Property Quarterly (March 2013)

In this issueValuation-related legislationUse of timber in the Christchurch re-buildUnit titles reform – what is wrong?Valuation of Maori land

Vol 3, Issue 1 • March 2013

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We provide expert navigation.

Simpson 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.

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

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

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

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

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

www.simpsongrierson.com

Publication Committee

Donn Armstrong Daniel Miles Ah-Lek Tay

Contact details

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

Phone: 04 382 7621 Email: [email protected]

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Julian Bateson

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Property 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Property Quarterly articles are not peer reviewed.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.

Issue 1 • March 2013

ContentsCEO’s comment David Clark ...................................................................................................................... 2Feature articlesValuation-related legislation in the spotlight Neil Sullivan .................................................................................................................. 3Valuation of Maori land Jason Clarke .................................................................................................................. 8Unit titles reform – what is wrong? John Greenwood .........................................................................................................13Use of timber in the Christchurch re-build Pierre Quenneville ......................................................................................................16Voice of the members from Property Institute research David Clark ..................................................................................................................26Continuing professional development A blessing or a curse? Marilyn Fitzpatrick .....................................................................................................30Technology at work and play Steve McNamara ........................................................................................................32GST issues for valuers and other property professionals Timothy Chemaly ........................................................................................................34Opinion piece on housing policy Annette King ...............................................................................................................37Auckland CBD and city fringe vacancy trends Sarah Davidson ...........................................................................................................38Joint study tour to China part two John Darroch ...............................................................................................................42Legal casesMisleading information in marketing a property When is an architect an architect? Niven Prasad ...............................................................................................................20The Consumer Law Reform Bill – a real estate perspective Select Committee report responds Niven Prasad ...............................................................................................................24ObituaryIain William Gribble ...................................................................................................45

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We provide expert navigation.

Simpson 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.

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

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

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

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

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

www.simpsongrierson.com

Vol 3, Issue 1, March 2013 Property Quarterly 1

CEO’s commentWelcome to the first Property Quarterly for 2013. The year is well and truly under way now, and the Property Institute has hit the ground running to make 2013 our best year yet.

This issue of Property Quarterly starts to set out some direction for the year. The next twelve months will be driven by the survey we conducted near the end of 2012, the results of which are summarised in the article on page 26. We have read every comment, including a large number of specific requests and suggestions, along with in-depth analysis of the data we gathered.

The article contains a number of specific actions we will be taking in the short term to improve, based on your feedback. It is important to emphasise that the actions mentioned are only the start. The Property Institute Board and the Institute of Valuers’ Council met recently to consider the results of the survey and set out our direction for the year. The next issue of Property Quarterly will contain an overview of our operational plan and the array of projects that will be coming out of it.

This edition also has Iain Gribble’s obituary on page 45. Iain sadly died suddenly on 25 December in Japan.

Can I remind to everyone that nominations for fellowships are due again by 31 March. Being made a Fellow of the Property Institute is a significant honour, and reflects the standing in which a person is held within our profession. I would encourage you to put some thought into nominations for fellowships, and help us to ensure that our most respected and involved members are rewarded.

CEO’s comment Value related legislation

The 2013 joint Property Institute of New Zealand and Australian Property Institute conference is set for Queenstown, from 10 to 12 July. We have a lot of exciting events lined up which I am looking forward to sharing with you over the coming months.

The conference will be opening on the evening of Wednesday the 10 July. You will be met at the bottom of the Skyline Gondola in Queenstown, where you will be handed a glass of bubbly to enjoy while you ride the gondola to the function centre on Bob’s Peak. You will have your first chance to network with other delegates and speakers as you overlook Queenstown and the Remarkables.

Over the coming weeks you will hear from us about the conference as we sign more agreements and confirm the wide array of speakers and activities which we are currently in negotiation with. Without a doubt it is going to be the most spectacular and educational conference we have been a part of, and I hope to see you all there.

Finally a correction. In my last CEO comment I stated that Lindsay McAlister contributed to the Property Institute. Of course, Lindsay’s contributions were to the NZIV before the formation of the Property Institute.

David Clark

2 Property Quarterly Vol 3, Issue 1, March 2013

CEO’s comment

Valuation-related legislation in the spotlight

New Zealand has witnessed a wave of property-related legislative change in recent years. The reasons for these changes are many and varied and all relate in some way to ensuring local and foreign investor confidence in our property market. For most New Zealanders their house is still their castle and there is a heightened expectation that the law will safeguard property rights, property quality and market integrity. Valuation is a vital part of the property confidence jigsaw, and this article looks at developments in three main statutes which affect valuers.

Neill Sullivan

Value related legislation

New Zealanders have a strong affiliation with the property market and for many people it represents the bulk of their wealth and assets. The reputation of the property market has proved to be very resilient over many years, and for this to continue there needs to be a high level of public and investor confidence in the adequacy of laws which regulate various components of the market. The need for continuing confidence necessitates constant monitoring and timely adjustments to government intervention levels and legislative requirements.

Legislative changesIn recent years there have been a number of new or amended property-related legislative changes, including the Building Act, Real Estate Agents Act 2008, Unit Titles Act 2010, Overseas Investment Act 2005, Crown Pastoral Land Act 1998 and the Financial Advisers Act 2008. These reviews were all initiated in response to changing risk trends affecting confidence in the property market. Changes to the Crown Pastoral Land Act have had immediate effects on the valuation profession and these will be discussed further in this article.

Notable exceptions from the list of legislation changes are two main pieces of statute governing valuers – the Valuers Act 1948 and the Rating


Valuations Act 1998. Valuation is a main component in maintaining confidence in the property market, and it looks increasingly more likely that the legislative review spotlight will be shone on this area in 2013. The following is a summary of current issues and developments affecting valuers under the Valuers Act, the Rating Valuations Act and the Crown Pastoral Land Act.

Valuers Act 1948 This Act is now the most dated piece of occupational regulation legislation in the country and many in the profession believe it is long overdue for an overhaul. The New Zealand Institute of Valuers approached the then Minister for Land Information at the start of the millennium to request a new Act. The Minister invited the Institute of Valuers to draft a Bill which was finally presented in 2008. History shows that the Registered Valuers Bill did not proceed, partly because there were a number of other, noisier pieces of competing legislation which were prioritised above valuation regulation.

The Property Institute and the Institute of Valuers wrote to the current Minister this year requesting initiation of a new review process and the Minister has agreed to start a review in 2013. Land Information New Zealand will lead a review of both the Valuers Act and Rating Valuations Act beginning in 2013.

The review process will consider a range of matters including the risks to public and investor confidence in the New Zealand property market arising from valuation practice. Work done by the Institute of Valuers on the previous Bill will also help inform this review. Once the level and nature of risks is assessed, these will form part of the process to decide on the best future intervention approach.

This means that a new Act would not be an automatic conclusion and other forms of intervention would also be considered such as non-legislated industry initiatives. Examples of such initiatives could include a disclosure and banning regime or a robust quality assurance scheme. Eventually, a decision will be made about the level of valuation risk and the need or otherwise for a legislated response.

The Valuers Act has generally served the profession well and it continues to have strong supporters. There will no doubt be pressure from the profession to retain the better parts of the Act. If a new one is required then this process would still take some time and may not be completed before 2015.

Valuers in AustraliaLicensing of valuers in Australia is still on the Australian government agenda and will probably be considered again in 2015. Australian states that no longer have a valuation registration regime are keen to get something back to re-establish stronger regulatory controls. Any new licensing

scheme would apply across all Australian states and provide a common base for their regulation of valuers. Potential effects and opportunities arising from this scheme would be considered as part of the review process to help decide the best intervention approach for New Zealand.

Irrespective of what happens in the statutory space, the profession should not see the possibility of a new Act as a silver bullet to ensure credibility. Professional institutes need to be highly involved and proactive in pursuit of quality assurance. The recent Property Institute initiative to introduce a quality assurance and accreditation scheme is an example of a positive initiative to complement existing legislation.

Disciplinary processOne area requiring close scrutiny in a review will be the effectiveness of the disciplinary process undertaken by the Valuers Registration Board. The Valuers Act never anticipated the volume of complaints that have been received in recent years. Concerns have been raised about the restricted number of Board members consisting of the chairman and four other registered valuers, an inability to co-opt or appoint lay members and the intensive natural justice process that has to be followed for every complaint.

These problems have affected the Board’s ability to work through complaints expediently. There appears to be a public perception that the profession’s performance in disciplining their own is out of step with complaint resolution expectations in the 21st century.

Fee increaseValuers will be aware that the fees for registration and annual practising certificates have increased by 35 per cent for the year beginning 2013. This is a significant increase and is due to a number of factors. The main reasons for this increase include −• Significantincreasesinthecostsofinvestigatingand

hearing disciplinary matters, including the cost of obtaining retrospective valuations and expert witness fees for prosecution hearings

• Ahigherproceduralandevidentialthresholdforprosecuting disciplinary cases resulting in increased legal fees

• TheneedforindependentlegaladvicetoensuretheBoard is current in its statutory processes and well positioned to withstand challenges from appeals and judicial review

• TheBoard’sagreementtofinanceallcomplaintinvestigations undertaken by the Institute of Valuers

• Anincreasingnumberofpractisingvaluersamendingtheir membership status to non-practising

• Sustainedhighlevelsofcomplaintsagainstregisteredvaluers, as illustrated below.

The graph shows the yearly number of complaints against individual valuers since 2005. A complaint against

Value related legislation Value related legislation


an individual may include multiple properties and more than one valuation date. Conversely, some individual valuer complaints may relate to the same property and valuation date or ethical issue.

that over-recovery does not occur, especially if complaint numbers trend downwards or other cost savings are found.

A review of the Valuers Act may, among other things, recommend changes to the discipline process and Board membership criteria, especially in the face of the seemingly entrenched high complaint levels at above 20 a year. Any changes will need to be carefully considered so as not to lose some of the more effective parts of the process. The fact that the Board membership consists of respected members who are nominated by the profession means that the current discipline process and rulings on complaints are still taken very seriously by registered valuers.

Rating Valuations Act 1998 The Valuation of Land Act 1951 was replaced in 1998 by the Ratings Valuation Act and this statutory regime has now been in place for the best part of 14 years. Consistent with good regulatory practice, Land Information New Zealand has decided to undertake a formal review of its performance and is using an independent external evaluation process to do this. Land Information New Zealand has commissioned EvaluationConsult, a Wellington-based firm, to undertake an evaluation to − • Assesstheeffectivenessandcost-effectivenessofthe

rating valuations regulatory framework against the original objectives

• Assessitsviabilityfornewandemergingneeds.Feedback will be sought about whether the

objectives and results of the Ratings Valuation Act have been met. The review will also consider any unintended results arising from the legislation. Main problems are likely to include the wider use of rating valuations than just for rating purposes, ownership of the district valuation roll data and the contestability framework.

A rigorous mixed-methods approach is being taken to the evaluation, which will include various forms of comprehensive stakeholder consultation. Industry representatives will be advised in due course of opportunities to contribute to the evaluation.

The evaluation will help produce information that may result in changes to the Ratings Valuation Act. Cabinet decisions will probably be sought in late 2013. Any legislative changes will be progressed via a Valuation Bill which will cover these proposals, as well as any amendments resulting from the review of the occupational regulation of valuers, also scheduled for 2013. There will be opportunities next year for industry and others to contribute to both these pieces of policy work. If you have any queries about the evaluation or related policy work you can contact Cindy O’Brien, Land Information New Zealand on 04 471 6856 or [email protected]

Crown Pastoral Land Act 1998 There are approximately 220 pastoral leases in the South Island High Country, many of which occupy iconic

Valuer complaints per year

The new scale of fees for practising valuers is −• Annualregistrationfee $421• Annualpractisingcertificatefee $373

The fees are less than those levied by comparable professional bodies, such as the Law Society and the Society of Chartered Accountants, which are both in excessof$1,000ayear.

The Board is not allowed to budget to make surpluses and is reactive to cost spikes. The complaint profile and increased natural justice process requirements in recent years have significantly affected the Board’s solvency and necessitated the fee increases. The cost of processing complaints through the formal prosecution phase is the most significant factor in the fee increases. The average of the total complaints received, compared to the number that progress to formal prosecution hearings, has been steady over the past decade at 30 per cent.

CostsProsecution costs are dominated by legal expenses and the expert witness costs for initial check valuation reports, hearing preparation, including analysing the work of the complained valuer and appearance at the hearing as an expertwitness.Totalcostsusuallyrangefrom$20,000to$170,000dependingonthecomplexityofthematter,length of hearing and amount of legal input.

There are up to eight hearings a year at an average costofapproximately$35,000,meaningpotentialcostsof$280,000ayearjustforhearings.Inadditiontherearealsosubstantial costs to investigate 70 per cent of complaints which do not proceed to a formal hearing. If a valuer is found guilty in a complaint matter they are often subject toafine,uptoamaximumof$10,000assetoutintheValuers Act, and a share of costs, which typically range from 20 to 60 per cent of the Board’s total costs.

The 60 per cent cost recovery is in line with other awards for disciplinary tribunals and means that the profession has to underwrite the balance. An effective complaints process is still a key criterion to maintain public confidence in a profession and is the main reason to validate the underwriting process. The accounts and budgets of the Board will be closely monitored to ensure



land adjoining mountains and lakes. Rent reviews for these leases, which are completed at 11 yearly spells, have become very contentious and there are currently 140 appeals challenging proposed rental increases lodged with the Land Valuation Tribunal.

Rental assessments were previously based on the land value exclusive of improvements with a rental factor of 2.25 per cent reduced to 2.0 per cent for prompt payment. Difficulties finding and agreeing appropriate evidence of land exclusive of improvements among valuers, along with inconsistencies between valuers when applying the old rent-setting process, has now resulted in a move away from valuation-based rental reviews.

The Crown Pastoral Land Act 1998 was amended in July 2012 to introduce new non-valuation based rent-setting criteria, and as a result the valuer’s role in the rent review process is now significantly reduced. The past legislation, common law developments and valuation practice were so complex that only a small and reducing cadre of highly experienced valuers had the knowledge to produce valuations for pastoral leases.

This concern, coupled with issues about the rental treatment of iconic features of the land such as views and the volume of Land Valuation Tribunal appeals, resulted in amendments to the legislation. Any loss of traditional work is worrying, and to some degree there is a message here about the profession needing to work collaboratively and strategically to find workable solutions to problems or risk statutory change. There are some parallels to this situation in recent drafting trends for standard commercial lease rent review clauses being based on movement in the Consumer Price Index rather than market values.

Setting the rentThe amended Crown Pastoral Land Act requires an efficient, predictable and objective process to set rent reviews, which is a departure from the more formal language normally associated with statute. The Valuer-General will soon be publishing new rules prescribing the requirements of the new streamlined rent review process. The rent will now be based on the productive capacity of the land when used for pastoral farming and the earnings available from that productive capacity.

To calculate rent, the new system uses information on the amount of stock the pastoral lease could carry, often referred to as the carrying capacity, and the earnings available from that productive capacity. The carrying capacity is assessed using information specific to the lease such as slope, altitude, characteristics of rock formations, land use capability and climate. The previous requirement to assess rentals based on Land Exclusive of Improvements has been completely removed, and with it the former case law precedents and common law developments that underpinned the old system.

The Act provides for carrying capacities of each lease

to be determined using predictive scientific evidence and information about the land. This requirement has been achieved with the use of scientific models and calculations, which convert physical characteristics of the land into stock unit carrying capacities.

In developing the model, rural valuation expertise was used to determine the unimproved carrying capacity for approximately 500 land points across the entire South Island pastoral estate. This data was then processed by the model to produce an algorithm, which generated expected carrying capacities for each individual lease. The new rent-setting process uses the power of geographic information systems (GIS) to bring multiple layers of property data together in a consolidated visual representation.

Given the rapid advancements in this technology, valuers should at least know what GIS is and be looking for opportunities to use this as part of their tools of trade. The Valuers Registration Board has been encouraging universities offering property degrees to incorporate an understanding of GIS in their teachings. Examples of GIS data are depicted on the following maps.

Property A – Base sample points per hectare on topographical map

Property B – Base carrying capacity per land use class unit on topographical map



How rent will be calculatedThe Act introduces two alternative formulae for calculating the rent on a pastoral lease.• Rentequalsratetimesthebasecarryingcapacity

plus (0.15 times current carrying capacity minus base carrying capacity)

• Rentequalsratetimesbasecarryingcapacity.It is highly unlikely that the second formula will

be used in practice, as it only applies when current carrying capacity is less than base carrying capacity. The components of the formula are outline below.

Base carrying capacity refers to how much stock the lease could plausibly carry, in its unimproved state, if it is used for pastoral farming. It is assessed using scientific data about land types and stock, and information on the physical characteristics of the lease

Current carrying capacity refers to how much stock the lease could carry under average efficient management. This is the carrying capacity achieved by a farm lying between the 60th and the 70th percentiles of productivity on similar farms, whether pastoral leases or not, when considered as a group. To determine the average efficient management for a lease, Crown assessors will consider information such as −• Landusedata• Weedsandpests• Developmentcapacityoftheland• Typicalequitylevelsandaccesstocapitalatatypical

cost • Economicviabilityoftheland• Currentproductionandperformance• Carryingcapacityofsimilarpropertiesanddistrict

norms.Base carrying capacity and current carrying

capacity are measured in stock unitsBase carrying capacity will be assessed once by

a Crown assessor. If this assessment is subject to dispute, an independent expert determiner will be appointed to determine it

Current carrying capacity will be assessed at each rent review

Rate is a rental rate, in dollars per stock unit. This is based on earnings before interest, tax and rent using the New Zealand Beef and Lamb economic service survey of the high country. The rate will be calculated and published annually by the Valuer-General in the New Zealand Gazette. The figure 0.15 is a value which attributes a portion of the lessees’ increased carrying capacity to recognise that the Crown provided the platform for development.

Example of new rent formula The formula for rent calculation for what was a Crown pastoral lease and the calculation is shown below.

A = B x (C+((D-C)x 0.15)) whereA = Annual rent for the pastoral leaseB = Rate in dollars per stock unitC = Base carrying capacityD = Current carrying capacity

Base carrying capacity 2,250 stock unitsCurrent carrying capacity 4,700 stock unitsRateperstockunit $5.00

A=$5.00x(2,250+((4,700-2,250)x0.15))

A=$13,088eachyear

Valuers and farm management consultants will be eligible for designation as assessors under the new process, and this will be set out in the Valuer-General Rules for assessing rents for pastoral leases. The designation process will ensure that assessors are appropriately qualified and authorised to make accurate assessments of individual lease carrying capacities for rent review purposes. Land Information New Zealand will be holding a series of seminars in the early part of 2013 to fully explain the new system and upcoming training opportunities.

ConclusionNew Zealand has witnessed a wave of property-related legislative change in recent years. The reasons for these changes are many and varied and all relate in some way to ensuring local and foreign investor confidence in our property market. There is a heightened expectation that the law will safeguard property rights, property quality and market integrity.

Valuation is an important part of the property confidence jigsaw, and a review of the currency and effectiveness of both the Valuers Act and Ratings Valuation Act will be undertaken by Land Information New Zealand in 2013. It is unclear at this stage what if anything will change. However, it is encouraging for the profession that there is a genuine intent to consider these Acts. Valuers should contribute into the consultation opportunities that will be available as part of these reviews.

Recent changes to the Crown Pastoral Land Act are a reminder to valuers that traditional work streams can be altered suddenly by the statutory process. Valuers should always be proactive to ensure that the customer experience is positive when dealing with the profession and find innovative ways to overcome challenges.

All valuers have a vested interest in the credibility of the reputation of the profession as a whole and need to contribute to enhancing its status. Individual valuers with a more high-level perspective is an important mechanism to maintaining the credibility of the profession and future income streams.

Neill Sullivan is the Valuer-General, Land Information New Zealand in Wellington



Valuation of Maori land

This article draws on the paper submitted by Te Puni Kokiri to the Property Institute Annual Conference in June 2012 and the research undertaken by Mr Leigh Halstead on Te Puni Kokiri’s behalf. It identifies the main issues for the rating valuation of Maori land and also reports on research and analysis undertaken to provide evidence.


Jason Clarke

Maori land is governed by its own legislation, the Te Ture Whenua Maori Act 1993, which provides for restrictions on the disposition of the land. All land in New Zealand is valued for rating purposes on the basis of highest and best use, but the Court of Appeal has recognised that the Act’s restrictions should be taken into account.

The Court of Appeal provided four main factors to be considered –• Thenatureandsizeoftheproperty• Thehistoricalconnectionoftheownerswiththeland• Membershipofthepreferredclassesofalieneesandtheresourcesavailableto

fund the purchase • ThestatutoryroleoftheMaoriLandCourtinrelationtothepropertyand

the prospect of obtaining confirmation of an outside sale from the Court.

Problem definition Concerns about the current practice and levels of rating valuation of Maori land have been raised in a number of places −• Alandvaluationtribunalhascalledforareviewoftheguidelines• TheMaori Law Review editorialised on the Taheke Paengaroa Trust Land

Valuation Tribunal case, noting the tribunal’s comments that changes to the market affecting Maori land since 1997 mean a greater discount may be warranted than the 15 per cent maximum figure applied under the Valuer-General’s Mangatu guidelines

• AlandvaluationtribunalhasmadedecisionsoutsidetheMangatuguidelinesand listed factors for consideration additional to those in the Court of Appeal



Valuation of Maori land Valuation of Maori land

decision and the Valuer-General’s guidelines• Thelocalgovernmentratesinquiryin2007

recommended that a new basis for valuing Maori land for rating purposes should be established to explicitly recognise the cultural context of Maori land, the objectives of Te Ture Whenua Maori Act, and the inappropriateness of valuations being based on market value

• OwnersofMaorilandhaveexpressedconcernsthatthe current approach does not fully reflect the effect of the Te Ture Whenua Maori Act on the valuation of Maori land and asked that consideration be given to alternate approaches to valuation.

Fifteen years have elapsed since the Court of Appeal considered the problems associated with the valuation of Maori land. There is a need to reconsider these problems, taking into account the current evidence and the effect of the Te Ture Whenua Maori Act as applied by the Maori Land Court.

Mangatu factors Four main factors were identified by the Court of Appeal.

Nature and size of the propertyThe Court of Appeal has indicated that size should be a specific consideration. As size increases, value increases, which in turn means that the ability of those within the preferred class of alienees to purchase the property decreases.

Other problems to be considered, in addition to size, could include income, use and special features. For example, a property which generates significant income would be more likely to generate a sale than a non-income producing property. Similarly, coastal property would be more valuable than non-coastal property.

Historical connectionThe historical connection of the owners to the land is only accounted for in the Valuer-General’s guidelines by adjustments for sites of special significance. These guidelines do not include allowance for a continuous relationship with the land. The implication of a strong historical connection with the land is that a sale would be less likely, although a sale is currently assumed under case law.

In the Ongare Land Valuation Tribunal decision, the ‘strong historical ties between the owners and the land’ was part of the rationale for giving a 20 per cent reduction in value. Consideration of the proportion of the land occupied by sites of special significance, for example wahi tapu, and the resulting restriction on use is required as part of valuation analysis. The site of special significance may not cover all of the property, but would still have an effect unless it was subdivided.

Membership of preferred class of alienees The only reference to the membership of the preferred

class of alienees within the Valuer-General’s guidelines is the number of criteria of owners. The Valuer-General’s approach recognises the increased cost and complexity as the number of owners increases. The Maori Land Court takes into account minority owner interests and views when considering matters before it. Therefore, the number of owners has an influence on the ability of the majority interest to deal with their land.

The Valuer-General’s approach takes into account the number of owners rather than the number of the preferred class of alienees, or any history of their activity. Where the number of owners is larger, this may be correlated to a larger number within the preferred class of alienees.

Presumably the larger the preferred class of alienees the easier it would be to effect a sale without going outside the preferred group, depending on the nature and value of the property. A larger group could also increase the probability of one of the preferred class holding up the sale or outbidding the potential buyer by exercising the first right of refusal at the Maori Land Court.

The implication is that it would be easier to sell a property to the preferred class of alienees when the price is low, or they have more resources available to fund the purchase. The current Valuer-General’s guidelines do not consider the resources of those within the preferred group of alienees.

From a mass appraisal valuation perspective it is difficult to identify the preferred class of alienees or their financial capacity. It follows that as value increases, the difficulty of funding a purchase would also increase. Also of relevance here is the apparent difficulty of raising finance using Maori land as security.

Statutory role of the Maori Land CourtThe role of the Maori Land Court is to promote the retention and development of Maori land. The Te Ture Whenua Maori Act provides restrictions with relation to the alienation of Maori land which are relevant to valuation. The Maori Land Court has the statutory role of approving status changes and alienation of Maori land.

Status changeA change of status from Maori land to general land is often sought in order to help the sale of Maori land. Often a change in status is a prerequisite to a sale because the buyer does not want the land to be subject to the constraints of the Te Ture Whenua Maori Act. The presumption of sale from the Rating Valuations Act 1998 does not extend to an assumption of status change.

Therefore, following a hypothetical sale as envisaged by the Rating Valuations Act, the property would continue to be subject to Maori Land Court procedures, including offering the preferred class of alienees the first right of refusal to buy the land. The ease with which a change of status can be obtained is a factor affecting the value of the land.


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Energy management specialists ECOsystems identi� ed the costs and bene� ts of improving the building’s HVAC system, and showed how the cost could be split between owner and tenant. This helped the two companies reach the decision to go ahead with the project, and showed them how to fund it.

Getting together with your tenant and contacting an energy management specialist is a good way to go. EECA Business programme partners can help you improve the ongoing energy ef� ciency of your HVAC system and unlock any funding that may be available to you.

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Steve Walsh, Director Aspec Properties says: ‘‘This has been a win-win situation. We’ve reduced ongoing building maintenance costs and we have a building that has signifi cantly reduced annual energy costs benefi tting our tenants.”

Bryan Crawford, CEO, DraftFCB says: “We’re pleased to have a comfortable working space, reduced energy costs and to be doing our bit to improve our environmental footprint.”

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An analysis of all 55 status change applications for the 2007 year has been completed. In that period, 15 applications were successful. Of these, three were temporary, one related to a mortgagee sale, seven corrected administrative errors, one related to hardship, and one involved a highly advantageous land swap.

Some of the status change applications cover the difficulty of raising mortgage finance in depth. There were examples of bank officers being requested to appear before the Maori Land Court. The judge invited the bank officers to explain why mortgage finance was not approved. When questioned, banking officers stated that they could not make a decision without a formal application, and that a mortgage on Maori land is possible.

It was unclear from the cases why formal applications were not taken or if they occurred after having been to the Maori Land Court hearing. This indicates policy and practice barriers to using Maori land as mortgage security. It is unclear if using Maori land as mortgage security is easier now that a Land Information New Zealand title can be produced for most properties.

Where cases involved a hearing, the average length was six months for the unsuccessful applications and just over two weeks more than six months for successful applications. Six of the applications were over a year in duration. While the Maori Land Court process is time-consuming, some of the delays were a result of the non-appearance of the applicant or where the application did not proceed.

The presence of a management structure can also be a relevant factor. Applications for status change require a management structure if the property has more than 10 owners.

AlienationAnother important factor affecting the value of Maori land is the time and cost associated with obtaining agreement to an alienation by the Maori Land Court. Research has been undertaken on alienation applications for the year 2007. Of the 49 transactions, six were beyond the scope of the study for a number of reasons. The remaining 43 transactions were broken into five categories for analysis and included those − • Requiredforpublicworks• Beingleased• Beingputintoafamilytrust

• Wheresharesinapropertywerebeingsold• Wherethewholepropertywasbeingsold.

The table at the bottom of the page gives the numbers of applications and the time taken to process them. The average processing time ranged from six months to two years.

AnalysisThe research indicates that it is very difficult to change the status of Maori land to general land to avoid Te Ture Whenua Maori Act restrictions. Sale of Maori land is possible, but is rare due to significant constraints and process. Leasing Maori land is possible, but involves an additional process and constraints over general land. There also appears to be a very low incidence of mortgages of Maori land compared to general land. In total, these constraints affect the ability to sell in a timely manner and involve significant costs which could be accounted for in the valuation.

Where sales were analysed it was found that many were due to special considerations, so could not be regarded as market sales. The few sales where non-market factors were not apparent generally showed that the current adjustments for the Te Ture Whenua Maori Act restrictions could be too conservative.

The Rating Valuation Act and current practice do not specifically allow for time and cost of sale. In effect, this was considered by the Mangatu decision in identifying the effect that future restrictions on sale have on the purchase price. It is arguable that the owners’ interest is less because of the additional time and costs of sale relative to the future costs faced by a single purchaser. In the case of many properties, the difficulties associated with sale would be significantly larger than those faced by a single owner.

There is a larger gap between what the purchaser pays and what the owner effectively receives for Maori land compared to general land. For Maori land there is also additional time to make a sale and therefore to receive payment. The usual presumption in valuation is that there is an agreement for sale with a transaction concluded soon after. For Maori land this is not a valid assumption.

Transaction costs could include professional fees, Maori Land Court fees, costs associated with calling and holding meetings of owners and the cost of advertising the alienation. It is probable that professional fees associated

Alienation application summaryPurpose Compulsory purchase Lease Sale of land Sale of shares Family trust

Successful 9 9 10 3 2

Unsuccessful 4 0 3 3 0

Total 13 9 13 6 2

Average time successful 16.8 months 6.5 months 9.7 months 8.1 months 6.6 months

Average time unsuccessful 24.5 months 0.2 months


HAVE HAPPY TENANTS, SAVE ON HVAC COSTS AND IMPROVE BUILDING RETURNS

When a Heating Ventilation and Air Conditioning (HVAC) system is running well you’ll have lower maintenance costs and less hassle, because the system is more reliable. Your tenants will enjoy a comfortable working environment and lower energy costs. And happier tenants can mean greater occupancy rates and higher returns for you.

Often the cost of improving energy ef� ciency is met by the building owner, yet the tenant will reap the bene� ts of lower energy costs. Auckland building owner Aspec Properties and their tenant DraftFCB took a different approach.

Energy management specialists ECOsystems identi� ed the costs and bene� ts of improving the building’s HVAC system, and showed how the cost could be split between owner and tenant. This helped the two companies reach the decision to go ahead with the project, and showed them how to fund it.

Getting together with your tenant and contacting an energy management specialist is a good way to go. EECA Business programme partners can help you improve the ongoing energy ef� ciency of your HVAC system and unlock any funding that may be available to you.

www.eecabusiness.govt.nz

EEC2665/PQ/A

Steve Walsh, Director Aspec Properties says: ‘‘This has been a win-win situation. We’ve reduced ongoing building maintenance costs and we have a building that has signifi cantly reduced annual energy costs benefi tting our tenants.”

Bryan Crawford, CEO, DraftFCB says: “We’re pleased to have a comfortable working space, reduced energy costs and to be doing our bit to improve our environmental footprint.”

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cAn mAKe yOu mOre cOmfOrTABLy Off



with transacting Maori land would exceed those of general land.

At a minimum there would be additional legal fees associated with the preparation of documents and appearance before the Maori Land Court. There may also be a requirement to present valuation evidence. In the valuation standards for financial reporting there is the ability to deduct cost when arriving at a valuation where an asset is surplus. While not directly parallel, this illustrates that rules could consider sale issues.

General land more likely to sellBetween 1998 and 2009, Quotable Value data indicates an average of 143,000 property sales a year over the last 10 years. This would equate to around 7.9 per cent of properties selling on average each year. Therefore, based on this and a rough comparison with 2007 Maori Land Court data, general land is over 100 times more likely to sell than a block of Maori land. This indicates that sales of Maori land should be treated with caution as there is a very constrained market. Sales with special circumstances should be used with caution.

The source of data used in this study was alienation applications from the Maori Land Court. The Court’s alienation process involves judges checking that full value is paid for any sales, and includes the requirement to provide valuation evidence. This could have the effect of limiting sales, so that there is no ability for a market to form at a level lower than that for general land which reflects the additional constraints on Maori land. It was not possible to link all sales to their rating valuation.

There is also the added difficulty of obtaining information of sales that did not proceed, either because the change of status was not granted or because anticipated difficulties discouraged the owner from trying. When the transactions are looked at as a whole, they tend to indicate that the amount of adjustment – up to 15 per cent – set by the Valuer General could be too low. The lack of data on sales of Maori land is evidence of a very constrained market, with sales occurring infrequently.

Next stepsThe proposed next step is for Te Puni Kokiri to work in partnership with the valuation industry. This will be to further strengthen and produce evidence for the problems associated with the valuation of Maori land and to develop specificity around proposals to address these concerns. The objective is to build an industry consensus around the rating valuation of Maori land. This could involve collecting more recent data, as the study was based on 2007 Land Valuation Tribunal application data, and further invlving the valuation industry and Maori land owners.

Jason Clarke is a Senior Policy Analyst at Te Puni Kokiri in Wellington.

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Unit titles reformValuation of Maori land


Unit titles reform

Unit titles reform – what is wrong?

The Unit Titles Act 2010 and Unit Titles Regulations 2011 have not really helped ease tensions within unit title developments. The new legislation has been plagued by errors in drafting and conflicting provisions. In addition a number of practical solutions, such as the disclosure regime, are not practical at all.

John Greenwood

In a recent High Court decision of Boutique Body Corporate Limited v J Star Property Management Limited, Justice Wylie observed ‘The Unit Titles Act is not particularly clear and contains conflicting provisions.’ Recently, the Ministry of Business, Innovation and Employment released a consultation document on the proposed Unit Title Amendment Bill which follows on from technical amendments made under the Statute Amendments Bill 2012. The consultation is limited to a narrow range of problems, with the Ministry of Business, Innovation and Employment not intending to carry out a full evaluation of the Act and its Regulations until after October 2013.

In my experience it has been frustrating to know that very few bodies corporate, and those who manage these, have voiced their concerns to government about the effect of this new legislation which has a surprising number of significant flaws and omissions. A limited number of some of the concerns since the introduction of the new legislation, which came into full force and effect in October 2012, are set out below.

Disclosure regime A cumbersome disclosure regime provides for pre-contract disclosure, pre-settlement disclosure, additional disclosure and turnover disposal disclosure. It would have made more sense to simply condense pre-contract disclosure, additional disclosure and pre-settlement disclosure into the one statement. This



is common overseas with the use of vendor disclosure statements.

Under the disclosure regime certain fundamental matters, such as providing body corporate insurance information, is only given if a buyer requests by asking for additional disclosure. What has resulted is that where there is no template for this additional disclosure, some solicitors and property managers are requesting excessive fee payments to collect this required extra information if asked.

A further difficulty is that it is too narrow an approach to require vendors or sellers to only have to disclose watertight problems affecting apartment blocks if an actual claim has been lodged with the Weathertight Homes Service or in the High Court. As most solicitors and purchasers will know, purchasers need to understand whether there are leaking problems even if claims have not been lodged. This is at odds with the real estate industry which must disclose such matters under their new code.

Signing provisionsThe signing provisions in the regulations are inadequate. Regulation 17 only relates to methods of contracting by the body corporate which gives rise to an enforceable contractable obligation. Regulation 11 covers the chairperson’s duty to sign ‘documents’ on behalf of the body corporate. It does not include reference to whether such documents include, for example, section 147(3) pre-settlement certificates, notices or applications. In addition no provision is made for the chairperson’s duty to be expressly delegated.

Fortunately, in the Ministry consultation document, there is a proposal to identify those other documents. There is also a proposal to allow a body corporate to authorise other individuals, hopefully including property managers, to sign and thereby release the chairperson of a not inconsiderable burden.

No default regimeAn important omission in the new legislation is that there is no penalty or default regime. This is very surprising given the prescriptive nature of the legislation.

There are only two provisions in the Unit Titles Act of relevance. First, under section 202, the chief executive of the Ministry may investigate a complaint and take such action that may involve legal proceedings, negotiation or arbitration as they think proper. There is no direction to the chief executive about what to do or any indication of what penalties or outcomes may or can result.

Second, under section 141, a body corporate or creditor of a body corporate or any person having a registered interest in the unit, may apply to the High Court for appointment of an administrator. This is at the discretion of the Court. Again, there are no guidelines

or direction given to the Court on what role an administrator should or could undertake and for what period of time.

Section 74 schemesThe section 74 provision mirrors the section 48 schemes provisions from the Unit Titles Act. However it has a reasonably major flaw in that, while it is applicable where damage or destruction results, it does not apply to earthquake-proof buildings. Body corporates are unable to avail themselves of the provisions of section 74 concerning buildings in need of repair. The only apparent solution is − • Tohaveownerscommittoanupgradethroughputting

together their own deed of settlement• Simplyrelyingonaspecialresolutionofownersto

implement the raising of adequate funds and a work programme to upgrade their apartment block.

Dispute processThe new legislation has put some emphasis on disputes being determined before the Tenancy Tribunal, but as the decision in the Boutique Body Corporate case noted, the legislation is far from clear as to determining the extent its jurisdiction. Worse is the fee regime. This means that applicants who wish to resolve complex disputes before it, mustfileafeeof$3,300althoughforminordisputesitisonly$850.

The monetary entry point to resolve disputes is wrong and is tantamount to denying justice in a cost-effective forum. It also seems odd that disputes on land issues can only be resolved in the High Court and not the District Court. As matters stand, the fee structure acts as a disincentive for people to go before the Tenancy Tribunal. It is a disappointing feature that section 174 in the Unit Titles Act indicates that bodies corporate need to go to the tribunal first before they can trigger an arbitration provision even if their own rules contain an arbitration rule.

Sections 126 and 138A feature of the new legislation is the move to placing the onus on body corporates, not individual owners, to implement repairs to building elements and infrastructure contained within principal units. Section 126, which is the recovery section, enables the body corporate to recover repair costs against those who substantially benefit from the work carried out.

The flaw, however, is that recovery in terms of section 126 can only be achieved once the work programme is completed. As a matter of practice, this will involve reimbursement and perhaps cost the use of interest being paid back to owners who do not benefit from the work programme.

A fairer outcome in situations where remedial work

Unit titles reform Unit titles reform


is required to some units and not others, is to get payment up front from those likely to benefit most. There would also need to be a reassessment or wash-up at the end of any work programme as often it is simply not possible to know with certainty at the outset the extent of remedial work required.

The flaw in section 126 is also repeated in section 138(4). Recovery from individual owners for repairs carried out to building elements and infrastructure by the body corporate, who now have the primary responsibility to repair, contained within a particular principal unit are only recoverable once the cost has been incurred.

Utility interestsUnder the existing Act a practical solution to imposing levies has seen the introduction of a split between ownership interests – the old unit entitlement regime based on relative value – and utility interests. The rationale was to see a fairer regime of charging for operational costs where some units, like the use of lifts, was charged to those who received the sole benefit.

Regrettably, no definition of what constituted utility interests is inserted into the new Act. This is apart from an indirect reference in section 41(5)(b) which says such assessment is made by the body corporate on a fair and equitable basis having regard to the relative benefits and the costs to units.

What is not said is whether this is on a line-by-line basis of expenses versus use, and whether the fact the reassessment, which is limited to looking back after every three years, is appropriate. In the Ministry consultation document it is proposed that reassessments can be made every six months, which will create even more uncertainty.

Management agreementsUnder section 140 of the Unit Titles Act, owners have the ability to challenge service contracts or management agreements on the basis of them being harsh or unconscionable However, there is nothing in the Act giving direction or guidelines to the High Court as to what constitutes harsh or unconscionable.

There is a significant number of unit developments which operate a letting service within unit developments. Therefore a problem results, as a body corporate is not empowered under its legislation to undertake a letting service, but individual owners can themselves enter into such an arrangement.

There have been two recent significant High Court

cases concerning this matter. In ABCDE Investment Limited v Van Gog & Others [2012] NZHC1131 a 23 unit complex was involved. The units 1 to 22 were holiday units and unit 23 the manager’s, with each holiday unit being subject to an encumbrance. The High Court held that the encumbrance bound the 22 holiday owners to exclusive letting rights through the manager.

Of more concern is the August 2012 decision of Body Corporate 396711 v Sentinel Management Limited. Here the Court held the management agreement in that case was harsh and unconscionable in terms of section 140(5) of the Unit Titles Act 2010 because of the −• Combinationofitsultraviresclauses• Potentiallengthofitstermof10yearswithtworights

of renewal, each of 10 years• Differenceinterminationrights.Theyhadbeen

designed to maximise profit for the management company in a way which the Court held restricted the rights of apartment owners to manage their building through their body corporate.

Basic rules neededIt seems clear that having exclusive letting rights set out in a body corporate management agreement will be unenforceable. It will be important to ensure that separate letting agreements are entered into between the manager and individual owners, although it would seem still possible to have an overview regime where the body corporate at least recognises the existence of a letting scheme within its complex.

As a number of management agreements are currently being challenged in the present reform process of the unit titles legislation, it would seem necessary to establish some basic rules. These could help body corporates in managing complexes where there is a total letting service regime or a hybrid regime where some owners opt out of letting altogether.

There are many more problems which need addressing in the reform process of unit title developments. Readers are encouraged to drop a line to www.unit.titles.dbh.govt.nz or address correspondence to the Unit Titles Amendment Services Team at the Ministry of Business, Innovation and Employment Building and Housing Group, PO Box 10 729, Wellington and let them know your concerns.

John Greenwood is an Honorary Fellow of the Property Institute and is Partner at GreenwoodRocheChisnell in Wellington, a specialist Project Lawyer firm.

Unit titles reform Unit titles reform


Use of timber in the Christchurch re-build

It is well-known within the engineering community that the Christchurch earthquakes and aftershocks have tested the engineering principles, designs and materials used in the building stock. The magnitude of the February 2011 earthquake and the measured accelerations were well above any predicted values.

Timber in the Christchurch re-build

Pierre Quenneville

The result was devastating, and now the city and the country must evaluate the consequence of past decisions, readjust their priorities and move on. On the bright side, this is an opportunity to give Christchurch a refreshed identity, similar to what Napier went through in the 1930s.

Since the attenuation of the aftershocks and the sorting out of some of the insurance claims, the tasks of re-designing and building Christchurch have begun. A renewed CBD has been proposed with definite business, health and entertainment districts, adjacent to park areas. This will be the most significant effect on the future identity of Christchurch.

However, another potential new trait of the future Christchurch could be in the materials used for its re-construction. Designers and builders are no longer restricted to the traditional concrete or steel for non-residential buildings. Timber products, highly engineered and sourced locally, can now be used for a large portion of the new buildings to be erected.

Progress in timber constructionThe progress in timber engineering in the last 10 to 15 years allows timber to compete against concrete and steel in certain types of structures which are outside the common perception. It is the development of very large timber panels and the advancement of the damage-avoidance seismically-resistant structural systems using timber components which are the two most significant ones.

The development of cross-laminated timber panels in Europe in the late 1990s has enabled timber to compete with other materials in the pre-fabricated




structures arena. Cross-laminated timber panels are fabricated of glued board, using formaldehyde-free adhesive, usually 25 to 45 millimetres in thickness, and arranged in layers at right angles to each other.

These panels are fabricated as large as five metres in width and 18 metres in length, depending on the manufacturer’s capabilities, and those up to 500 millimetres in thickness have been used in Europe. Typical thicknesses range from 100 to 200 millimetres, depending on the intended use of the panel.

The fabrication of cross-laminated timber is usually accompanied by automated cutting and drilling of all openings and pre-installation of some of the services. The results are large structural components which are as strong as pre-cast concrete panels, but are significantly lighter and easier to connect to allow a fast construction and a much earlier completion of the project.

Timber panel construction is usually combined with concrete foundations and underground parking. However, as the timber structure above is lighter than a concrete one, the foundation work required is less elaborate. This could prove to be a significant advantage for buildings located in Christchurch. The foundation engineering will be as significant an exercise as the superstructure itself, given the potential problems with liquefaction and foundation spreading.

Projects using cross-laminated timber range from simple housing, industrial complexes and multi-storey apartment buildings. For all of these, the speed of erection made possible by pre-fabrication of the components and simple connections on-site is a distinct advantage. There are usually minimal wet trades in bathrooms and kitchens,

Typical seven-layer cross-laminated timber panels awaiting delivery

Press-Lam shearwalls in the NMIT building in Nelson

resulting in little need to dry out the building. To enclose the building, doors and windows are fitted early.

Recent projects using cross-laminated timber in multi-storey buildings include a nine-storey multi-unit residential building in Hackney, London and a 10-storey one in Melbourne. Both have been built in record time. The London cross-laminated timber building attracted a lot of attention worldwide as it became the landmark timber project of the last five years. It showed to the rest of the world that architects could adopt timber solutions in non-traditional timber buildings.

The London cross-laminated timber project, known as the Murray Grove Apartment, or Stadthaus, consisted of eight storeys of cross-laminated timber clad apartments



over a reinforced concrete ground floor structure. Cross-laminated timber panels were used for floors, roof, internal and external walls, lift and stair cores. There are no columns or beams anywhere and openings can be added in non-load-bearing walls with relative ease.

The construction was carried out by the crew supplied by the Austrian cross-laminated timber panel manufacturer, KLH, who would spend three days in London each week to erect all the panels for one floor. The cross-laminated timber panel structure was erected in eight weeks, the entire structure in nine weeks. To achieve 60 minutes of fire resistance the structural engineer allowed for charring and achieved up to 90 minutes of fire resistance by adding plasterboard.

The untreated cross-laminated timber panels rely on the building envelope for protection from damp and rot. While installation in wet weather is realistically impossible unless special measures are taken, it has no effect on the panels as the system releases moisture readily as it dries.

Up to seven storeysThe use of cross-laminated timber panels for buildings in the Christchurch re-build would not cause any problem. For those who still wonder how timber can be used in buildings other than housing, they can be reassured that extensive testing has been conducted by various agencies

around the world to prove the timber option viability. Italian researchers teamed up with Japanese to evaluate the seismic behaviour and resistance of a cross-laminated timber built multi-storey structure.

A seven-storey building was tested at the Japanese E-Defence seismic testing facilities in Miki, near Kobe. Numerous earthquake loadings were imposed and the building always returned to its original position. This is possible as the panels are very rigid and deform only slightly. The absorption of the seismic energy is made possible by the connections between the panels. These connections may need to be repaired following a serious earthquake.

The same research team also evaluated the behaviour of cross-laminated timber buildings in a fire. A three-storey building was tested in a realistic fire condition. The cross-laminated timber structure comfortably sustained the one hour requirement. The timber burned only on the surface. It will burn as deep as it possibly can and the resulting charred layer protects the remaining portion of the timber material. The inside timber material remains intact and is able to carry all loadings. Following a fire, the charred layer can be removed and a new layer of timber boards put in place. The technology has now been implemented within New Zealand and cross-laminated timber panels are now produced by a Nelson-based firm, XLAM Ltd.

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Timber in the Christchurch re-build Timber in the Christchurch re-build


Damage-avoidance technologyThe second significant factor which will make timber structure a material of choice for the Christchurch re-build is the development of damage-avoidance seismically-resistant timber systems, such as the Press-Lam system. This was developed at the University of Canterbury by Professors Buchanan, Pampanin and Palermo.

The system consists of laminated veneer lumber hollow beams, columns and shearwall panels, all tied together using post-tensioned steel tendons. This feature gives the required resilience to the system by acting as elastic bands that bring parts together in their original position. Coupled with cleverly placed energy dissipating devices, the entire system is capable of resisting and absorbing the largest earthquakes without sustaining much permanent damage, if any.

The technology is not new. It has been adapted from the pre-cast concrete industry, using the same concept. However, the resulting seismic forces to be resisted are much lower as timber is approximately a quarter of the weight of concrete. The concept has been used in the Nelson-Marlborough Institute of Technology Arts and Media building, in the College of Creative Arts building in Wellington, and in the STIC building on the University of Canterbury grounds. Other buildings using this technology are being erected in the Christchurch CBD, such as the Merrit building and the Trimble Navigation office and warehouse.

Stars are lining upFor the timber industry to make in-roads into the non-residential timber market required a few stars to line up. It is not enough to have a structurally performing material or structural systems that will perform adequately in earthquakes. There were a few barriers, some cultural, others practical that had to be overcome.

First, there were interested investors and building owners who wanted to make a difference and chose to go with the timber option. Architects and engineers are next in line but there were some who were already aware of timber, enough not to run away from proposed projects.

The next group involved is quantity surveyors. They were the least favourable to the use of timber, a result of the timber options being new and more costly. The quantity surveyor can influence the way the project is developing as the bottom line is usually the most important factor. The timber industry had not done all its homework and made sure that all involved in the process knew about what was coming. This resulted in a lot more convincing required and some risk-taking by very keen investors.

Finally, council reviewers needed to be convinced of the viability and durability of timber, especially in light of the leaky home debacle that New Zealand is grappling with. Such a process is tedious and not productive in the long run, but every new project success is now a showcase for the industry.

There are other projects where timber products are being used. Some of them are to be built using more traditional products such as glue-laminated beams and columns, for example the Enterprise Precinct and Innovation Campus. Other products, such as the innovative ‘hollow timber rounds’ piles, will not be as visible, but will play a strong supporting role in providing low-cost deep foundations.

EpilogueThe Christchurch earthquakes created the conditions where the demand for new buildings increased significantly, to the point where the construction industry associated with one material could not suffice to meet the demand. These are perfect conditions for the timber construction industry to make some serious progress and prove itself capable of high-end buildings outside the residential market.

Keen investors and property owners are now turning to the timber option for their next project. The timber industry is responding enthusiastically to the challenge and providing creative solutions using new products and clever structural systems. Watch the space – there is more on the way.

Pierre Quenneville is Professor of Timber Design at the University of Auckland

Timber in the Christchurch re-build Timber in the Christchurch re-build

Three layer cross laminated timber panel


When is an architect an architect?When is an architect an architect?

Niven Prasad

Misleading information in marketing a property When is an architect an architect? Herman v Real Estate Agents Authority [2012]

When a property is marketed as being designed by an architect it is generally seen as having added prestige and desirability, and in turn added market value. But what allows a real estate agent to advertise a property as architect-designed? Does the associated architect have to have an architecture degree? Do they have to be a registered architect?

Legal cases

The recent controversial case of Herman v Real Estate Agents Authority shows us what the Real Estate Agents Disciplinary Tribunal has classified as an architect for the purposes of advertising a property. The Tribunal decided that an architect in this context does not have to be a registered architect or even have an architecture degree. Based on an English case law definition of an architect, the Tribunal decided that a person can be an architect for the purposes of an architect-designed house if that person possesses the necessary skill and knowledge to perform the work that they actually undertook, and had designed with proper regard to aesthetic or practical considerations.

Not popularNaturally, this is a ruling which does not sit well with architecture bodies in this country and, in particular, the New Zealand Registered Architects Board. They see the decision as eroding the use of the word architect when architectural designers or draftspeople are being held out as prominent architects. There is a concern that such representations in advertising properties will lead to the public purchasing properties at prices inflated beyond the value that might otherwise be attributed to them – a wider issue which is quite prominent in the media at the moment.

The Tribunal shared the concerns of the Board, but was not prepared to veer away from the wide case law definition which they had previously applied. That definition may well come under more fierce scrutiny in the near future.

Background The Herman case was an appeal against the findings of the Complaints Assessment Committee, a judicial panel which is part of the Real Estate Agents Authority. The Committee had reprimanded eight licensed real estate agents for separately advertising property for sale as ‘architect-designed’ when no New Zealand registered architect was involved. A registered architect is an architect registered on the New Zealand Architects Register, which is publicly available.

The real estate agents all used information provided by the respective vendors to represent their listings as ‘architect-designed’. The people named as the architects were not registered architects, nor did they have a degree in architecture. They were, however, variously trained in some form of building design or drafting.

The chief executive of the New Zealand Registered Architects Board brought the complaints against each of the agents on the basis that the people named by the real estate agents were not registered architects. The complaints were on the grounds that ‘such a false reference to an architect shows that the licensee sees it as adding lustre and, therefore, market value to the property in order to enrich the agent and the vendor at the expense of the buyer.’

ProblemThe issue before the Tribunal was whether advertising a property as ‘architect-designed’ when the person associated with that term is neither registered as an architect nor has an architecture degree is a breach of Rule 6.4 of the Real


Estate Agents Act (Professional Conduct and Client Care) Rules 2009 −• Prohibitingrealestateagentsfrommisleading

customers or clients • Providingfalseinformation• Withholdinginformationwhichshouldbylawor

fairness be provided to a customer or client.

Decision and reasoningThe Tribunal concluded that none of the appellants were guilty of unsatisfactory conduct on the basis that the information they advertised was not misleading in the first place.

In finding for the real estate agents, the Tribunal adhered to the definition of ‘architect’ in the English case of R v Architects Tribunal, ex p Jaggar [1945] 2 All ER 131 (KB) at 134, where the definition of an architect is said to be ‘one who possesses, with due regard to aesthetic as well as practical consideration, adequate skill and knowledge to enable him:(i) to originate(ii) to design and plan and(iii) to arrange for and supervise the erection of such buildings or other works calling for skill in design and planning as he might, in the course of his business, reasonably be asked to carry out or in respect of which he offers his services as a specialist.’

This is a wide definition of the word as opposed to the Board’s view that a person referred to in property advertising as an architect should be a registered architect.

The Tribunal cited its previous cases (Jackman v CAC & Cussen & Hale, Jackman v CAC & Anderson, Jackman v CAC & Raos at [2011] NZREADT 29, 30, and 31 respectively) and reasoned that registration was not evidence of whether a person could be described as an architect. The Tribunal analogised the situation to scenarios within the engineering and accounting contexts. The Tribunal also commented that ‘an engineer is still an engineer, despite not being registered as a chartered professional engineer’ and ‘an accountant who is not a chartered accountant is still an accountant.’

However, in this case most of the architects did not even have an architecture degree. The Tribunal went on to say that this did not matter for two reasons − • TheJagger case did not make an architecture degree a

necessary pre-requisite to being an architect • TheTribunalcitedtheRegisteredArchitectsRules

2006 which do not make a degree in architecture a requirement of obtaining registration.

The Tribunal then shifted its focus on the conduct of the real estate agents. In relation to this charge, it found the real estate agents not guilty of unsatisfactory conduct. The Tribunal said that ‘all the appellants relied in good faith on information supplied to them by vendors and, to varying degrees, they also made some further enquiries to verify the status of the designer as an “architect” in their view. ‘In saying this, the Tribunal held that a real estate agent does not have to check the New Zealand Architects Register as part of their enquiries into whether a designer is an architect.

Implications of the caseThe Herman decision is a topical one because it is set within a wider context of a very important topic at the moment – house prices. It is also controversial in that it outlines a concern between a regulated industry – registered architects – and those who obtain value by exploiting, perhaps inadvertently, the edges around what is perceived as the meaning of an architect.

Already, architecture bodies such as the New Zealand Registered Architects Board and the New Zealand Institute of Architects are urging members of the public, via the media, to take a closer look at the people behind an architect-designed home. Indeed the Tribunal in the Herman decision, despite its adherence to the common law definition, expressed its concern to say that they ‘feel that many of the public of New Zealand would expect an architect to hold a university degree in architecture and also be registered.’

It may be that the market, once it has greater information on these distinctions, regulates itself whereby a registered architect-designed home assumes a higher tier of prestige than a home that is simply architect-designed.

Another view on this issue is that a purchaser will not necessarily be persuaded to buy a house simply because it is architect-designed. Architect-designed homes and leaky homes, for example, are not mutually exclusive. Buying a house involves wider considerations and actually feeling whether a house fits for you. However, misleading conduct – or avoidance of it – in marketing property is still a problem which will not be far from the microscope. It may well be that the Tribunal’s use of the case law definition is visited once again in the near future.

Niven Prasad is a Solicitor at Simpson Grierson in Auckland.

When is an architect an architect?When is an architect an architect?

Legal cases


Niven Prasad

The Consumer Law Reform Bill – a real estate perspective Select Committee report responds

The Consumer Law Reform Bill featured heavily in the media earlier this year when the Real Estate Institute, among others, was vocally opposed to some of the changes proposed by the Bill.

Legal cases

Consumer Law Reform Bill

In particular, the new offence of ‘unsubstantiated representations’ came under heavy criticism from submissions to the Commerce Select Committee from a whole range of bodies including law societies and private corporations. The new offence would expose a person to a claim to substantiate a representation they made about a product, including land, at the time they made the representation, irrespective of whether or not that representation was false or misleading.

This is not confined to the real estate sector, but certain submissions did raise concerns with the new offence specific to the real estate context. The Bill also sought to revamp the law of auctions by establishing a new register, modernising the definition of ‘auction’, and consolidating the law around conduct at auctions into the Fair Trading Act 1986. Details on these areas of interest were reported in a previous issue of Property Quarterly.

Now the select committee has considered submissions and reported back on the Bill. It has recommended the Bill be passed with certain proposed changes including, significantly, qualifications on the offence of ‘unsubstantiated representations’. In this article, the main implications the Bill has for the real estate industry are briefly recapped, and then comments on the latest changes proposed by the select committee.

Recap on main effects of the Bill In general, as mentioned, the Bill presents two major implications for the real estate context. First is an overhaul of the law of auctions and secondly, the new offence of ‘unsubstantiated representations’.

AuctionsThe Bill will give the law of auctions a make-over by first repealing the current Auctioneers Act 1928 and secondly, inserting provisions about conduct at auctions into the Fair Trading Act 1986. Generally, the three main areas of concern in relation to auctions are −• Amoderniseddefinitionofauction

• Arevampoftheauctioneersregistrationsystem• NewconductprovisionsforauctionsintheFair

Trading Act 1986.There is a concern that the new definition of

auction, modernised to accommodate for changes in technology, does not distinguish the definition of real estate agency work in the Real Estate Agents Act 2008. Therefore, arguably, an auctioneer will be ‘carrying on the business of an auctioneer’ but also handling ‘real estate agency work’. This exception for real estate agents is preserved in the Bill, but the exemption for auctioneers from the Real Estate Agents Act is repealed.

The Bill creates a new register of auctioneers to move registration of auctioneers away from the district courts, where they are currently registered. This makes sense, as the historical reasons for having registration with the district courts has faded away. The registration system is one of negative licensing, meaning that you can be registered as an auctioneer provided you are not disqualified from being registered by dint of an adverse personal record such as bankruptcy or a criminal conviction. A positive licensing system, such as that for real estate agents on the other hand, means that you have to take positive steps such as certain training or assessments before you can be registered.

The amendments to the area of conduct at auctions addresses two main concerns. First, the Bill addresses vendor bids by provisions which state that each such bid must be identified as it is given. This is largely a response to the concerns raised by the Court of Appeal in the case of Commerce Commission v Grenadier Real Estate Limited [2004] 2 NZLR 186. Here the court said that unidentified vendor bids can ‘be misleading to create the illusion of real competition where there is none.’

Secondly, the Bill proposes that if an auctioneer accepts an offer within one working day after the close of bidding, that property must be treated as having been sold at auction. However, a practical reality is that post-auction negotiations sometimes extend beyond one working day

Consumer Law Reform Bill


Consumer Law Reform Bill Consumer Law Reform Bill

before an offer is accepted. These situations may not be captured by the provisions in the Bill. Submissions have included the point that parties should be free to agree that the terms apply for a reasonable period after the auction.

There are also concerns that disclosure of the type of sale will affect whether a real estate agent breaches Rule 6 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009, which prohibits misleading a customer or client. Therefore, an agent or auctioneer who represents a sale as being by auction, after the auction has concluded, could be accused of misleading a customer or client.

Unsubstantiated representationsBefore the select committee report the Bill defined unsubstantiated representation as –

A representation made by a person who does not, at the time of making the representation, have reasonable grounds for the representation, irrespective of whether or not the representation is in fact false or misleading.

There are compelling arguments against making this a new offence under the Fair Trading Act −• ExistinglawssuchasthoseintheFairTradingActitself

and the Real Estate Agents Act already sufficiently cover claims against such representations

• Prohibiting‘unsubstantiatedrepresentations’iscontraryto the government’s pledge to ‘remove requirements that are unnecessary, ineffective or excessively costly’

• Uncertaintyaboutstandardsofcompliancetosubstantiate representations will increase compliance costs for businesses

• Theprovisionraisesthepossibilityofcompetitorharassment if businesses are required to substantiate their representations, irrespective of whether the representations are true or have caused any harm.

The select committee report kept the definition the same but has added qualifications to the definition.

Changes proposed by the select committeeAfter substantial pressure to change the offence of ‘unsubstantiated representations’, the select committee has provided clarification that the new prohibition on ‘unsubstantiated representations’ should not apply to representations that a reasonable person would not expect to be substantiated, ‘so that creativity in advertising would not be stifled.’ This is a welcome change to the wording, because otherwise business people such as property professionals could be exposed to unwarranted or frivolous complaints where there has been no harm to the party making the complaint.

In addition, the select committee recommended that the ‘unsubstantiated representation’ provisions would not apply to representations already covered by industry-specific legislation. In the real estate context, for example,

Rule 6 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 already require agents to disclose information to a certain standard while striking a balance with the commercial reality of agents selling property. As mentioned in an earlier article on the Bill, having to substantiate representations at the precise time they are made does not fit comfortably with that commercial reality, so this addition is welcome.

In relation to auctions, there are a few amendments made by the select committee to the Bill. These include mainly clarifying matters around vendor bids so that it is clear that an auctioneer cannot accept this bid at a price higher than the reserve price, and that the vendor bid is distinct, recognisable and from one source only. The other change brought about by the select committee process is to make a conviction under the Fair Trading Act a reason for disqualification from being allowed to register as an auctioneer.

The future of the BillIn the real estate context, it is a welcome change that the Bill acknowledges industry practice and reasonableness when a claim for unsubstantiated representation is brought. This is probably the biggest change to the Bill brought about by the select committee process. However, it will still be interesting to see how this will work in practice. As mentioned, there may still be bodies wanting further change to this area of the law given the concern expressed about the Bill so far.

From a policy stance, the select committee’s view seems to be that the advantages outweigh the burden of increased compliance costs and undue pressure on business. Their reasoning is that the provision levels the playing field among traders, including real estate professionals, who go to significant lengths to make sure that they have undertaken the relevant research before making claims. In addition, it will prevent consumers from being disillusioned and paying a premium for goods, including property, where the additional benefits or expectations do not happen.

In the area of auctions, the provisions relating to conduct are consolidated and clear. While it serves to distinguish vendor bids, there have been concerns previously about whether making each and every vendor bid clear will slow down the auction process. Again, the select committee’s response to this is that the consumer’s concerns outweigh those increased burdens.

While the select committee report gives a good indication about what the final version will look like, the Bill still has a few steps to progress through before it becomes law. It will be worth keeping an eye on what further progress is made on this, as we will certainly be.

Niven Prasad is a Solicitor at Simpson Grierson in Auckland.


David Clark

Voice of the members from Property Institute research

The annual member research completed in December 2012 provided useful results and tangible opportunities to improve services for members. In the research around 500 members, over 20 per cent of total membership, took the opportunity to voice their feedback and make suggestions. Here are some of the results and what it means for the Property Institute in 2013 as well as some actions we will be taking.

Voice of the members

Overall satisfaction increasingThe results show an upward trend in the level of satisfaction across all units of the Property Institute relative to last year

The level of satisfaction varies across different groups. In particular, respondents who work for a firm which is accredited with the Property Institute showed the highest overall satisfaction, reinforcing the positive effect of increased communication and involvement. By contrast, respondents who work across multiple areas of specialisation, or who do not fit within a professional community, are the least satisfied group overall.

How satisfied are you with the overall performancePercentage

Dissatisfied

Neutral

Satisfied


Dissatis�ed

Satis�ed

How satis�ed are you with the overallperformance?

How useful did you �nd the Property Institute services?

Disagree

Agree

Member research


Market information The main benefits of membership are being kept informed of industry news, trends and events, and belonging to a recognised professional body. The least valuable benefit provided are the third party discounts arranged for members such as with Telecom, Air NZ Koru Club and Cardplus Shell Fuel Card.

Members told us that we perform best on the benefit of keeping you informed of market news, but there is still ample room for improvement. In the table the term ‘top

How useful did you find the following services

Percentage

events, depending on which one the member belonged to. Auckland, Taranaki, Wellington and Central Otago scored higher on this measure.

Suggestions provided to improve the services offered to members included • Focusingonthetechnologicalpresentationofwebinars• Improvingthefrequencyandqualityofbranchevents• Broadeningtherangeofeducationtopicswhile

offering more depth in the topics which are already available.

2 box’ included responses such as extremely important or very important, as well as extremely good performance or very good performance

Branch events Over 50 per cent of members who answered the survey said that the branch events are extremely useful or very useful, more so than any other service provided. There was some variation in the perceived value of branch

Quality assurance accreditation scheme Around 20 per cent of members who completed the survey said they were extremely familiar or very familiar with the quality assurance accreditation scheme, with another 30 per cent stating they were moderately familiar. This shows that understanding of the scheme is increasing, although there remains an opportunity to increase members’ understanding.

Dissatisfied

Neutral

Satisfied

Importance of benefit Performance of Property Institute

Benefit Important Moderately important

Not important

Good Moderate Not so good

Being kept informed of industry news, trends & events 75% 18% 7% 43% 43% 14%

Belonging to a recognised industry body 73% 19% 8% Not asked

An expert property voice representing members 68% 22% 10% 23% 34% 44%

Receiving professional recognition by clients 64% 23% 13% Not asked

Networking with property professionals 60% 27% 13% 32% 45% 24%

Continuing Professional Development 57% 32% 11% 36% 39% 25%

Assisting in recruitment prospects 26% 30% 44% Not asked

Third party offers for members 13% 29% 58% 10% 38% 52%



Members who do not work for an accredited firm were asked to rate their level of agreement with a series of statements. While many members answered that they neither agree nor disagree with the statements, which is probably a reflection of their familiarity with the scheme.

Members aged under 39 years were more likely to agree with the statements, while those aged 40 to 49 years and those working in Southland and Hawke’s Bay were the most likely to disagree with them.

Members who work for an accredited firm were asked to rate their level of agreement with a series of similar statements. The results showed strong endorsement for the scheme amongst these members as shown below.

Quality assurance accreditation scheme

Positive feedback In 2012 a new format was used for the ethics seminar involving interactive face-to-face sessions facilitated by the branch and a representative from the Board or Council. Feedback on the seminar was good, with 79 per cent of members finding the content ‘directly relevant to me’ and 65 per cent ‘enjoying this learning approach’. The seminar also produced increased understanding about ethics among attendees, with 55 per cent of members agreeing ‘I am more aware of the risks in our profession since this session’ and 46 per cent ‘reflecting on my own ethical behaviour since this session’.

There was some variation in the results across different regions, although the number of responses in some regions was quite low. Further work is therefore underway to compile feedback and what was learned from a range of sources so that the format can be refined for future use.

Preference for webinars Around 50 per cent of members who completed the survey have now tried webinars offered by the Property

Institute, and around 30 per cent have completed online learning. When asked their preferred type of learning method relative to the different costs involved, a slight majority of members, 57 per cent, prefer to use different methods depending on the specific topic. However, 27 per cent of members stated that they would prefer either a live or pre-recorded webinar style. This is a significant increase from the 16 per cent who preferred webinars in 2011.

It is clear that there is still improvement to be made to webinars to ensure the technology works efficiently every time. The Property Institute has been using a new provider for this service.

Frequency of communication Nearly 80 per cent of members who completed the survey felt that the frequency of communications received from National Office is about right. Around 50 per cent of members rated the communication as moderately effective, with a further 32 per cent rating it as either very effective or extremely effective.

Members offered many valuable suggestions around how communication could be improved. Some of the common themes included −• Agreateropportunityfortwo-waydialogue• Increasedmeansformemberstobeableto

communicate with other members• LiftingtheexternalprofileofthePropertyInstitute• Moreinformationaboutcourtcasesandhearings• Keepingmembersbetterinformedaroundwhatthe

Property Institute has been doing with stakeholders and the public.

Improved perception of Property QuarterlyIn the 2011 member survey, members indicated a preference to obtain a hard copy magazine of Property

Statement Agree Neutral Disagree

I take a sense of pride in working for an accredited firm 73% 22% 5%

I believe accreditation will make our firm more influential with banks & key stakeholders 73% 16% 11%

Accreditation will be a good selling point with clients 70% 17% 14%

The Institute supported our firm through the process of applying for accreditation 68% 27% 5%

The scheme is an example of how the Institute leads the property profession 67% 22% 11%

In the future I will be more likely to seek employment with an accredited firm 64% 22% 14%

Statement Agree Neutral Disagree

I support this initiative to provide firms with a way to demonstrate their adherence to standards 46% 33% 21%

Accreditation would be a good selling point with clients 36% 39% 26%

The scheme is an example of how the Institute leads the property profession 29% 41% 29%

I believe accreditation would make my firm more influential with banks & key stakeholders 25% 42% 33%

I would be more likely to seek employment with an accredited firm 24% 44% 32%

Voice of the members Voice of the members


Quarterly rather than the electronic version only. This change implemented in 2012, along with a continual cycle of improvement in the range and quality of articles included in the magazine, has led to an improved perception.

Over 85 per cent of members who completed the survey said that they read Property Quarterly, and nearly 80 per cent rated the professionalism as ‘extremely professional’ or ‘very professional’. This is a significant increase from 55 per cent in 2011.

Suggestions offered to improve Property Quarterly included −• Morecaselaw• Agreaterrangeoftopics,includingbusinesstips• Offeringmarketstatisticsonsales,leasingratesandrent

levels• Asectioncoveringlettersfrommembers• Integratingasurveyofmembersopinionswithexpert

comment to form an article, for example, professional indemnity insurance levels and options or sales mapping systems.

Website improvements are gradual During 2012 improvements were made to the website www.property.org.nz to minimise the need for members to log-in to access information and to simplify the content on the website.

Feedback in the 2012 survey showed that around 45 per cent of members were ‘extremely satisfied’ or ‘very satisfied’ with the website. Another 43 per cent were neither satisfied nor dissatisfied. In addition 43 per cent rated the website as ‘extremely professional’ or ‘very professional’. Another 50 per cent said it is moderately professional.

The results show that there remains an opportunity to improve navigation around the website, to find information and to further improve its clarity. Suggestions included −• Aforumformemberstodiscussordebatetopics• Commercialsalesandactivity• Morecaselaw,ValuersRegistrationBoarddecisions

and tribunal decisions• SummariesofBoard,Councilandcommitteemeetings• Makingiteasierformemberstolog-in.

Given the scale, complexity and cost involved in rebuilding the website, which is linked to our membership database, improvements need to be made in a progressive cycle of change and review.

Other organisationsOver 60 per cent of members who completed the survey in 2012 do not belong to other organisations. The most commonly held membership is to the Real Estate Institute of New Zealand, followed by the Royal Institution of Chartered Surveyors.

What we are doingShortly before this article went to press, the Property Institute Board and the Valuers’ Council held strategy days to analyse these results and work out how we can improve.• WeneedtoraisetheprofileofthePropertyInstitute

with the public. We have already begun work on putting together a comprehensive media strategy to make sure that the Property Institute’s views and expertise are more widely heard. The final form of this will be available later in March.

• Branchesneedtobesupportedforqualitynetworkingevents. We will be doing this right away, and branch chair people will be hearing from us over the next few weeks to begin putting these events together.

• MembersinleadershiprolesinthePropertyInstituteneed to be offered greater development opportunities. We had already begun some work on this, starting development of our new leadership programme. We will extend further development opportunities to others on our committees, branches, council and board.

• WearecontinuingtoinvestintheQualityAssurancescheme. The survey results show that our commitment to it is paying off.

• Memberswillbekeptinformedofwhatisgoingaswe continue to increase our focus on communication. We are very aware of the need a balance between informing and inundating with information. We will be revamping email lists in the coming weeks to allow members to receive as much, or as little, information as you want, and on those topics that matter most to you.

As well as the actions described above, we expect a lot more to come out of the strategy days as we develop a new operational plan. We have set ourselves a timeline to ensure that the details of this plan will be made available in the next Property Quarterly in July.

Thank you to all members who completed the survey and congratulations to the winners of the wine. We are grateful for your guidance, and look forward to putting effort and resourcing into achieving what you asked for.

Are you a member of any of the following organisations?

Voice of the members Voice of the members


Continuing professional development

Continuing professional development A blessing or a curse?

Continuing professional development obligations are common to most professions, and there are many different views about them. To some people they are a contractual requirement, to others a condition for their licence or quality assurance compliance, and to yet others just a necessary evil and time out of their day. However you see continuing professional development activities, few would disagree that increasing your skills, reflecting on your practice, being part of a focus group and sharing best practice are all positive.

Marilyn Fitzpatrick

There is a growing perception that we are time poor. Time, or the lack of it, restricts our opportunity to take part in creative learning experiences. The 40-hour week is fast becoming a thing of the past. With all these conflicting priorities, it does not give us much time for our required continuing professional development.

At the Property Institute we recognise that up-skilling is a constant process. Of the 20 continuing professional development points needed each year, only five must be with Property Institute activities. The balance can be your own and other organisation’s activities related to your area of interest and specialism. It is your choice, it is as easy as that.

A focus on resultsEducation is important for developing effective and committed professionals and it is everyone’s responsibility. The Property Institute is the conduit, the employer the investor, and the employee capabilities are vital for a company’s bottom line.

You may have paid for your continuing professional development, attended that seminar, watched that webinar or been to that conference – but what did




you learn? Was it useful or relevant? Can you apply it immediately? Rarely is an employer’s investment in continuing professional development measured, even though they have invested or contributed time or money into your participation.

The Property Institute cannot measure the effect of your work, but employers can. They can identify your skill gaps, address poor performance, help motivate you and support your continuous improvement. They are able to measure the value of their investment. Measuring performance is critical if you want to evaluate the effect, report on improvement or even negotiate personal remuneration.

Quality can be a point of difference between companies. A quality policy addressing continuous improvement for their employees demonstrates their commitment to invest in staff, and supports their educational requirements. It puts a stake in the ground about best practice in the property profession. Evaluating their investment can take many forms, but all learning should benefit the company and make a difference in the workplace. It should help in decision-making, and possibly have an effect on future change.

Ethics in actionThe Property Institute recently ran a collaborative training workshop about ethics in every branch in the country. Ethics is a mandatory subject which must be repeated every four years. If you have been a member of the Property Institute for many years you might think there is not much to learn about ethical behaviour. However, it was interesting to note that our survey showed over half the attendees said they had reflected on their own ethical behaviour since the session. I thought it was a good result, considering that most attendees firmly believed they were personally ethical at the start.

Complaints continue to keep the Valuer Registration Board on its toes. Perhaps measuring the complaint trend in the future could change continuing professional development, providing some insight for the Property Institute into how to devise alternative development for members connected to ethics.

What we can doSince starting with the Property Institute in June 2012, I have been keen to talk to members about their training needs and provide continuing professional development which is relevant, interesting and topical. The Property Institute has done a good job this year and provided a variety of events and learning opportunities to suit different learners.

The recent survey shows we have made some headway, with increased satisfaction and penetration with our continuing professional development events. For example, the Education Committee is finding its voice

and produced four successful webinars in the latter half of the year. There have been some technical problems in the past, but I believe we have ironed out the kinks. In the future we will be in a position to provide quality products at an affordable cost as well as make them available as a library resource.

Various modulesOur Professional Pathways online training modules are accessible on our e-learning website www.propertyelearning.co.nz. Their popularity is gaining momentum as our members start to push for registration in their various specialisations. The core modules provide the content to help the professional communities identify the competencies required to gain registration. Ethics, standards, professional risk and data collection are great refreshers for those wanting to get started after years of sitting on graduate status.

Our biennial one-day graduate event in October was one of our most successful this year in terms of involving attendees. Graduates came together to hear about their next steps. The theme was ‘The Future of the Profession’. We had input from the Valuer-General, Auckland University’s Head of Property, and on quality assurance and accreditation. We heard about learning experiences from emerging young leaders, and had First Crossings adventurer Kevin Biggar speaking about taking performance to the next level.

These were excellent contributions over the course of a fast-paced day. We practice what we preach and measured the effect. Since October 2012, we have seen six self-paced study groups set up by graduates to support their preparation for registration.

Succession planWe all need to stay at the top of our game. The Property Institute also recognises its own vulnerability in this competitive and challenging environment. We have launched the Leadership Plan, which will become the Property Institute’s succession plan. This continuing professional development opportunity will −• DevelopthePropertyInstitute’sfutureleaders• Retainmember’ssocialandemotionalintelligence• Provideanopportunitytoleadandsupportourfuture

professionals within our governance parameters. The effect of the Leadership Plan will be measured.

No-one likes being told what to do, and the continuing professional development programme is designed to recognise this and allow you to focus on the skills you see as the most important. It also enables you to keep your skills up-to-date, maintain focus on where you are going, and regularly measure what has been achieved. A blessing or a curse − it is up to us.

Marilyn Fitzpatrick is Education Manager at the Property Institute of New Zealand.



Technology at work and play

For this first issue of 2013, I have changed the format of the technology article. I will be demonstrating how technology can be used in the workplace but also in play.

Steve McNamara

Photographing a very wide landscapeWe often find ourselves in a position where we are unable to take a wider than normal photograph to encapsulate the whole property. The app Photosynth enables you to take a very wide pan – it can do 360° if you wish – and simply convert it into a photograph. It is useful for all types of property reports.

Copies of your business receiptsAre you sick of being chased by accounts department for copies of your business receipts?

Often we find ourselves with a drawer full of receipts which should have been provided to the accounts department. The app Receipt Catcher allows you to photograph the receipt on the spot, and record details of which company, purpose and notes against it. Then at the end of the month simply email the whole file to the accounts department – no more paper.

Where the sun will be The app Sun Seeker Lite demonstrates the solar path so that you, as a valuer or property manager, can see what direction the sun will be shining from sunrise to sunset. This helps you ensure you can fully appreciate the attributes of a property’s aspect.

Technology at work and playTechnology at work and play



You can also upgrade this to allow you to see which rooms in the house get the sun, and at what times of the year. It is also useful for valuing houses off plans where some people may find it difficult to visualise the exact orientation of the buildings on the property.

Quick Response code

These days many articles as well as real estate listings have a Quick Response or QR code which looks like this.

To access the relevant article, simply download the app QR Reader which enables you to scan the Quick Response code, providing you with instant access to the article.

Time left on your Vodafone account

If you have a Vodafone you can download the app which will tell you how much data, phone minutes and text messages you have used, and how many you have remaining. It will also tell you how far through your billing cycle you are, so at a glance you can see whether you are going to exceed your plan or not.

Business cards to add to your contacts list

Using the app WorldCard allows you to photograph a business card and then automatically put the correct details into the fields of your contacts list. It can be a real time saver.

Less about work, more about fun

The name of the song

How often do you hear a song playing but cannot remember who sings it? The app MusicID will listen to the song for 10 to 15 seconds and then identify the name and artist. From here you can buy the song or album on iTunes, or have a direct link through to YouTube where you can also see a video of the song.

Get your children out and about

The app Geocaching will keep children exercising while they enjoy interaction with technology. This app is similar to orienteering, with your iPhone picking your current location, and knowing the coordinates of the ‘treasure’. This enables you or your children to use the technology to navigate the streets, or through bush,

to find a small treasure which is often hidden in a small jar or container. The children should enjoy the fact they are in control of the technology while also doing a fair amount of exercise.

Recording distance and speed

I enjoy cycling, and I use the app Strava to record my rides, measuring distance, elevation, average and top speed as well as several other statistics. Being on the net you can also join up with mates so you can encourage each other during training. This is what I used when training for the around Taupo race in November, keeping me and my mates honest. Your children can also enjoy measuring how far they ride, and even set up small groups amongst themselves.

Not sure where your children are?

Have you ever wondered where your wife may be two hours after she got ‘lost’ shopping, or have you been waiting at the finish line of an event for hours hoping to get a glimpse of your friends as they cross? The app Latitude, which is based on the Google map platform, enables you to see exactly where your friends are, based on the GPS position of their iPhone. It could also be used to see where your staff members are, confirming whether they are close to a property which may need urgent inspection for some purpose. If you do not want someone to know where you are, you can turn the app off.

Going camping

First, one to keep children interested for a few minutes late at night is the app Star Map 3D which allows you to find planets, constellations, galaxies and more using your iPhone’s compass and gyroscope. Second, a very simple app called TorchPro turns your iPhone into a torch as well as a strobe light. It will also convert text to Morse code.

If all else fails download Angry Birds– at least it will give you five minutes of peace.

Steve McNamara is Managing Director at Property InDepth Limited in the Hawke’s Bay



GST issues for valuers and other property professionals

GST is a consumption tax or spending tax currently imposed at the rate of 15 per cent. It is applied to most goods and services in New Zealand by a person or company registered for GST in the course of carrying on a taxable activity. It is charged by the supplier of the goods or service to the recipient of those goods or service. They then have an obligation to pay the amount of such GST to the Inland Revenue Department.

GST for valuers

Timothy Chemaly

GST operates on an offset basis. It is charged on all taxable supplies whether made by importers, manufacturers, wholesalers or retailers. At each stage along this chain, businesses making taxable supplies must account for GST on each supply. At the same time they are able to offset, by way of refund, the GST which they pay on the goods and services they receive. Exempt supplies are completely excluded from the GST regime and it cannot be claimed back on the expenses incurred in supplying them.

GST is charged only on supplies if you are GST registered. You must be registered for it if you carry on a taxable activity and the total taxable supplies inany12-monthperiodexceeds,orisexpectedtoexceed,$60,000.Thosewithanannualturnoveroflessthan$60,000havetheoptionofregisteringforitprovided they are carrying on a taxable activity. The purpose of this threshold is to reduce compliance costs by excluding part-time traders or contractors, non-profit organisations, small businesses and anyone with hobbies whose GST liabilities would be insignificant.

GST inclusive and exclusiveGST can be exclusive where it is added to the consideration or purchase price. Alternatively it can be inclusive where it forms part of this. For example, if I sellapropertyfor$100,000andtheGSTisexclusive,thepricepayablebythe

GST for valuers


GST for valuers

purchaserwillbe$100,000plus$15,000inGST,atotalof$115,000.InsuchacaseIbankthe$100,000andpayoverthe$15,000inGSTtotheIRD.

If,ontheotherhand,thepurchasepriceis$100,000inclusive, then the GST portion is calculated by applying the GST fraction of 3/23 to the price. In this case the GSTcomponentis$13,043.Herethevendorpocketsonly$86,957andpaysoverthe$13,043inGST.

Where do valuations fit? GST is a transactional tax based on supplies of goods or services as opposed to income tax, which is a tax on money coming in. The amount of GST payable or claimable on any transaction is determined by the consideration paid or payable for such GST supply.

Some supplies are specifically exempt from GST while others are zero-rated. Most importantly however, some supplies may include those which are partly chargeable and partly exempt or partly zero-rated.

In some cases involving dwellings a single transaction can contain two supplies, only one of which is subject to GST. Where an asset is in the GST net and the taxpayer wants to remove it from there, or vice versa, the current market value of the asset usually needs to be determined to calculate the GST to be paid or claimed.

In all these cases you may need to value the supply or supplies for GST purposes. This is required in order to quantify the GST portion which may be subject to GST or exempt as the case may be.

As an example, a potato farm may involve property subject to GST, that is, the farmland itself which is planted with potatoes. The property which is exempt from it would be the farm dwelling and surrounding curtilage. This transaction may be in one sale and purchase agreement where the purchase price has not been split up in any way.

A valuer at some stage may be required to value the farm land, and the dwelling and curtilage, to determine the value of property subject to GST or exempt from it as the case may be. Valuations for GST purposes will usually involve real estate and personal property and seldom shares, given that the supply of shares will generally not have GST charged.

GST and the valuation of landThe starting point for any valuation for GST purposes is market price or market value, without regard to any taxes that may or may not be payable. In this sense valuing for GST is no different from any other valuation, other than the fact that you would rarely use a valuation other than market value. Therefore a valuer for GST purposes would still use the traditional methods of determining market value, such as sales comparisons, income capitalisations, discounted cash flow analysis or comparison with cost.

Market value is defined in the International Valuation Standards 1 Section 4.1 as −

… a representation of value in exchange, or the amount a property would bring if offered for sale in the (open) market at the date of valuation under circumstances that meet the requirements of the market value definition.

Factors which are specific to a particular buyer or seller and not available to market participants generally are therefore excluded from the inputs used in a market-based valuation. This means that a valuation will not be affected by the fact that, arising from the transaction in question, one or other party may have a tax impost or tax deduction as the case may be.

The market value cannot be different depending on whether or not GST is payable by the vendor or claimable by the purchaser – see Minister of Lands v Nutsford-Cumming HC, 2003. To put it another way, the GST status of an individual party might be irrelevant – see Baron and Wareham v Waitakere City Council, LVT, 2010.

However, where GST is a real cost to a purchaser where they will not be able to recover it, this latent tax liability will affect the purchase price of the property and its valuation. In determining a market value for a property, a valuer is entitled to be aware that potential purchasers of that property may have a tax or GST imposed on the purchase of the property in question, and that this may affect the market value.

A valuer should state whether GST is included or not – see Otago Harbour Board v Queenstown Tourist Holdings Ltd, HC, 1989. The valuation statement should indicate if the valuation is ‘plus GST, if any’ or ‘including GST, if any’.

The IRD’s view of land valuationThe IRD can challenge registered valuations, so any valuation must be justifiable. In their Tax Information Bulletin of July 2010, the IRD published the following general comments in relation to the valuation of land for GST purposes.

The Commissioner considers that a pro rata method of apportionment of cost will generally be appropriate for supplies of bare land. However where it is not realistic to attribute the same proportion of the cost to all parts of the land, a pro rata method of apportionment will be inappropriate.

The pro rata method, also called the area method, takes the proportion of land subject to the supply and uses it to apportion the purchase price of the whole block of land in order to calculate the ‘cost’ of the part. The Commissioner considers that the courts will generally accept a pro rata approach, even when the land is not completely uniform. However it is possible that the courts

GST for valuers


GST for valuers

may depart from a pro rata approach and accept some other method in situations where there is evidence that it would not be realistic to attribute the same proportion of the cost to all parts of the land.

Examples would be where a parcel of land is not uniform in nature because it is made up of areas of significantly different features. For example, a flat pasture land, land bordering on a beach or lake-side, mountainous land or swamp, or part of the land is zoned differently under a district plan, or a right attaches to a specific part of the land such as a right of way or easement.

Any method adopted must however be made on an intelligible basis, based on the facts as known at the time of purchase and not be too theoretical or artificial.

Specific provisions for land valuationResidential valuationsIn New Zealand non-residential valuations or commercial property are generally stated as being ‘plus GST, if any’, and residential valuations as ‘including GST, if any.’ Exceptions to the standard treatment of GST should be clearly stated.

The reason for this practice is that residences will mostly be acquired by someone not registered for GST, and who therefore have no ability to claim it back. As a result it is fairer for to be presented with a valuation that

includes GST so that the price they see is the price they pay, to achieve transparency.

However, when there is a sale of a residential property from one registered person to another, then the normal GST inclusive price should be reduced by the GST tax fraction of 3/23 and changed to a ‘plus GST, if any’. That is, the valuation is treated like that of one on a commercial property.

Curtilage and other land A valuer can use an apportionment calculation based on a pro-rata land area basis, where the land all is of the same quality, or on the basis of a registered valuation where evidence of nearby residential sections establishes that a pro-rata basis is inappropriate. Where there is doubt, or significant amounts are involved, a full valuation should be prepared.

Residential apartment versus serviced apartment Where you have a serviced apartment which will no longer be used as such but as a residential apartment, a GST change of use adjustment or GST deregistration is required and it must be repaid. To calculate the amount, in each case the market value of the apartment must be ascertained. GST should be ignored in any such valuation.

For example, if the serviced apartment was bought for$575,000andzero-ratedwithnoGSTpaidonpurchase, the market value, if no change of value, would stillbe$575,000.HoweverwhileGSTshouldbeignoredin any valuation, you cannot ignore any latent GST that could be imposed and the effect it will have on the purchase price and valuation of an apartment.

Assume there is an identical serviced apartment next door for sale. A purchaser, who eventually wants an apartment to occupy in a couple of two years’ time, would paynomorethan$500,000plusGSTforaservicedapartmentgivenapotential$75,000GSTliabilityintwoyears’ time.

Commercial land not in GST net Assumeyouhavecommerciallandworthsay$10millionplus GST. Assume also that the vendor, correctly, is not GST registered. The value of the land to a GST registered purchaserisarguably$11.5million‘GSTinclusive,ifany’,astheycanclaimaninputtaxof$1.5million,sothatthenetcostis$10million.

Due to the GST compulsory zero-rating provisions, where commercial land is sold between two GST registered persons, there is no GST payable or claimable, so GST should have absolutely no effect on any valuation of property subject to these provisions. However where one party is not GST registered, the usual GST provisions will apply.

Tim Chemaly joined nsaTax (Taxation and Trust Specialists) in 2008. His areas of interest include taxation disputes and litigation, GST, and overseas pensions.

Opinion piece


GST for valuers Opinion piece

Phil Twyford

Opinion piece on housing policy

This is one of a series of articles from political parties which we will run in future issues of Property Quarterly

Late last year Labour announced its new policy to tackle New Zealand’s housing affordability crisis. This brief article is the guts of it.

The Kiwi dream of owning a home is becoming increasingly difficult, with hundreds of thousands of New Zealanders failing even to get on the first rung of the housing ladder. The biggest barrier for people starting out is a lack of new entry level houses. In the 1960s and 1970s when home ownership was on the rise, 30 to 35 per cent of new homes built were entry level. Today, that proportion has fallen to just five per cent.

Pricing first home buyers out of the market is a trend that has been well reported. In just one year 2011 to 2012 there has been a 36 per cent increase in the number of homes selling for over a million dollars. Statistics also show median house prices have increased by 13.4 per cent since 2008, while wages have remained stagnant for many.

The Crown is the only player large enough to make a real difference here. That is why Labour will take a bold hands-on approach to fix this hole in this country’s housing market. Looking back, in 1991 three-quarters of New Zealand households owned their own home. Then we could boast one of the highest rates of home ownership in the OECD. However, contrary to most other countries, home ownership rates have been falling since then and are predicted to fall further.

Last year Labour offered a solution. Our KiwiBuild programme would help Kiwis into their first homes by building 100,000 modern affordable homes over 10 years. We would partner with the private sector, community agencies and local government to build these houses. The benefits of KiwiBuild will be substantial, and the policy has already received widespread support. Considerable interest has also been shown by the construction industry as well as local government and third sector providers.

Estimates of the cost of modest entry level homes suggesttheycanbebuiltforaround$300,000,especiallywhen building is undertaken on a large scale. This can vary between regions and further policy work on the details is still under way. KiwiBuild houses would be sold as they are built, so over the full course of the programme there would be no cost to the Crown. Once the build is under way the programme would become self-sustaining within the first term as the sale of one batch of houses finances the development of the next.

To kick-start the programme, there would be a one-off$1.5billioninvestment.Becausethiswould-becapitalinvestment, it would not affect our path back to surplus.

Substantial economic benefits would also flow from KiwiBuild. These include creating a significant number of new jobs in the New Zealand construction industry, providing apprenticeship opportunities, and generating $2billionayearineconomicgrowthbyextrajobsandspending on construction materials. The programme would help halt the ever-increasing costs of the accommodation supplement, which has grown by over 75 per cent, or more than half a billion dollars, over the last decade and is projected to keep growing strongly.

This policy is not about tinkering with the consent process or looking at productivity in the construction sector. KiwiBuild will be the largest public building programme in over 50 years. It would increase the number of houses being built by up to 50 per cent, and tackle the barriers faced by hopeful homeowners. It is ambitious, but is achievable and is needed. A Labour government will be a player, not a spectator. New Zealand is facing some big challenges − we need some big changes.

Phil Twyford is the Labour Party housing spokesperson, as well as spokesperson for Auckland issues and Member of Parliament for Te Atatu.


Auckland vacancy trends

Sarah Davidson

Auckland CBD and city fringe vacancy trends

Vacancy within the Auckland CBD office market fell to 12 per cent in January 2013 according to the results of the latest Bayleys Research survey. The latest total reflects a one per cent reduction on that recorded in January 2012 when the rate stood at 13 per cent.

The reduction in the annual vacancy figure fits with the improvement in economic sentiment that was observed throughout 2012. Auckland, in particular, was a relatively positive place to be. Economic growth reflected that, with the economy expanding 2.1 per cent in the year to June 2012 which was a rate far in excess of the national average.

Economic sentiment eased in the second half of 2012. As a result, during the last six months of that survey period, the rate of vacancy picked up marginally. The vacancy rose to 12 per cent from 11.4 per cent.

Auckland CBD offices overall vacancy rateVacancy rate

Auckland vacancy trends


Auckland vacancy trends Auckland vacancy trends

The pick-up in vacancy was due to there being a drop in the amount of office space required by tenants, rather than an increase in total space available, as displayed in the graph below. The total amount of inventory had a minor reduction, while the amount of space occupied by tenants dropped by nearly 13,000 square metres.

While the overall vacancy rate increased over the six months, since the last occupancy survey the steadfastness of the higher graded office space ensured that vacancy did not increase further. Premium and A grade office space remain the most sought after sector of the market and have a combined vacancy of 8.5 per cent, a rate which has been reducing over the last three surveys. As a contrast, secondary vacancy covering B and C grade space is at 14.1 per cent vacancy. This has increased over the last survey period.

Throughout the recession, occupancy cost was frequently cited as the main motivator of leasing decisions. This started a stronger than usual uptake of secondary space and left prime offices empty. The result was a convergence of vacancy rates between prime and secondary property, narrowing the gap to just 2.4 percentage points.

Growing confidenceAs confidence has grown, and different market forces became motivating factors, the difference between prime and secondary vacancy has expanded once again. Prime vacancy for January 2013 sits at 8.5 per cent, while secondary vacancy is 5.6 percentage points higher at 14.1 per cent.

Confidence in New Zealand’s economy is not the sole reason for this flight to quality office space. Company leasing decisions are still strongly influenced by the level of safety a building will offer tenants in the event of a natural disaster. Following the catastrophic earthquakes in Christchurch, and the subsequent Royal Commission into the performance of buildings during the earthquakes, there is heightened awareness of both the likelihood of business continuity and the ability to provide a safe working environment for staff.

Overall vacancy rate versus half yearly absorption

Absorption per square metre Vacancy rate

percentage

Although there are always exceptions, the general rule of thumb is that the newer a building is, the greater both its grade and its rating relative to the new building standard. The greatest demand for space is directed at the best quality buildings.

Mixed resultsAcross the precincts, there has been a mix of large and small-scale movements creating changes in vacancy data. In the Viaduct, for example, the 3.5 percentage point reduction in vacancy was the result of a gradual uptake of space over the course of the year. Conversely, in

CBD vacancy by precinct

Precinct 2013 2012 Movement

Anzac Ave 12.5% 10.6%

Britomart 3.3% 3.6%

Downtown 16.3% 19.0%

Midtown 10.3% 9.8%

Peripheral & Upper Queen

7.4% 8.1%

Quay Park 16.1% 4.4%

Symonds Street Ridge

14.2% 16.7%

Viaduct Harbour 7.2% 10.7%

Victoria Quarter 13.2% 12.2%

Western peripheral 9.5% 11.5%

Western reclamation 5.8% 3.6%

CBD Total 12.0% 13.0%


Anzac Avenue, Midtown, Victoria Quarter and Western Reclamation the increases in vacancy in these precincts were due to small tracts of space becoming available, rather than any major tenant exodus.

In Downtown, the CBD precinct including the greatest amount of floor space had more noticeable tenant movements, which reduced the vacancy rate overall by 2.7 per cent. Over 2012, the leasing programme for Zurich House was completed with all floors now occupied. Barfoot & Thompson relocated its head office, leaving approximately 4,000 square metres vacant in Kitchener Street and taking space in the Auckland Club Tower in Shortland Street.

Apart from these movements, vacancy remains elevated in one of the CBD’s most sought after areas. This was due to approximately 12,000 square metres of B grade space available for lease following BNZ’s departure from 125 Queen Street. The length of time for which the space has been unoccupied emphasises that tenants have a strong preference for grade and quality of space over location.

City fringe officesTwo major new office buildings brought to the market over 2012 have displayed a positive long-term view of the city fringe office market, with both developments being completed on a speculative basis. Despite this positive view, vacancy in the fringe picked up over the last year.

Vacancy in the city fringe office market overall remains elevated at 15 per cent. While this reflects a reduction from the peak level of 16.9 per cent reached in 2011, the figure is 1.5 per cent greater than recorded 12 months ago.

The precincts within Auckland’s city fringe have suffered over the last four years with increased competition, due to the additional space available for lease in the CBD. Many city fringe tenants chose to locate there for reasons such as easier accessibility. However, others are taking the opportunity of reduced occupancy costs in CBD precincts to relocate to what is arguably a higher profile location.

In contrast to the CBD, this pick-up in vacancy over the course of the year was mostly the result of additional space being added to the market as opposed to less space being required from the current stock. Over 2012, an additional 13,000 square metres of net lettable office area was added to the city fringe market. This eclipsed the uptake of space over the year by approximately 8,000 square metres. While the amount of newly leased space was therefore positive, it was not great enough to reduce vacancy.

The two buildings which contributed most to the additional space were the GHD Centre in Napier Street, College Hill and Samson’s Geyser Development on Parnell Road. The former, a TCLM Manson project, added 7,775 square metres of inventory. Of this, 2,800 square metres along with naming rights to the building is leased to GHD with the remainder yet to be secured.

The second building, the Geyser Development in Parnell Road, was completed in late 2012, adding 3,475 square metres to the city fringe office inventory. At the time of surveying, only a small suite in the development was occupied, by Samson Corporation themselves. Interest in the Green Star rated property has been keen, with a number of other spaces leased in and awaiting tenant occupation.

As a result of the additions to the College Hill and Parnell precincts, vacancy increased in the year to the January 2013. In Parnell, 18.8 per cent of office space is vacant, a 5.3 per cent rise over the year. In College Hill, vacancy increased to 10.3 per cent, from a minute 2.8 per cent in 2012.

Newmarket’s vacancy increased over the course of the year to 11.6 per cent. The additional vacancy was almost all attributed to C grade space. The largest contributor was 309 Broadway on the corner of Mortimer Pass, where approximately 3,500 square metres of office space sits unoccupied. The site, owned by Westfield, will form part of the proposed Westfield Shopping Centre expansion.

The most significant reduction in office vacancy was noted in Newton. In the precinct overall vacancy decreased to 13.1 per cent, down 8.3 per cent. The

City fringe office vacancy

Vacancy rate



City fringe offices Absorption versus vacancy rate

Annual absorption per square metre

Vacancy rate percentage

Total net lettable area by gradeThousands of square metres

most significant lease was the uptake of the remaining 3,700 square metres in the former Telecom Building on Hereford Street.

Office sector outlookIn the year ahead, we can expect to see a landscape similar to that experienced throughout 2012. The improving economic sentiment will continue, although at an inhibited pace. A flight to both quality and safety will be motivating factors in leasing decisions, although with the era of over-indulgence well passed, total occupancy cost will still play a significant role.

For the most part, the office construction tail has reached its end with the exception of a couple of developments. First, Kiwi Income Property Trust’s ASB North Wharf development is scheduled for completion within 2013. This will add 23,000 square metres of prime floor area to the CBD’s inventory. Backfilling the space left by ASB in its self-titled building will be Auckland Council following its purchase of the tower. Here, the council will consolidate staff from both CBD and fringe premises,

including its own building on Greys Avenue. Secondly, TCLM Manson is constructing a five-level

office development at 73 Remuera Road. The building, due for completion in 2013, will add 12,415 square metres of office space over five levels to the fringe office market.

Sarah Davidson is a property research analyst at Bayley’s Realty Group in Auckland.

City fringe vacancy by precinct

Precinct 2013 2012 Movement

Parnell 18.8% 13.5%

Newmarket 11.6% 9.4%

Grafton 21.0% 18.6%

Newton 13.1% 22.4%

College Hill 10.4% 2.8%

Southern Corridor 6.8% 9.9%



Study tour to China

John Darroch

Joint study tour to China Part two

This is the second part of the account of the joint Property Institute and Property Council study tour to China in October 2012.

Beijing is a massive city with a population of 20 million. It is very modern, is the capital and is also a major financial centre in world terms. The city is well laid out, and while there are a number of high-rise buildings, it is quite spread out with low to medium-rise in parts.

It was autumn when we were there, which is a really nice time of year. The summers are really hot – up to 40°C and 90 per cent humidity with winter temperatures down as low as minus 20°C, a large temperature range. I found

Study tour to China


Study tour to China

out that part of the in-ground services such as power and water include government supplied steam, which is used for central heating. The construction season stops for about six weeks in the coldest part of the winter because concrete is not able to set in such low temperatures.

CarsPeople work a normal five-day week and an eight-hour day. There is a big problem with numbers of cars and in the past, the government has tried a rationing system. Using the last two numbers of your registration plate, it meant that there was one day a week when you were not allowed to use your car. This was intended as a saving of 20 per cent of cars each day. However, it did not appear to work and the system has been phased out.

At one point, there were 2,000 new cars a day being registered and the government could see that this was going to increase to close to 4,000 a day. In December 2010 they introduced new rules for cars. The day before the new rules came in there were 170,000 car sales and registrations.

With cars there is a luxury car tax of 100 per cent. So an Audi or a BMW is very expensive. A cheap car isRMB$50,000,whichisaboutNZ$10,000,andanaveragecarbetween$20,000and$60,000,muchlikeNewZealand. German and American cars are very popular, but at the moment Japanese cars are not because of the dispute over ownership of the islands with China,

Public transportThe public transport in Beijing is incredibly cheap. The underground,themassrapidtransport,isonlyRMB$2for a trip to virtually anywhere. This is about 40 cents New Zealand. Other parts of China are only a bit more expensive, a deliberate policy by the government to encourage public transport and reduce congestion on the roads. The price has been the same for 20 years.

The parking charges have been increased once again todiscouragecarsandthesewereatRMB$2perhourin2010.After2010thefirsthourwasincreasedtoRMB$10,thesecondhourRMB$15andthethirdhourRMB$20.I think Auckland Council is introducing a similar policy. Another traffic control measure in Beijing is that trucks are only allowed in the city between midnight and 6.00 am.

Being a touristWe were meant to have a free morning but rearranged our schedule as the traffic in Beijing was so bad. We decided to go and do some of our tourist things and headed off into the centre of Beijing to Tiananmen Square and the Forbidden City. This was a highlight of our tour. Everyone had heard of this square and most people have heard of the Forbidden City but not that many people have visited them both.

Study tour to China

On arriving, we walked past a number of amazing buildings including the National Art Centre and the People’s Congress to head into Tiananmen Square itself. Some of the surrounding buildings in the square include the Great Hall of the People, the Mausoleum for Chairman Mao, the National Museum and the Tian Gate, Tiananmen Square itself and the Forbidden City.

The People’s Congress Hall was usually open to tourists but was closed due to the pending national elections, which are held every five years to select a new leader. The elections are a major event in China and it was good to be so close to the action.

The Forbidden City was our main reason for the visit and we headed off to it, going through the outer gates, then a series of inner gates, and finally getting to the centre of the city. This was a complex of about 70 hectares where the emperors used to live in the middle with all their royal family surrounding them and then their senior bureaucrats and politicians. Finally, on the most outer ring were the poorer people. It was obviously a very stratified society and people kept to their area and did not cross over.

MeetingsWe then went back to the hotel before our afternoon meeting with the Ministry of Housing and Urban/Rural Development. This was another formal meeting with what is a Chinese government ministry, but important for the Property Institute. The same Chinese group had visited New Zealand two years earlier a study tour checking out licensing and registration systems as well as online learning for the property industry.

They had chosen New Zealand as having one of the best examples and being willing to discuss the processes, and we were honoured to host them back two years ago. In fact, it was because of that meeting that we were visiting China now. We had quite in-depth discussions about the certified property manager process in China. There are now 30,000 with such registration and we talked about the qualification system, the university and the valuation processes that are involved.

At this stage, any university and any degree qualify you to start the certified property manager process. Being China, it is all about size, so one of the property managers’ criteria is that they must manage at least 200,000 square metres of floor space. It is possible that stronger relations will develop out of our meetings with this group but that may be some time off.

Facilities managementThe next morning we were hosted by a property management company called Yinda in one of their prestige buildings – Dong Huan Square. The presentation was more about facilities management. We were all amazed to hear about the in-house barracks for the team of


about one-and-a-half hours to an area about 75 kilometres north of Beijing where an important section of the Great Wall is located. The Wall is over 5,000 kilometres long and runs east to west.

The walk was exhilarating. It started with a cable car ride and from there a number of us walked to the number 23 lookout. There were about 1,000 steps, so it was not easy. Our oldest team member, Stan West, put the younger ones to shame, although he did have a walking stick.

After heading back to Beijing we made a quick visit to the Bird’s Nest stadium which was the venue for the 2008 Beijing Olympics. We did not have time to go inside, but had a good look at the outside, and it is now a major tourist attraction. We have been told it is not actually used a lot for sports events, as it is more about tourists. My impression was that it could do with a water blast as it is quite grimy.

We had an evening free and a number of us went off to the local food court and diner where the food and local beer was very pleasant and cheap. The main course was steamed dumplings of various flavours. These are somewhat of a staple in northern China, a white dough folded over and with a meat ball or vegetable ball inside.

John Darroch is Director of Valuation Services for Bayleys in Auckland.

Study tour to China

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security guards and to see the immaculate granite flooring in the plant rooms.

We found out about the average wage, which in BeijingisaroundRMB$5,000amonthorNZ$1,000.AninterpretergetsaboutRMB$100,000orNZ$20,000andone who speaks good English, and can do tours like ours, wethinkisprobablyearningaroundNZ$40,000.Needlessto say there is a big gap between rich and poor in China.

Learning English is compulsory from the age of six. Our guide Ping, who is now 31, learned English in high school but she is a bit older and she started learning when she was 13. She told us about her property purchase – it would appear that she is quite an entrepreneur. She brought her own apartment five years ago when the prices werereallylow,payingRMB$300,000,whichisaboutNZ$60,000.Pingreckonsitisnowworththreetimesthat.

She also opened up and told us a little about the one child policy and her own experiences. The one child policy has worked and the population is 1.4 billion, only increasing 400,000 million over the last 32 years. However, there are more older people as a result.

Great Wall On our last full day in Beijing we got to walk the Great Wall of China. We headed off fairly early and drove through the Friday morning Beijing rush hour traffic for


Study tour to China

Iain William GribbleCompiled by Earl Gordon and Ken Parker

Iain passed away suddenly in Tokyo on 28 December 2012. He and wife Heather were returning home from a five-week holiday in Europe. He was aged 65.

Educated at Auckland Grammar, Iain commenced his valuation career as an urban field cadet in the Auckland office of the Valuation Department in January 1967. He went on to further his study at Auckland University. Following the completion of his studies for the Diploma in Urban Valuation in 1970 he was posted to New Plymouth. Subsequent postings saw him move through a number of the department offices including District Valuer in Invercargill in 1975.

Through the years 1975 to 1980 he served in the Wellington office as District Valuer. Iain then moved to Takapuna where promotion followed, with him being appointed Supervising Valuer for the Auckland region in 1983 and then Assistant Chief Valuer at Head Office in Wellington. In 1985, he was appointed Chief Valuer responsible for field operations and 343 staff valuers.

In 1986 Iain chose a new direction – he moved into private practice. Initially, he was a Principal at Robertson Young Telfer in Auckland and subsequently joined Mahoney Gardner Churton. He then established his own practice, now known as Gribble Churton Taylor Limited. Iain qualified for registration and associate status of the NZIV in 1971.

His contribution to the Property Institute and the valuation profession at large has been significant, as witnessed by the following attainments −• MemberoftheWellingtonbranchcommitteeinthe

periods 1974-1980 and 1983-1987, being branch chairman in 1979-1980

• ExaminerfortheNZIVpracticalandoralexaminationsover the period 1976-1982, written examiner for the subject Valuation 2B from 1977-1984, and specialist tutor in valuation for the New Zealand Technical Correspondence School from 1974-1977

• Part-timelecturerinvaluationsubjectsatWellingtonPolytechnic from 1976-1979 and at Auckland University in more recent years

• MemberoftheAucklandPanPacificConferenceorganising committee

• GraduateoftheNewZealandAdministrationStaffCollege Senior Executive Course. Iain presented a technical paper at the Pan Pacific Congress of Valuers in Hawaii in August 1986, and was the Valuer General’s nominee on the NZIV Council in 1986-1987

• AwardedFellowstatusin1988,electedNZIVAuckland

Councillor in 1991, Vice-President in 1993 and NZIV President in 1995 for a two-year term.

• CompletedaDiplomainBusinessStudies(DisputeResolution) from Massey University and became an Associate Member of the Arbitrators and Mediators Institute of New Zealand (AMINZ). Iain was awarded the Sir Ronald Davidson Award for his arbitration studies in 1999. He was a highly respected arbitrator and expert witness with nationwide demand for his services.

• AwardedlifemembershipofboththeNZIVandtheProperty Institute of New Zealand by unanimous vote of the Council and the Board of the Institutes in 2007, having given pre-eminent and outstanding service to the institutes and profession over 35 years.

• MemberoftheAucklandLandValuationTribunalattherequest of the Ministry of Justice

• MemberoftheBoardoftheLandProfessionalMutualSociety Incorporated, a professional indemnity insurer

• MemberofthenationalProfessionalPracticesCommitteeof the NZIF and the Property Institute since 1997, served the Auckland branch committee for many years, and chaired the Fellowship sub-committee. He was also was a member of the Membership Advance Committee for a number of years.

• MemberofthePublicationCommitteeoftheProperty Quarterly magazine.

Iain was a very well-known identity in the property profession, having given freely of his advice to members when called upon. He was a regular presenter at seminars and was held in high regard for his knowledge and outstanding ability as a registered valuer and arbitrator, in both the Auckland region and nationally, by members and the business community. He was one of the valuation profession’s most experienced members and enjoyed the respect of all his fellow colleagues throughout the country.

In later years, Iain’s valuation assignments became more demanding and he took pride in presenting a sound well-reasoned valuation judgment. His commitments, however, meant he worked long hours.

His other interests included his family and friends, mowing the lawns at his seaside holiday home, and overseas travel. With the latter he favoured cruising by sea, rivers and canals, and cross-country train travel, helped along the way by the occasional glass of chardonnay.

Iain is survived by his wife, Heather, four sons, a daughter and five grandchildren.


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Property Quarterly (March 2013)

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Transcript of Property Quarterly (March 2013)