www.lawyer-monthly.comqueen city law26

july 2011

Construction Law and the Property Sectorin the Antipodes – New Zealand

Christchurch’s recent earthquakes

In terms of the property sector, the cost of repair to

property is currently expected to be NZ$10B. I

would not be surprised to see this figure escalate

and notes that the funding for this work will come

from the New Zealand Government, insurance

companies internationally and the private sector. I

believe that Christchurch very much needs the

urgent input of visionary developers and planners to

get Christchurch back on its feet quickly with as

little bureaucratic interference as possible. In

circumstances such as Christchurch finds itself it

is critical that all stakeholders work in as

collaborative development manner as possible and

get the job done.

Leaky Buildings throughout New Zealand

As funny as it may sound this disturbing issue is

very much an area of growth in NZ with current

estimates for repair work ranging from NZ$10-20B.

Considerable long term litigation has taken place of

behalf of the ‘victims’ of affected properties and

recent settlements with local government are now

including the appointment of approved contractors,

architects and construction lawyers. This

Marcus Beveridge owns New Zealand-based, award-winning

boutique law firm, Queen City Law, based in Queen Street,

Auckland. This firm has won New Zealand’s Boutique Law Firm of

the Year several times over the last few years and has also won

awards as New Zealand’s top Construction Law firm in 2008, 2009

and 2010. In late 2010 Queen City Law won New Zealand’s

combined Construction and Property Law Firm of the year award.

The firm has acted for developers of a significant number of high

rise projects in Auckland with associated capital expenditure in the

vicinity of NZ$1B. The firm enjoys an extremely loyal client base

and has a reputation for getting intricately involved in property

projects from the very commencement of a project and adding

bottom line value. This month, Lawyer Monthly asked Marcus to

share his thoughts on Construction and Property in New Zealand

in July 2011.

Marcus Beveridge

july 2011

www.lawyer-monthly.com queen city law 27

predicament reflects badly on all and in some caseshas had tragic results. The High Court in Aucklandis back-logged with claims and it is hoped that asubstantial number of properties will be repairedover the next couple of years and that such repairswill not form the basis of second generation claims.

Developers / Global Credit Crunch

A significant number of New Zealand’s best knowndevelopers and leading finance companies offeringmezzanine funding and other products have becomeinsolvent over the last three years, resulting inbillions of dollars of investors funds being wipedout. Our trading banks (virtually all Australian-owned) have also taken some big hits in theproperty sector but continue to make huge profit.This has created a plethora of civil litigationwinding its way imperceptibly through our Courts –however most of the capital is gone and there areunlikely to be many pecuniary winners. In such a climate new projects thereforenecessitate basic discipline to have any chance ofgetting off the ground and currently requiresignificant developer equity (NZ banks currentlylike their property developer clients to be in a 30per cent LVR position), a robust due diligence bythe mortgagee and in any event, as much certaintyas possible of a clear exit for funders. In Aucklandcity itself, the number of cranes on our landscape iscurrently very low but some change is imminent.However, retail banks are now lending up to 95 percent on residential properties (again) and it isexpected the residential market will become moreactive, particularly as 100,000 new homes will berequired in Auckland to accommodate its growingpopulation.

Rugby World Cup - October 2011

I am pretty confident the All Black’s will bringhome the bacon this year, as they are of course welloverdue. In a sense, the Rugby World Cup is but ablip on the long-term radar but the construction ofnew stadia throughout the country has been one ofthe good things in the construction sector and therewill of course be positive off-spins in terms oftourism, immigration and direct investment.Assuming the AB’s do win the World Cup, it islikely that the National Party will again form thegovernment in this year’s election.

Legislative Framework

New Zealand enjoys a very sophisticated legalsystem and the legal framework relating to propertyand construction law is constantly being refined andupdated and the case law is fluid. The ConstructionContracts Act 2002 and the Building Act 2004 arenow very much the law of the land and there are amyriad of regular changes to property lawsimpacting on taxation, regulation of building

practitioners, constant changes to standard form

sale and purchase agreements, specific fast-track

laws for Christchurch, the imposition of the new

Super City in Auckland, changes to the Resource

Management Act 1991 and other planning changes,

heritage and earthquake strengthening issues and a

myriad of other considerations, all impacting on

property lawyers knowledge baskets almost on a

daily basis. The disciplines of property and

construction law are of course a science all unto

their selves like other disciplines of the law and

2011 has, to date, proved to be a whirlwind of a

year.

The Future

New Zealand enjoys one of the most deregulated

economies in the OECD and there are very few

barriers for foreign investment in NZ. In the

property sector Singapore, Hong Kong and

Australian companies have traditionally invested

heavily in NZ.

More recently, significant capital flows have come

from China and found a home in NZ’s property

sector and there is currently considerable focus on

our farming sector.

Given the ravaging and insolvency of a large

number of NZ’s most well-known developers over

the last few years, an almost perfect storm scenario

exists for those bold enough to actively invest in the

property and construction sectors.

I am very confident that Queen City Law will

continue to be at the forefront of major property

developments in Auckland. The firm is

well-positioned to exploit the unusual shape of NZ’s

property sector, including very recent legislative

changes allowing NZ’s 11,000 lawyers to act as

agents on property transactions. The firm has

cleaned up so many of NZ’s law awards because of

its client-centric approach to the business of law and

has continued to expand during recessionary times.

These are not the times for the faint-hearted, but

unlike the crash of the late 80’s where local

companies had no money, this cycle is different. The

property market is after all about timing and for

those who are cashed up and able to exploit

distressed asset scenarios and pick the bottom of the

cycle, the results could well be spectacular. A

number of NZ’s smartest property commentators

think that time has now come. LM