming there is not an over-supply of housing.

Irrespective of the effect on capital values, housing wealth poses difficulties for the asset-rich and income-poor. People needing to access their housing wealth for retirement income can either trade down homes or release home equity via financial contracts such as reverse mortgages. As a result, one might expect further development, promotion and understanding of equity release products in New Zealand.

Evolving notions Too often the ageing population is discussed in negative terms. In fact, it reflects reduced death rates at all ages. That we are living longer is positive. Indeed, the concept of what it means to be aged, elderly or old continues to evolve as we experience improved health, well-being and survival into increasingly older ages. New Zealanders reaching age 65 around 1950 lived, on average, another 14 years. By comparison, those reaching age 65 in 2013 can expect, on average, to live another 22 years.

Our older population will affect many aspects of our country and communities. This presents opportunities, as well as challenges, for those involved with the property market.

Kim Dunstan is a Senior Demographer at Statistics New Zealand in Wellington. The views expressed in this article are those of the author and do not necessarily reflect those of Statistics New Zealand.



Land Professionals Mutual Society Incorporated (LPMS) has been arranging group professional liability insurances for member firms since 1976.

It is governed by a Board which is made up of member firms principals, including valuers, surveyors and kindred professions.

The group has built up over many years very wide expertise in the liability field and offers policies which cover all aspects of liability risk for valuer members.

LPMS is a risk management organisation, with its principal objectives being:

• Guidancetomembersonthewaysandmeansofavoidingorminimizingliabilityclaims;

• Providingmemberswithsupportiveclaimsassistanceandadministrationincluding quality technical, legal and insurance assistance;

• Offeringmembersaccesstoespeciallytailoredgroupprofessionalindemnityand other liability insurance facilities;

LPMS is not profit driven and provides:

• ComplimentaryrunoffforretiredprincipalswhohavehadcontinuousPIcoverfor a minimum of 5 years prior to ceasing practice;

• Complimentary$50,000termlifecoverforprincipalswhohavehadcontinuouscoverwithLPMSforaperiodof10ormoreyearsandareaged70oryoungeratthe time of application;

• Apolicyofapplyingadiscountintheannualpremiumorsubscriptionforlong-standing member firms when LPMS has surplus funds.

InsuranceConsultant: InsuranceandClaimsAdministration AonNewZealandLimited Attention:DougMorton(04)8194086

Formoreinformationvisitourwebsiteatwww.lpms.co.nz

Land Professionals Mutual Society Incorporated (LPMS) has been arranging group professional liability insurances for member firms since 1976.

It is governed by a Board which is made up of member firms principals, including valuers, surveyors and kindred professions.

The group has built up over many years very wide expertise in the liability field and offers policies which cover all aspects of liability risk for valuer members.

LPMS is a risk management organisation, with its principal objectives being:

• Guidancetomembersonthewaysandmeansofavoidingorminimizingliabilityclaims;

• Providingmemberswithsupportiveclaimsassistanceandadministrationincluding quality technical, legal and insurance assistance;

• Offeringmembersaccesstoespeciallytailoredgroupprofessionalindemnityand other liability insurance facilities;

LPMS is not profit driven and provides:

• ComplimentaryrunoffforretiredprincipalswhohavehadcontinuousPIcoverfor a minimum of 5 years prior to ceasing practice;

• Complimentary$50,000termlifecoverforprincipalswhohavehadcontinuouscoverwithLPMSforaperiodof10ormoreyearsandareaged70oryoungeratthe time of application;

• Apolicyofapplyingadiscountintheannualpremiumorsubscriptionforlong-standing member firms when LPMS has surplus funds.

InsuranceConsultant: InsuranceandClaimsAdministration AonNewZealandLimited Attention:DougMorton(04)8194086

Formoreinformationvisitourwebsiteatwww.lpms.co.nz

Rent reviews

Brian Stafford-Bush

Rent reviews Which hat am I wearing today?

As valuers, we are required to be independent in our valuation assessments and conclusions. Why then does the valuer working for a landlord inevitably produce a higher value than the valuer working for the tenant when it comes to assessing rentals at review?

I have heard it blamed on the weather. The valuer for the landlord chooses to visit the property and undertake his assessment on a sunny day while the valuer for the tenant happens to go on a grey and rainy day.

However you look at it, there is no getting away from the fact that it is difficult for valuers to divorce themselves from recognition that the client they are working for, be it landlord or tenant, is paying the bill. How do we balance the duty of independence to our profession, acknowledgement of the hand that is feeding us, interpreting market forces and maintaining our status as an expert?

Common senseIn terms of best evidence for the rental market, common sense and court precedence has established that new leases, freely negotiated in the marketplace, provide the strongest evidence. However, in many cases other reviews provide the majority of the available evidence. If other reviewed rents resulted from comparisons to new rentals, then they could also be given a greater weighting. However if those rental reviews had been established by reference to other rental reviews, or CPI adjustments, then the situation becomes more tenuous and less reliable.

In both cases, landlord or tenant valuer, the first point of reference is generally the property with a physical inspection and a measurement based on accepted measurement principles. This is generally followed by a close reading of the lease to fully understand the problems to be dealt with. If you are lucky, the lease will detail the ownership of fit-out and chattels, but unfortunately this is seldom the case and will often become contentious.

Then it is researching your database and out into the marketplace to look for the evidence which will be relevant to the rent review at hand. The landlord’s valuer will be looking for other rentals which support an increase and will be quick to write off any comparisons which do not suit the case, provided there is a justifiable reason to do so.

Chattels and fittingsThe tenant’s valuer is quite likely to delve more deeply into ascertaining what rental incentives and other side deals might have been done in any comparable new leases so that the face rent can be clawed back to a lower level. Other tenants in nearby premises are also likely to be helpful if they know you are working to lower rentals or restrict increases in their immediate area.

As mentioned earlier, fit-out and chattels are often contentious. The landlord’s valuer will probably assume that all the fit-out, such as partitioning and air conditioning, belongs to the landlord unless clearly stated otherwise. Conversely, the tenant’s valuer will no doubt query the tenant as to any chattels or fittings that they have introduced to the property and should be excluded in assessing a rental.

Provided that each of these two assessments is within an acceptable margin of error, then I do not see a problem in such differential. In the free bargaining situation, it is likely that a landlord will look more optimistically at the rent they would like for the property and the tenant will probably want to minimise rental outgoing. In this free bargaining, if neither side has a compelling reason to settle, there will probably be a meeting of the minds towards the middle in the same way as the assessments between landlord’s and tenant’s valuer would probably strike a near mid-point compromise.

A question of independenceI must stress again that it is only when the two assessments are within an acceptable margin of error that this can be condoned. Where either valuer has produced an assessment which is outside of an acceptable range, as determined by the available evidence, then it naturally raises the question of independence.

At the first meeting between valuers where there is a differential to be resolved it is usual to first check the measurements each has of the property being reviewed. Then to make sure that both parties are in agreement

Rent reviews


Rent reviews Rent reviews

with the terms of reference as determined by the lease, the ownership of any fit-out and the effective date of review. Often points of difference in the initial assessments are the result of inconsistencies, errors or omissions. When both parties are operating from common agreed parameters, an acceptable resolution may become apparent.

Being the arbitratorMy most satisfying rental assessments have been undertaken where both landlord and tenant have jointly agreed that I will effectively act as an arbitrator and set a rental they will both agree to. It does not make it any easier, as you have to be particularly balanced in your conclusion, like being an umpire or arbitrator but without input from any other party. Least satisfying are those assignments where there is already antagonism between landlord and tenant. The valuer has to mentally block out the negative comments which inevitably become part of the instruction when taking on the assignment.

A word of advice to the tenant. If you are friendly and accommodating to the landlord’s valuer or aggressive and difficult, it may colour the valuer’s assessment, no matter how professional the valuer may try to be.

It does not need me to say that it is easier to be a landlord’s valuer in a rising market, but easier to be a tenant’s valuer in a soft or declining market. In times of rapid rental inflation, rental negotiations become very much the province of the valuer. It is also the case when rentals are declining and a lease has a soft or no ratchet clause which the valuer has a big part to play. However, after having come through the last three to four years of minimal rental growth, it is easy to see why landlords have tended to favour leases containing CPI rental increment clauses rather than the traditional and more expensive market using a valuer rental review process.

The original questionTo get back to the original question. Even when all of the evidence is exactly the same, how is it that the landlord’s valuer and the tenant’s valuer will come up with such different recommendations?

If all of the evidence was homogeneous, then the

answer should be the same. However, because of the different nuances within the evidence and the particular attributes of the property being reviewed, there is scope for variation to occur. In analysing the evidence, the subjective nature of our profession allows for a range of interpretation. The lessor’s valuer will naturally give the benefit of the doubt to his or her client as will the lessee’s valuer. This is the classic sunny day versus rainy day scenario. While both can be right as determined by an acceptable margin of error, the answer will usually lie somewhere between.

An interesting example which highlights the various issues I have raised is provided by the recent ground rental arbitration for the Ngati Whatua land in Downtown Auckland near the railway station. Bounded by The Strand, QuayStreetandBeachRoad,thelandisa20hectareblock which was subdivided into development pods with a 150-year leasehold tenure.

Under the deal done with the original developer, the first rent review, which is on a fixed return basis, only took place in 2012 after a 15 year rent holiday. Taken to arbitration as a test case, the site at 18-24 The Strand, developed as Parnell Terraces, has 317 apartments. Ground rent is fixed at six per cent of the unimproved value of the land. Each party used two very senior and well respected valuers to present their professional opinions as to that land value to the arbitrator.

Forthelessor,thevaluerspresentedacasethatthelandwaswortharound$13million,butthelessee’svaluerscontended that the land was only worth between six and seven million dollars, or approximately half of that assessed by the lessor’s valuers. Using the same portfolio of evidence, it all came down to the interpretation and effect of the various factors applying to this particular parcel of land compared to the other land sales. In the event, the ruling byexHighCourtJudgeRobertFisherQCwasthatthelandwasworth$12.3million,whichconfirmedthatinthis case the sunny day valuers had a more compelling argument than the rainy day valuers.

Brian Stafford-Bush is a senior valuer who took up valuation as a career later in life.

Landlord’s valuer looks for Tenant’s valuer looks for

• Fullmeasurementbenefit

• Rentalssupportinganincrease

• Fullrecognitionoflandlordfit-out

• Tenantoutgoingsexclusionsinlease

• Othertenantbenefitsinlease

• Inspectiononasunnyday

• Buildingmeasurementinconsistencies

• Rentalssupportingminimalincreaseorreduction

• Incentivesunderminingapparentfacerents

• Tenantfit-outinbuilding

• Termsoneroustotenantinleasedocumentation

• Inspectiononrainyday



The Edinburgh of the South is renowned for its large andimpressivestockofheritagebuildings.VictorianandEdwardian buildings dominate the city’s streetscapes, providing a special identity for the city which is highly valued by its residents and visitors. This heritage character is most clearly evident in the inner city and surrounding suburbs.

Many of the city’s suburban centres, industrial areas and outlying smaller settlements have also seen relatively little physical change since the gold rush, industrialisation and the subsequenteconomicboom.FormanyyearsDunedinwasthen the country’s largest and most wealthy city.

On the flipside, this also means that, of all of New Zealand’s major centres, Dunedin probably has one of the largest numbers of unreinforced masonry buildings, in absolute and proportional terms. Added to this are the challenges of lower growth and returns, long-term under-investment in building maintenance and upgrade, structural change in the city’s economy and the shorter-term effects of the recession. The Canterbury earthquakes raised the profile of seismic issues to be one of the problems facing the city.

Widespread debate has centered on questions of risks and questions around what the policy and statutory reactions or over-reactions might be. As in other cities and towns around the country, the insurance market has become more difficult for owners of older buildings, and tenants and organisations have become more selective about the buildings they occupy. Most visibly, this has been seen with the high-profile closure of buildings such as the Dunedin courthouse and moves of other government tenants, such as NZ Post, out of buildings found to be earthquake-prone.

Change in approachRatherthantakingapassiveordefeatistapproachtothesechallenges, or pretending that nothing has changed, the

Glen Hazelton


The Canterbury earthquakes sent shockwaves through the country, not only because of their physical and human destruction but also in terms of the insurance, political, statutory and policy repercussions which are only now becoming clearer. For a city so strongly built on its heritage buildings, these changes had the potential to have a major effect on Dunedin. Despite the challenges and uncertainties around future changes to legislation, there are also some positive stories coming out of the city because of its approach to earthquake strengthening.

FormerAHReedBuildingunderreconstructionandstrengthening, saved from demolition in 2012 by Zeal Steel


Dunedin’s earthquake strengthening Dunedin’s earthquake strengthening

Dunedin City Council and many building owners in the city have been taking a more proactive and positive approach to the problem. Throughout the city a large amount of seismic upgrade is taking place. This is both a result of changes of use, where upgrade is required, and proactive work by building owners aiming to improve the safety of those in and around their buildings and to protect their investments.

High-profile companies and organisations such as Speight’s and the University of Otago have taken a strong position on moving to upgrade their buildings, with massive multi-million dollar investments. On a smaller scale, there are countless projects throughout the city by building owners, working individually or in clusters, to improve public safety and often with little visible change that these improvements are occurring.

Earthquake strengthening policyAt the same time as the Canterbury earthquakes, most local authorities around New Zealand were entering a phase where their earthquake-prone buildings policies were due for review, something required by the Building Act on a five-yearly basis. Like many other councils, the Dunedin City Council had taken a relatively passive approach to seismic upgrade in its 2007 policy.

This policy was already being questioned internally whentheeventsof2010tookplaceinCanterbury.Ratherthan placing its review on hold and waiting for a new policy from the government, the Dunedin City Council

decided to continue with its review, releasing a draft for consultation in May 2011 and approving the new policy later that year.

This potentially controversial decision was taken on the basis that any government changes could be some years away by the time that the investigation and legislative processes had been completed. In the meantime, building owners and the city needed a clearer and more robust policy to work from. With policies needing to be reviewed every five years, and the government’s legislative changes not likely to take effect until 2014, it was decided to review the policy but recognise that it may require further revision in the coming years.

The 2011 policy The Dunedin City Council’s 2011 policy takes a much more active approach to seismic upgrade. It requires assessment of the city’s pre-1976 buildings by 2014. The policy also provides clearer rules around when upgrade is required and revised timeframes for upgrade which relate to a building’s current performance. This means shorter timeframes for buildings with lower current seismic performance and longer for those closer to the minimum requirement.

The policy also outlines approaches to the staging of upgrades, large property portfolios, rural churches and significant alterations. It tries to outline a clearer and more practical approach that attempts to deal with buildings of greatest risk more quickly to balance a range of public safety, social and economic factors.

Vogel Street in the Warehouse Precinct in 2009Vogel Street in the

Warehouse Precinct transforming in 2013


Overall, the policy has been as well received as could be expected. The most debated area has been the requirement for building owners to have their buildings assessed at their own cost, and that the timeframe to do so may prove challenging due to the demand on local engineers.

However, the fact that insurers, banks and tenants also have an interest in this information means many building owners have already had assessments completed for their own purposes. The hearings panel judged that this responsibility for assessing buildings was better to be with those who owned the buildings.

Other parallel initiatives – the carrotsFortheDunedinCityCouncil,thepolicyisonlyonepart of the equation. The council has also taken an active approach to providing building owners with information and incentives around earthquake strengthening, recognising the importance of these areas. In particular, it has targeted incentives to the owners of historic buildings, acknowledging the great public interest in their retention and the more restricted range of options that owners have for resolving the earthquake-prone status of their buildings.

These incentives include grants via the Dunedin HeritageFund,ratesrelief,atargetedrateschemeandfree building consents for seismic upgrade. Overall, over $400,000hasbeenprovidedinincentivefundingtobuilding owners throughout the city since 2010. The council hosts an annual free workshop for building owners, at which experts present on a range of practical topics including earthquake strengthening, as well as visits to seismic upgrade projects throughout the year. It also runs an awards scheme for the re-use of heritage buildings, including an earthquake-strengthening award sponsored by Oakwood Properties for the last two years.

Many of these incentives and initiatives came out of the work of the Dunedin Heritage Buildings Economic Re-useSteeringGroup.Thisisajointcouncilandprivatesector group which investigated a range of barriers to building re-use and presented its recommendations in July 2011.

Warehouse precinct The Dunedin City Council has also been testing a more geographically targeted approach to building re-use and earthquake strengthening. In this approach, the council

works with building owners, the community and a range of stakeholders within in a specific geographic area to enhance buildings, public spaces, economic activity and the overall functioning of the area.

The council cannot provide funding for each and every upgrade project, but it can improve the broader vitality of the area and the potential for owners to upgrade their buildings in a financially viable way. Earthquake strengthening is part of a broader range of improvements and enhancements.

The first area targeted has become known as the Warehouse Precinct, an important heritage area adjacent to the central city. This was once part of Dunedin’s thriving commercial hub and home to large companies such as the Union Steamship Company, National Mortgage Agency Company and Briscoes. The area had entered a long decline from the 1950s.

Vacancyratesintheareahadrisen,manybuildingswere becoming derelict, demolitions were increasing, and the area was becoming more of a blight on the cityscape than an area to visit and enjoy. The added costs of seismic upgrade of these large under-used buildings looked to have the potential to consign many to demolition.

FollowingthedevelopmentofaDunedincentralcity plan, the council committed to work more closely with building owners in the precinct where the stirrings of regeneration were beginning to become apparent. Already highly-motivated building owners were looking to transform the area beyond their own buildings.

The Dunedin City Council has worked with building owners and the community to develop a long-term Warehouse Precinct revitalisation plan for the area, which wasendorsedbythecouncilinFebruarythisyear.Inaddition to the general incentives it provides for heritage buildingre-useandupgrade,$70,000hasbeenallocatedforspecific additional incentive funding for building upgrades inthearea.Another$500,000wasalsoallocatedforpublicrealm improvements to make the area easier to get around and more pleasant for businesses, residents and visitors.

While still early days, the area is busy with construction and new residents and businesses moving into the area. Additional building upgrade projects seem to be announced on a monthly basis. Buildings that were apparently fit only for demolition two years ago are now being saved and upgraded. The knock-on effect of this revitalisation is that the precinct will probably have



proportionally more earthquake-strengthened buildings than in any other part of the city at this time, with most at 67 per cent or more of the standards.

While other economic factors, such as low initial building values are also involved, the successes in the precinct have been based on the willingness of building owners, the council and a range of other partners to work together to for mutual benefit. The lessons from this strategy and the implementation of Dunedin’s 2011 earthquake-prone buildings policy are the importance of flexibility and pragmatism. Staging of strengthening programmes, financial incentives and waivers, flexibility over timeframes and how historic buildings can be adapted and used, all vary between buildings, areas, towns and cities.

Review of national regulationsAll the work so far is at the heart of the submissions to the government’s review of national regulations

concerning earthquake-prone buildings. More action is needed on the problem of seismic resilience throughout the country, but greater national consistency and proactiveness should not be at the expense of tailored and flexible approaches.

Overly restrictive timeframes or requirements must recognise local conditions and the broad range of risks, not just the seismic risks. A national ‘one-size-fits-all’ approach would reduce opportunities to implement innovative local solutions targeted to local conditions and risks. In the Dunedin experience it is some of these local innovations, and tailored initiatives, which have the best potential to ensure we better balance economic, cultural and social considerations in making our towns and cities safer places.

Glen Hazelton is Policy Planner (Heritage), City Planning at Dunedin City Council.

FormerStavelyBuilding,burntoutin2008,thensavedfromdemolitionin2011

Dunedin’s earthquake strengthening Dunedin’s earthquake strengthening


Building a solid foundation

Phillip Curnow


At the June 2010 AGM the NZIV Foundation was introduced to members by the NZIV Council as a ‘vehicle to provide the means to lift professional thinking, research, the advocating of new ideas, along with challenging existing conventions’.

ThisFoundationproposalhadoriginatedfromaninaugural group comprising Ian Campbell, Gwendoline Callaghan, Tony Culav and myself. It was clear to this group that there was a need to create a more robust and vigorous valuation culture. Completion of university studies and achieving registration should only be the start point in professional understanding, not the end of academic achievement.

Advice was provided by Simpson Grierson on theappropriateFoundationstructure,andadraftDeedof Trust was prepared which stated that the charitable purposesoftheFoundation−

… shall involve promoting the acquisition and communication of knowledge in relation to the valuing of land and related subjects, including (to the extent that such purposes are Charitable Purposes):

• Theadvancementofeducation,training,researchanddevelopment in valuation and land economy

• Thepromotionofpublicandprofessionaleducationand promoting excellence and integrity in valuation and land economy practice.

• Theencouragementandsupportofresearchofissuesof valuation and land economy and in the furtherance of this purpose:– To make known to persons interested in the fields

of valuation and land economy, the results of the research

– To make generally available the benefits of any patentsorotherrightsacquiredbytheFoundationfrom the research.

• Facilitatingandencouragingthedisseminationofinformation and ideas germane to valuation and land economy by way of, amongst other things, conferences, publication of papers and the use of various media

• Facilitatingandencouragingconferences,meetingsand courses in the field of valuation and land economy whetherornotconductedbytheFoundationandhowsoever called

• Theprovisionandsupportofscholarshipsorprizeshowsoever described to further the purposes of the Foundation

• Educationalmaterial;producingeducationalmaterialon matters of importance in valuation and land economy

• Thepursuitofanyactivityincidentalto,butnotanynon-charitable purpose independent of, the Charitable PurposespursuedbytheFoundation.

Followinganupdatetomembersatthe2012NZIVAGM,memberfeedbacktotheFoundationproposalwasrequested via the website. This proposal is still available for viewingontheNZIVsectionofthePropertyInstitutewebsite www.property.org.nz.

There was a low response from valuers, but most were in favour of the proposal. Those who were against thoughtthattheNZIVshouldalreadybedoingwhattheFoundationproposed.Frommyperspectiveallthefeedback was valid. However, without a clear vision and a method there will probably be no change in the near future.

The next stepWhatisnecessarytomaketheFoundationareality?Now that membership approval has been gained and theNZIVCouncilwouldliketoseetheFoundationproposal implemented, the next step is to appoint the trustees, finalise the deed of trust, and establish the funding formula.

The appointment of trustees is a function of theNZIVCouncil.Thedraftdeedoftruststatesaminimum of three and a maximum of seven trustees. To be representative of the profession I suggest an initial five trustees would be appropriate, allowing two further trustees to be recommended in due course.

These trustees are likely to be all valuers, especially to finalise the trust deed. In time, this trust board may evolve depending on the skills and knowledge required by thetrustees.FundingoftheFoundationwillprobablybecontroversial. The choices about where funding may be available from include −• NZIVbankdeposits• Headwaydividends• $12,000annualrentalfortheofficefloorandservice



• Levelagreementrental• Interestgeneratedfromsaleoftheofficefloor• Sponsorship• Membershiplevyviasubscription.

The funding options should be kept flexible. The above are my suggestions about the sources of this fund.IamstronglyoftheviewthattheFoundationshould avoid the perception of being captured by any particular sponsorship and potentially associated naming rights.TheFoundationmustportrayanindependentimage. Directions to the trustees in this respect could be encompassed within the final deed of trust. In any event, the main criteria will be what is best for the membership.

There will be several aspects to the draft deed of trust that the inaugural trustees will need to debate and funding will be just one of them. The availability of funds will obviouslydictatetheextentofinfluencetheFoundationcouldhave.Anallocationofatleast$20,000ayear,approximatelyequivalentto$20amember,ofdedicatedfunding to research and publication of findings would be $20,000morethaniscurrentlythecase.TheabilityoftheFoundationtoring-fencevaluerfundscouldwellbeattractive to the membership.

Valuer benefitsTheover-ridingpurposeoftheFoundationistoprovidebenefitsfortheNZIVmembership.Thesebenefitswillliftthe professional image of registered valuers, expand their role in the wider property sector and, ultimately, the fee earning capability of practitioners.

I am aware of valuers at various stages in their careers to whom the challenge of research or providing papers has a strong attraction. It need not be a valuer providing the paper that can be of benefit to valuers’ learning. A resultant lifting of expertise, together with exploring new avenues for valuers to provide advice and opinions, will help in strengthening the profession.

TheFoundationisawaytobuildonthecurrentvaluer knowledge database, education programme and professional development. It is not suggested to replace any institute functions, but to increase opportunities for learning and enhance the effectiveness of individual valuer members.

The futureThe valuing profession has for some years now reacted to change and events. It has lost the leading edge and challenging thinking that was the hallmark of the profession. What is important is that those valuers who have led the profession still have much to give, together with a new generation whose potential is yet to be tapped.

AFoundationwhichcanharnessandfundtheintellectual firepower of the profession is an exciting prospect.Forexample,tohaveaqualityresearchpaperfundedbytheFoundation,presentedattheAGMoraseminar each year, would be a good drawcard. The options are virtually endless. Within the wider property profession there is a lot of goodwill and collegial relationships which can be used to lift the valuing profession in its future relevance. It will also recognise and reward, albeit modestly, thosewhoseizetheopportunityofferedbytheFoundation.

There has been much energy and emotion over recent years directed into making the Property Institute organisation work for all members. This is obviously continuing, but the time is ripe to lift our sights. The valuing profession has shrunk in numerical size. This may not reverse quickly, but the advice and opinions that registered valuers provide needs to be at the forefront of property, infrastructural and social change. To quote life member Graeme Horsley’s term for this thinking – ‘to occupy the intellectual high ground’.

At the time of writing this article the Auckland Unitary Plan was a hot topic and this has many property-related angles. Independent registered valuers’ opinions on the effect this Unitary Plan would be of significant importance to the debate. Yet I have not read one comment or opinion from a registered valuer. This is one example of where leading edge professional opinion could be both high profile and very useful in the Unitary Plan consultation.

Inconclusion,itismyhopethattheNZIVCouncilwillhelptheFoundationbecomeafullyfunctioningpartof the property profession’s armoury.

Phillip Curnow is Director of Curnow Tizard, Registered Valuers in Hamilton and a Member of the Valuers Registration Board.


Profile

AfterleavingAucklandGrammarSchoolin1996,Richardworked at a family manufacturing business for four years before deciding to head into tertiary study at the University of Auckland. He has always had an interest in property, stemming from his family’s involvement in industrial property in the 1990s. It was a hard decision for him to go back to study as a mature student after being in the workforce for a number of years, but he felt he needed a change of direction. He was interested in property, so decided to start a Bachelor of Property degree and see how it went from there.

AtuniversityRichardwasinterestedinallfacetsof property, and went down the valuation pathway as he thought it would give him a good insight and understanding of most components of the property industry. Discussions with Dean Humphries reinforced his thinking and that working in the valuation industry would result in being involved with all types of property, be challenging, and would ensure that he stayed in regular contact with his fellow property students and other registered valuers. Having been a property valuer for over 10 years, he is happy with his career choice and the broad range of property knowledge he has developed.

In 2005, while continuing to work for Gribble ChurtonTaylor,Richardcompletedapostgraduatepaperat University of Auckland with a view to completing a Masters of Property. However, as work got busier and he started to develop his client base he decided to put his studies on hold. He has since gone back to university, but this time as a lecturer.

He had not completely ruled out finishing his second degree or possibly taking some arbitration and dispute resolution papers to progress his career. However, working full-time and lecturing is taking up most of his time. He enjoys being on the other side of the podium and has come to appreciate the varied learning styles of his students. He says that this has helped deepen his understanding of valuation theories and, hopefully, will make him a more appreciative student when he eventually returns to study.

RichardwasadmittedasanAssociateoftheNewZealandInstituteofValuersinJanuary2009andasaSenior Member of the Property Institute in May 2012. He has been heavily involved in both the New Zealand InstituteofValuersandPropertyInstituteAucklandbranches, being a member of the committee, including being the Young Guns Convenor and treasurer.

Gribble Churton Taylor LimitedWhilecompletinghisdegreeRichardworkedpart-time for Gribble Churton Taylor. As part of the applied valuation project each student was required to find a mentor who worked as a registered valuer to help them in preparing five full valuation reports. He applied to Gribble Churton Taylor as he wanted to be in a small firm environment, work closely with a number of experienced and respected valuers, and be exposed to a range of valuation work.

Onfinishinghisdegree,Richardwasofferedafull-time role as a graduate valuer where he undertook a range of valuation assignments under the guidance of the four directors at the time. This work varied greatly from large portfolio asset valuations to commercial and industrial rental reviews for corporates and high net worth individuals. Many of these clients he still works for today.

He is currently involved in a number of valuation assignments including a full range of compensation assignments in line with the Public Works Act, lessor and lessee interest leasehold valuations, and central Auckland commercial office buildings and retail premises. He also oversees suburban commercial assignments and industrial properties throughout the Auckland region.

Valuation lecturerIn2012,RichardreturnedtotheDepartmentofPropertyat the University of Auckland to teach the stage two PropertyValuationcourseinsemesteroneandtheAdvancedValuationandAppliedValuationProjectcoursesin semester two. While lecturing, he has continued to work as a principal at Gribble Churton Taylor. He is

Profile: Richard LawsonRichard Lawson is based with Gribble Churton Taylor Limited in Auckland. He started with the company after completing a Bachelor of Property in 2002, was registered as a valuer in 2007, and later became a shareholder and principal in the firm in April 2011.


Profile

lecturing the same three valuation papers in 2013. Lecturing has been an opportunity for him to share

some of his experiences in a more practical sense with possible future property professionals and workmates. He tries to use real world examples and make sure his lectures are as interactive and practical as possible.

He hopes that he is able give the students a good insight into what a valuer does on a day-to-day basis, rather than just the theory behind the valuation. He is keen to continue this year, having had one full year behind him and the steep learning curve that this entailed.

Positives and negativesForRichardthereareanumberofpositivesinavaluationcareer. These include being able to view a wide range of properties, from residential houses to apartments, and from vacant land for development to large industrial buildings and complex commercial assignments. With this varied range he has been able to interact with a diverse range of clients – first home buyers, high net worth investors, skilled property consultants, corporate organisations with large property-focused teams, listed institutions and government departments.

Another interest, which sets property valuation apart from other professional service industries for him, is that while firms compete for clients and work, valuers regularly contact other valuers in competing firms for sales or rental evidence and to discuss similar assignments.

Richardsaysthatvaluationisnotcompletelyobjective, because even based on the same or similar evidence no two valuers will necessarily reach the same assessment which has to be supported by market evidence and peer review. An amount that a client believes their property is worth is not reliable evidence, particularly when they have a personal agenda for wanting a valuation.

He therefore feels that it is imperative to obtain the best possible sales or rental evidence to complete your valuation. Sometimes that means you get to contact old friends and also have a catch-up, other times you may need to contact someone you have never met. This sharing within the industry means that you are in regular contact with other valuers and build relationships which can be of help if you are ever sitting together around a negotiating table.

He also finds it a conversation starter as soon as people hear he is a property valuer. With the current buoyant residential property market in Auckland, he is often quizzed as to his views on whether people should be buying, selling or investing. H does not specialise in residential valuations, but does enjoy hearing the views of others.

HeadingWhile working in a collegial industry and in Gribble ChurtonTaylor’steamenvironment,Richardlikesthe

degree of autonomy in having his own clients and predominantly undertaking valuations individually. He feels that being the only person responsible for your files and your clients can be a positive and a negative. There is personal satisfaction from completing a long and complex valuation, as well as your existing clients referring you to new clients because they are satisfied with the work you have done. Building a personal brand in the sectors you want to work in can be tough, but it is reassuring when new jobs are steadily coming in.

He also notes that working by yourself on files means that you need to have good time management as you cannot rely on others and you are responsible for meeting deadlines. Working in a service industry means you are really only selling your time. He says there are only so many hours that you can work in a day and a week, so sometimes to meets a client’s expectations it is necessary to put in some long hours, although sometimes you need to explain to clients that their expectations are not realistic.

On some days, time and client expectation management, along with your networks and personal brand all work together to result in a good productive week. At other times you just have a week you want to forget about, although there are not many of these.

Advice for new entrantsStudents considering a career in valuation and new entrants to the valuation field should get to know as many valuers and property professionals as possible. Property valuation is a small industry and you will deal with colleagues on a day-to-day basis, often looking for market evidence on properties colleagues have worked on. It therefore pays to be friendly with people in a number of valuation firms.

The Property Institute and the New Zealand InstituteofValuersorganisecontinuingprofessionaldevelopment events to attend which provide valuable learning resources and the opportunity to network. Richardbelievesagoodwaytomeetpeopleistoattend the Property Institute’s Young Guns initiative that the Auckland branch organises. Around 100 younger professionals throughout the industry converge for networking and refreshments. New entrants can get in touch by email to [email protected].

Richardalsourgesnewentrantstoregularlyattendcontinuing professional development events and to learn as much from their more experienced colleagues as they can. There are a number of people who have been working in the industry for over 25 years – the lessons and advice they can sometimes provide is invaluable.

Richard Lawson is a principal and shareholder at Gribble Churton Taylor Limited in Auckland

Profile


Robert Morrin McGough

Bob began his career as an urban field cadet with the ValuationDepartmentin1953andcompletedtheDiplomainUrbanValuationattheUniversityofAuckland in 1957. After gaining registration as a valuer he commenced in public practice in 1961 as a residential valuerwithCFBennettLtd,locatedinBlackettsBuildingat the corner of Queen and Shortland Streets in Auckland.

Bob quickly moved into commercial valuation. Although the practice was focused on the Auckland region, he was well known to valuers throughout New ZealandforhisserviceonNZIVnationalcommittees,as a speaker at conferences and seminars, and as an expert witness and valuer of unquestionable repute and independence.

After changes in personnel and the retirement of W G Boswell, the company owner, Bob with the other employed valuers purchased the valuation business in 1984andformedCFBennett(Valuations)Ltd.Theymoved to the Countrywide Building in Queen Street. A merger of companies saw the formation of Eyles McGough Hilton and Waite Ltd in 1995. After further company amalgamation in 2000, the company evolved into Eyles McGough Ltd and Bob moved from director to consultant.

Over the years, his services were always in demand as an umpire or arbitrator in rental disputes, and he was a longstanding member of the Auckland District Court’s LandValuationTribunal.

His special interest was in the education of students inAuckland,particularlyvaluers.Formanyyearshewasapart-time lecturer at Auckland University, and he acted as national counsellor for students liaison for about 10 years from 1971. He contributed to the 1990 publication of Urban Valuation in New Zealand Volume II, with a section on periodic asset valuations, and was also a contributor to the Valuers Journal for over 20 years.

BobwasalsoactiveinNZIVaffairsasamemberofthe Auckland branch committee and was branch chairman in1971and1972.HewasadvancedtoFellowstatus

in 1972. Between 1977 and 1984 he served as branch councillor on the Council of the New Zealand Institute ofValuers.

During this time, Bob chaired the Tariff Committee andthecommitteeprovidingaWhitePaperontheFutureFinancialCommitmentsoftheNZIV.Thiswasawide-ranging paper, written at a time of change and when therewasacloserrelationshipbetweentheNZIVandtheother professions of the land, including the then Property Management Institute of which Bob was also a member. From1983,hewasarepresentativeontheCouncilofLandRelatedProfessions.

Followingaperiodasvice-president,BobwaselectedpresidentoftheNZIVforthetwo-yeartermfrom1981.It was in this role that he led the New Zealand delegation tothe1981PanPacificCongressofRealEstateAppraisersValuersandCounsellorsinMelbourne,atwhichhepresented a paper on ‘Current Cost Accounting and the Valuer.’Hewasalsoanattendeeatotherinternationalconferences, notably in Sydney and Los Angeles.

At this time, when Bob was at the height of his commercial career, major changes occurred to the New Zealand economic framework. Moving from a highly protected, regulated and subsidised economy during the early 1980s included a wage and price freeze, rent limitation regulations, and for valuers removal of the scale of charges.

New Zealand deregulated its economy, including floating its currency in 1985. This produced a massive impetus to the commercial property market and led to a property boom and ultimately bust following the 1987 global sharemarket crash. Bob was in the vanguard of change and was sought out as advisor and valuer by many major investors, tenants, lenders and developers over this period.

At the same time as this dramatic economic change to the country was the effect of technology on the valuation profession. This included the advent of instant communication and desktop computers that allowed

Robert Morrin McGoughBob McGough, Property Institute and NZIV Life Member, passed away on 3 March 2013 aged 77. He had been part of the valuation profession and the Auckland valuation community for over half a century.



for more sophisticated valuation techniques and report production enhancements.

Bob embraced these changes, but his reliance on them was less than for the new generation coming through as he was definitely old school. He had honed his analytical and report writing skills when there was no such thing as a spellchecker and auto-correct function, let alone an ability to easily change wording. It had to be right first time. His early spreadsheets consisted of a large A3 page neatly ruled into rows and columns for projecting rental cash flows.

Throughout these market and technology changes his philosophy was unwavering. It was that valuers were market interpreters and that there was a need to stand back, review the final answer, and ensure that it passed the sanity test – or test of reasonableness.

In1987,Bob’spre-eminentservicetotheNZIVandprofession over a long period was recognised at the AGM with the conferring of Life Membership at the young age of52.In2000,hewastobecomeafoundationLifeFellowmember of the newly formed Property Institute of New Zealand.

More recently, and with his many years of experience in practice and arbitration, he concentrated on dispute resolution for which his skills were keenly sought, both in Auckland and nationally.

Bob took dispute resolution processes extremely seriously, knowing the significant impact such decisions can have.

His decisions handed down were always well considered and logical, whether you agreed with them or not. Bob often said that if both parties are unhappy, you are probably about right. His decisions were never rushed. His habit was to write up an award after being satisfied he had all the necessary facts, then leave it for a few days, reconsider, and only then advise the parties it was available.

The Auckland branch marked Bob’s retirement in

August 2006 with a function at the Auckland Club, given in gratitude for his contribution to the profession. It was atthiseventthattheinauguralpresentationoftheRMMcGoughPrizeinValuationwasmadebyBobtothetopstudent at Massey University’s Albany campus. Sponsored by the Auckland branch, this award is now presented annually as part of the Academic Excellence Awards in the SchoolofEconomicsandFinance.

Bob was an esteemed colleague, confidante and friend to many fellow valuers. He gave freely of his advice when asked, and was well known and respected in the wider property business community.

Clear of thought, staunch at times, necessarily formal when need be, but always principled and a gentleman in possession of a beaming smile.

He was a quiet leader of unquestioned integrity and high professional standards. His legacy is shown in the students he trained, the protégés he mentored, the fellow valuers who were guided by him in wise counsel, and the wider valuation community, even those across the arbitration table. All of these people are fortunate indeed to have benefited from his outstanding contribution and selfless service to the profession.

Born and brought up in Pukekohe, Bob was one of six children. He learned the trombone and euphonium as a youngster and played in a number of bands over his adultlifeincludingtheBandoftheRoyalRegimentofNew Zealand Artillery. He played rugby league in his younger days, was a demon table tennis player during lunchbreaksattheValuationDepartment,arecreationaljogger with a neighbourhood group before it became fashionable, an avid sea and trout fisherman, loved a beer, and spent many happy hours with his family at the bach at Huia.

Married to Bernice, who was a prominent ballet and dance teacher, Bob is survived by daughter Andrea, a dance teacher and ballet academy owner in Los Angeles, son John a nationally renowned musician, and his grandchildrenDylan,Veronica,NicholasandErica.



Make the most of JLT’s partnership with the Property Institute and receive handcraftedprofessional indemnity and insurance solutions unique to your needs

Natasha Clarkeph 03 363 1194

[email protected]

Deborah Fisherph 09 300 3763

[email protected]

www.jlt.co.nz

Date post:	14-Mar-2016
Category:	Documents
Upload:	property-institute
View:	244 times
Download:	1 times

Property Quarterly (June 2013)

Documents