News & Insights

/files/download/documents/Greenwood Roche on the NBEA and SPA.pdf

Malcolm, a pioneering property developer, has created a long list of high-profile developments including the soon-to-be completed NZ Campus of Innovation and Sport in Heretaunga – one of the most advanced training and research facilities in the world. Malcolm, the managing director of Gillies Group, has also created residential developments including Riverstone Terraces, Wallaceville Estate and Plimmerton Farm, and industrial and commercial precincts such as the South Pacific Industrial Park. 

The judging panel praised Malcolm for driving change in both residential and leisure property sectors in a region that is not only his work base but also where he calls home. They felt Malcolm had created a focal point and increased the desirability of Upper Hutt through his vision and work. That he achieved this and was well-regarded in the industry and well-liked by his team made him a stand-out leader and a fitting recipient of the Greenwood Roche Supreme Excellence award.

We would like to extend our congratulations to all other award recipients and nominees from the evening.

Thank you to the team at Property Council New Zealand for organising the event and celebrating industry success.

Greenwood Roche looks forward to continuing our long association with the Awards in 2023.

The Bill is aimed at bringing transparency to business-to-business payment terms and practices in New Zealand, based on feedback from small businesses that late payments and lengthy payment terms harm their business.  As the Explanatory Note sagely points out, this can lead to cash flow problems, temporary borrowing and, even, insolvency.  When one considers how little many smaller businesses have to come and go on to even out the ebbs and flows, this is rather an understatement.

The sincerity of the Bill’s purpose statement is laudable:  With this new public disclosure of payment practices information, members of the public and other entities will thus be equipped to to make an informed choice about whether to engage with certain large entities.

Despite all this, at the same time the Bill is openly honest in another stated aim of “supporting the Government to determine if there is a broader problem with extended payment terms” at all, such that regulatory intervention is warranted.

The Bill requires “large entities” (not just companies) with more than $33 million in annual revenue (including GST) for 2 or more consecutive accounting periods to file, twice yearly, a payment practices return with the newly created Registrar of Business Payment Practices.  This return must cover invoices received or paid, the time taken to pay, the proportion of invoices paid in full plus other information relating to payment practices and policies, yet to be specified in regulations.  The data will be published on a publicly searchable register maintained by MBIE.

Importantly, it seems, the filed return must include a statement that a director is satisfied the information in it is complete and accurate.  Presumably if a director has turned their mind to it, the information should be reliable and directors will be incentivised to request change if the information paints their business in a bad light.

The Bill relies on large entities valuing their reputation sufficiently that they alter their payment practices to something, presumably, fairer.  There are no other substantive sanctions short of not filing a return.

Talking of fairness, why could the unfair contracts provisions of the Fair Trading Act 1986 not have been relied on to deal with this potential problem?  And why, in these difficult economic times, did Parliament need to spend valuable time legislating for something that is neither established to be a problem and could in any event have been dealt with through non-legislative means?

If you need any assistance in making a submission, in support or otherwise, please contact a member of our commercial team.

_{November 2022}

The increasing financial attraction of forestry activities and accumulation of carbon credits caused by changes to the Emissions Trading Scheme and government afforestation incentives has triggered an escalation in the conversion of farm land to forestry blocks. The Government had been facing mounting pressure from the agricultural industry to ensure that overseas investments involving the conversion of land to forestry genuinely benefit New Zealand and that any associated risks (including the loss of productive farmland and threats to biodiversity) are better managed.

Those in the forestry sector and overseas investors were largely opposed to the changes. Investors view the changes as unnecessarily discouraging investment in New Zealand where there is little evidence of any real problem to address. However, the majority of submitters, particularly those submitting from an environmental and agricultural standpoint, were supportive of the amendments which aim to strike a better balance between encouraging foreign investment and protecting the production and amenity values of New Zealand’s rural landscape.

The amendments apply to all agreements entered into following 16 August 2022.  Agreements entered into before 16 August 2022 are still assessed under the previous rules, even if an OIO condition in those contracts is yet to be satisfied. 

The “benefit to New Zealand” test in section 16A of the OIA now applies to overseas investments involving the conversion of existing farm land to forestry, adding a further threshold for overseas investors to meet. 

Acquisitions of existing forestry assets will remain under the previous, and more streamlined, special forestry test. The special forestry test involves a lower threshold, and only requires evidence of the investor’s financial acumen, proposed investment strategy for the property and wider business strategy generally, and a commitment to preserving existing third-party access arrangements, heritage and conservation on the property. It does not also require the investor to establish a benefit to New Zealand. It is almost considered a tick box checklist, with minimal discretion for the Minister to decline consent provided the criteria are met.

In contrast, for forestry conversions, the benefit to New Zealand test also requires an assessment of the benefit to New Zealand introduced by the overseas investment, compared to how the current property owner would continue to run the farming operation if they retained the property. This will involve a greater element of Ministerial discretion where the proposed benefits are seen as insufficient to mitigate the loss of farm land for forestry. 

The key points worth noting from the OIA Amendment Act are:

1. Forestry conversions are removed from the previous special forestry test, so it will now only apply to acquisitions of existing forestry assets.
2. Forestry conversions will now be considered under the benefit to New Zealand test in section 16A of the OIA. This test considers the benefits to the economy, the natural environment, public access, protection of heritage features, advancing government policy, participation in the investment by New Zealanders, and other consequential benefits to New Zealand, which will be generated by the overseas investment. Any factors put forward must be property-specific and evidence based, and more highly productive pastoral farming land will generally require stronger benefits than marginal land due to its higher sensitivity.
3. The higher threshold applied to farm land in section 16A(1C) (where investors must prove a “substantial” benefit to New Zealand, and where economic benefit and New Zealand participation are given more weight than the other benefit factors above) will not apply to forestry conversions where: 
• the property will be used nearly exclusively for forestry activities;
• any trees harvested will be replanted; and
• the overseas person will not occupy the land for residential purposes.

Some submitters, including Federated Farmers, thought the amendments should have gone further and subjected forestry conversions to the higher farm land benefit test. However, most supporters of the OIA Amendment Act agreed that this would be a step too far and would be overly prohibitive to investment in New Zealand.

The OIO will require a high level of evidence of a long-term intention of carrying out forestry activities and harvesting trees, something that has not been required previously.

4. The land can be occupied for residential purposes provided it is by a New Zealander and not the overseas person (i.e. dwellings can be rented at market rental to a New Zealander on arms-length terms or used as accommodation for forestry workers).
5. The definition of forestry activities is narrowed to mean maintaining, harvesting or establishing a crop of trees (whether native or exotic, that are to be harvested to provide wood). ”Forestry activities” therefore now excludes permanent carbon forests, which means investment in existing carbon forests is also now subject to the benefit test. Also, unlike farmland conversions to forestry, carbon forests will be subject to the stricter farmland benefit test, requiring a “substantial” benefit to New Zealand, and greater weight placed on the economic benefit and New Zealand participation.
6. Standing consents for forestry conversions granted before commencement of the OIA Amendment Act can continue to be used on the terms, and for the period, which they were granted, without needing to satisfy the additional benefit to New Zealand test. Most standing consents have been granted for a period of 3-4 years only so are likely to expire within the next 2 years in any case. New standing consents are only available for acquisitions of existing forest.
7. Decisions may be delegated to the OIO or decided by the Minister (delegation being more likely for larger properties) Differing assessment timeframes and application fees will apply.

If you have any questions, or if you are considering acquiring land or business assets in New Zealand, please get in touch with a member of our Overseas Investment team.

The NPS-HPL is a push by the Government to protect the availability of favourable soils for food and fibre production.  However, it doesn’t purport to provide absolute protection for highly productive land recognising that ensuring compatibility with the National Policy Statement on Urban Development (NPS-UD) is also a key consideration.

The scope of the NPS-HPL is limited to rural land recognised through Land Use Capability (LUC) classifications as having productive value.  It does not apply to land zoned or identified for urban purposes (including residential, commercial and industrial).  The objective is to protect highly productive land for land-based primary production, both now and for future generations.  The policies ensure a consistent approach to the management of highly productive land and reverse sensitivity associated with primary production across the whenua.  There is also a renewed approach to ensuring tangata whenua involvement across decision-making structures for whānau, hapū, and iwi. 

We summarise the key elements of the NPS-HPL below. 

Definition

Regional councils must map as highly productive land any land that:  

• is in a general rural zone or rural production zone;
• is predominantly scored as having LUC classification 1, 2, or 3.  LUC class 1 signals the highest versatility of the land to accommodate primary production, with the fewest limitations on its use for that purpose.  The lowest rating is an ‘8’ which indicates no productive value; and
• forms a large and geographically cohesive area.

Regional councils may map land that is zoned general rural or rural production but is not LUC 1, 2 or 3 as highly productive if the land is or has the potential, depending on the region, to be highly productive for land-based activity in the region. 

However, land identified for future urban development will be excluded. 

Timing for mapping and the transitional position until the mapping has occurred

The NPS-HPL comes into effect on 17 October 2022.  As soon as practicable, or within a maximum of 3 years, regional councils must notify a proposed regional policy statement with updated planning maps of the region identifying highly productive land.  Within 6 months of notification, corresponding district councils must update district planning maps in accordance with the proposed regional plans. 

Critically, in the transition period until regional councils have mapped all highly productive land, a transitional definition applies such that all land zoned general rural, rural production and classed LUC 1, 2, or 3 is deemed highly productive (and therefore subject to the provisions of the NPS-HPL) unless the land:

• is identified by the relevant council for future urban development; OR
• is subject to a council-initiated, or council adopted, notified plan change to rezone it from general rural or rural production to urban or rural lifestyle.  

We expect this transitional definition and the resultant application of the NPS-HPL provisions could have significant implications for a number of proposals seeking to utilise rural land for urban purposes.

Rezoning, subdivision and/or development of highly productive land

Where, either through the transitional definition or through the subsequent regional council mapping, a site is identified as containing “highly productive land”, the NPS-HPL directs that rezoning, subdivision or development of that land is to be avoided (not undertaken at all) except in certain circumstances.

In a nod to the aspirations/requirements of the NPS-UD, rezoning that land for urban purposes may occur in Tier 1 or Tier 2 territorial authority areas only if:

• the urban rezoning is required to meet demand for housing/business land to give effect to the NPS-UD;
• there are no other reasonably practicable or feasible options for providing sufficient development capacity within the same locality and market (considering both location and housing typology); and
• the environmental, social, cultural and economic benefits of rezoning must also outweigh the long-term environmental, social, cultural and economic costs associated with a loss of highly productive land, considering both tangible and intangible values. 

In addition to restrictions on rezoning proposals, the NPS-HPL also includes a range of constraints on subdivision and use or development of highly productive land (including where no rezoning is proposed).  Those constraints generally seek to prevent subdivision and use/development where it will adversely impact the productive capacity of the land.  There are specific exceptions to that general prohibition on inappropriate use/development of highly productive land, including where it is on specified Maori land; relates to indigenous biodiversity; is for a designated activity; or where it is needed for the operation, maintenance, upgrade or expansion of specified infrastructure. 

Where those exceptions do not apply to the subdivision, use or development, the NPS-HPL will only authorise such activities on highly productive land where territorial authorities are satisfied that: 

• permanent or long-term constraints exist in respect of that land which mean use of it for primary production is not economically viable for at least 30 years;
• the subdivision, use or development avoids significant loss (either individually or cumulatively) or productive capacity of such land in the district; avoids the fragmentation of large areas of highly productive land; and avoids/mitigates any potential reverse sensitivity effects on surrounding primary production; and
• the environmental, social, cultural and economic benefits of the proposal must also outweigh the corresponding long-term costs associated with the loss of highly productive land.

What does the NPS-HPL mean for you?

As illustrated above, this NPS, like a number of those issued in recent years, contains strong directions designed to protect a specific feature of the natural environment, in this case, productive land.  Where that feature is identified on a subject site, those directions could have the effect of precluding the rezoning, subdivision, land use or development entirely. 

Given the importance of our highly productive soils to human health and the health of the environment, these constraints may well be justified.  It is also clear that the potential tensions of the NPS-HPL with the aspirations and requirements of the NPS-UD relating to housing capacity have been recognised, and attempts have been made with the former to provide some accommodation to the latter.  However, the difficulty, as we see it, is the potential for significant areas of land to be classified as highly productive under the NPS-HPL when in reality they have very limited productive value.  This is made possible by the heavy (though not exclusive) reliance within that document on the LUC classifications to determine whether land is “highly productive” or not.  In reality (and as anticipated by the discussion document version of the NPS-HPL) there are a wide range of reasons why land may have productive value (or not), and there would appear to be limited opportunity to account for those in the identification of highly productive land either during the transitional default period, or through the regional councils’ mapping exercise. 

As a result, large areas of land otherwise suitable for housing, for example, could, for example, be withdrawn from any rezoning proposal because of their LUC classification, despite the fact that land may otherwise be constrained for productive use.

The NPS-HPL could also significantly constrain the establishment of new renewable energy proposals on highly productive land, noting though that an exception can exist where environmental and economic benefits outweigh the costs of loss of productive use.  This might seem at odds with both the direction within the NPS on Renewable Electricity Generation 2011, and with broader energy policy in this space.

To that end, if you are considering or currently preparing a rezoning proposal for rural land or are undertaking activities on rural land falls within LUC classifications 1, 2 or 3, we would strongly recommend that you contact Francelle Lupis or Lauren Semple to discuss the potential implications of the NPS-HPL.  You can review the LUC classification of your site for free through the Landcare/Manaaki Whenua website.

The proposed Plan Change is required under the Resource Management Act 1991 (RMA) to, among other changes, incorporate the Medium Density Residential Standards (MDRS) within the District Plan to enable more intensified housing through the city.  The requirement is aimed at accelerating and strengthening the outcomes for our urban centres anticipated by the National Policy Statement on Urban Development 2020 (NPS-UD). Notification of the Plan Change was required by law to occur on 20 August 2022.  Christchurch City Council had already delayed notification of the Plan Change previously for Covid-19 related reasons.

Implementing the MDRS through the Plan Change would have allowed up to three homes of up to 12m high to be built in most residential areas of the city (with certain exceptions), without the requirement for resource consent.  The Plan Change would have had immediate effect upon its public notification.

The Plan Change faced resistance from many members of the community, and was unpopular around the Councillor table from the start with Deputy Mayor Andrew Turner beginning his remarks by stating:

"Christchurch isn't Auckland. Christchurch does not need Auckland's solutions to problems that Christchurch doesn't have”

However, despite views of this nature being reasonably widely shared the Councillors (and the Council as an organisation) have no statutory ability to simply decide not to implement the required MDRS changes.  As such, in declining to approve the Plan Change, there is now a real risk that Hon Nanaia Mahuta (as the Minister for Local Government) will utilise the powers available to her under the Local Government Act 2002 and appoint a Commissioner or a Crown Manager to implement the Plan Change on the Council’s behalf. With local body elections on the horizon, if a Commissioner is appointed, the Minister may also decide to postpone the upcoming Council election.  In wider fallout there could be ramifications for the Greater Christchurch Partnership (of which the Council is a member) and its relationship with the Crown under its Urban Growth Partnership.

If a Commissioner or Crown Manager is appointed, their role is not necessarily limited to simply notifying the required Plan Change - it could extend to all of the Council’s functions and duties, as well as, in the case of the appointment of a Commissioner, the exercise of the Council and its members powers under the Local Government Act and any other enactment.  There is also a risk that if an appointment of this nature were to occur, Councillors will no longer have any input into the content of the Plan Change, and the Change may ultimately be notified with less Qualifying Matters than those recommended by Council officers. This risk was clearly articulated by current councillor Dr Melanie Coker in her speech on the Change:

"I want to vote no, not to notify to give the proverbial finger to the government and let them take full responsibility. I also want to vote yes to notify to try our best to protect our character and heritage areas and trees in our suburbs."

Certainly a bold move on the part of Christchurch City Council to reject a statutory direction which may have wide reaching consequences.  It will be interesting to see how the Government reacts to this stand and whether the decision to reject the Plan Change will be of long-term benefit to Christchurch or will instead result in an even more enabling plan change being notified.  

We are closely observing this process as it unfolds and will be providing regular updates – watch this space!

September 2022

Given that many streams and rivers and most of the groundwater in Canterbury is either fully or over allocated, water allocation is a significant issue for the region.  Read on for our analysis of a recent Court of Appeal decision which has potentially major implications for existing water consents in Canterbury, where a change in use is proposed, and across New Zealand.

In the recently released Court of Appeal decision Aotearoa Water Action Inc v Canterbury Regional Council [2022] NZCA 325, consents granted by the Regional Council (allowing up to 8.8 billion litres of water to be used for water bottling purposes) have been set aside.  This decision will likely affect any existing water consents sought to be used for a different purpose than consented, and may also have ramifications in other regions across the country.

Background

Consents had historically been granted by the Regional Council to “take and use” water for the purposes of a freezing works and a wool scour respectively. Those consents were later transferred to Rapaki Natural Resources Ltd and Cloud Ocean Water Ltd.  Both companies subsequently applied for (and were granted) new consents to “use” (for a different purpose) the water able to be taken under the existing “take” consents.

Once the new “use” consents were granted, the Regional Council amalgamated those consents with the historical “take” consents.  The Court described this as an “administrative process” in order to demonstrate that the companies had consents to both “take and use” water for bottling purposes. This included the issuing of new consent numbers. Interestingly, the Court of Appeal described this process as a “legitimate administrative step” despite the Regional Council acknowledging that such a process has no statutory basis in the Resource Management Act 1991 (RMA).

As acknowledged in the Canterbury Land and Water Regional Plan (LWRP), most rivers and streams in Canterbury are at or near full allocation for reliable ‘run-of-river’ takes. Similarly, many groundwater allocation zones in the region are at or over allocation limits for abstraction.  The approach taken by the Regional Council, in processing an application for a “use” only, effectively enabled the water bottling companies to sidestep the relevant rule in the LWRP which makes new applications to “take and use” water in fully-allocated groundwater allocation zones (including the applicable to the subject site of the consents) a prohibited activity. 

The Court of Appeal’s main focus was on whether the granting the consents to “use” water for water bottling, without granting new consents to “take” the water, was lawful. Essentially, the question before the Court was whether a consent to “use” water under s14 of the RMA can be sought and granted without an associated application to “take” water for the same use.  The case for Aotearoa Water Action Incorporated was that applications for “take” and “use” must be considered together. 

The Court found that there is no reason based on the wording of s14, to treat a “take” as necessarily combined with “use”, any more than there is to treat “take” as being necessarily linked to the other activities provided for in the provision such as “dam” or “divert”.  However, whether a Council can grant a separate consent for a “use” and a separate consent for a “take”, will depend on the terms of the relevant regional plan.

The Court closely considered the relevant rules of the LWRP, noting that that Plan refers variously to “taking or use” and “taking and use”, with this difference in wording being considered by the Court to be important and clearly intended. 

As the relevant rule that applied to the companies’ consent applications referred to the “taking and use” of groundwater, the Court held that the LWRP contemplated that it be regarded as one activity. This meant the Council could not lawfully grant a resource consent to “use” water separately to the authorisation to take water.  The Court stated that if both elements were to be considered separately, it is difficult to see how the plan can be administered in a way that preserves its integrity.

The Court’s decision is of some significance in Canterbury, given the questions that now arise (particularly for consent holders who have been granted new “use” consents on the basis rejected by the Court).  We anticipate that the Regional Council may seek to enable separate “use” consents from “take” consents by way of a change to the LWRP, and that other regional councils or unitary authorities around the country will also now be closely scrutinising the wording of their Plan rules.  As examples, the Wellington Regional Freshwater Plan appears to generally use the terminology “take or use” in relation to water, suggesting the granting of “use” consents separately from “take” consents may be lawful there. The Auckland Regional Plan, in contrast, appears to treat the taking and using of water as a single activity.

Cloud Ocean Water has sought leave to appeal the decision to the Supreme Court.  The Regional Council has decided not to appeal the decision.  Whether or not leave will be granted by the Supreme Court should be known later this year.  

If you would like specific advice on the implications of the Court of Appeal’s decision and how it might affect any consents you currently hold (or might wish to acquire), please contact Monique Thomas.

August 2022.

The new prohibitions apply to a range of business activities, including pricing, sales techniques and advertising.

The Commerce Commission’s guidance describes “unconscionable conduct” as conduct or a business activity that is a “substantial” departure from New Zealand’s generally accepted or expected standards of business conduct: and conduct that “obviously” departs from what is to be expected from persons acting in good commercial conscience.

Interestingly, the threshold for “substantial” or “obvious” departure is relatively high and we are yet to see how the courts here will apply it in assessing unconscionability.

The Law

Section 7(1) of the Fair Trading Act 1986 states that the courts may make a finding of unconscionable conduct against a person in trade whether or not:

• there is a system or pattern of unconscionable conduct; or
• a particular individual is identified as disadvantaged, or likely to be disadvantaged, by the conduct; or
• a contract is entered into.

Under section 8(1), the courts may have regard to certain matters in deciding whether a person’s conduct is unconscionable, including:

• the relative bargaining strength of the parties;
• the extent to which the parties acted in good faith;
• the extent to which the affected party could protect their interest;
• whether the affected party could understand the documents;
• the use of undue influence, pressure or unfair tactics; and
• whether any adverse impacts or risks to the affected party’s interests were explained.

Ultimately, the courts’ assessment of these matters will be influenced by any other relevant factors, the specific facts of the case before them: and what is fair, just and reasonable in the overall circumstances of the case.

New Zealand businesses can take lessons from Australia…

Until New Zealand courts have considered these issues, lessons can be taken from the Australian experience. Below are some examples of conduct or behaviour that have been found to be unconscionable by the Australian courts in:

• deception and unconscionable sales techniques (particularly where the affected party is vulnerable) e.g. the sale of expensive vacuum cleaners, by creating a sense of obligation to buy, to elderly who did not want or need the cleaners;
• misstatements, non-disclosure of information, threats and intimidation for unilateral profit gouging e.g. where a franchisor demanded a 50% fee increase from franchisees for access to a national telephone number which the franchisees relied on to receive consumer inquiries and work, not only requiring existing franchisees to vary their franchise agreements accordingly but also disconnecting franchisees who did not pay the increased fee;
• false advertising, taking advantage and unconscionable sales techniques e.g. an online education provider enticed students to enrol in full-time courses with claims the courses were free and with offers of free laptops, but they were enrolled under a student loan scheme and left with large debts. The company did not assess the students' suitability for the courses including their language, literacy and numeracy skills and students were unlikely to complete the course. The company also paid large commissions to salespeople who they did not train and monitor.

What to do

While the New Zealand courts develop their own jurisprudence around what is and isn’t unconscionable, we recommend businesses play it safe, always asking themselves “what is reasonable and fair here”.  Consider the section 8(1) list of matters in relation to any marketing or sales initiative, any negotiating conduct or any contracting that could lead to customers or others you engage with incurring an obligation to you or being potentially misled.

August 2022

It provides an opportunity to deliver mass housing at speed, minimise on-site waste, energy consumption and health and safety requirements, and optimise transportation of labour, equipment and materials. Yet instead of waves we are seeing ripples (and most of those are made by Kāinga Ora’s building programme). Amy Rutherford and Jordan Ropati of Greenwood Roche Project Lawyers examine what’s impeding progress.

One of the key issues is a building consents system which is not designed for modular construction.  The government has sought to remedy this issue with changes to the Building Act 2004 which will, according to MBIE, “enable faster consenting for innovative, efficient building methods, and increase the use of offsite and prefab manufacturing and products”.

This article provides an overview of legislative changes to the Building Act which will come into force on 7 September 2022 (the Amendment Act) and comments on whether these changes will make any meaningful impact on the uptake of modular construction in New Zealand. 

The problem with the consents system

The Building Act was not designed to deal with the realities of modular construction.  

By way of example, the current consenting process requires a separate consent for each module produced. If a module is produced in a different building consent authority (BCA) region to where it is delivered for assembly, then consent may be required from both councils.  Not only does this result in duplication of processes, it creates the potential for inconsistent decisions between BCAs. 

These issues, added to the typical speed at which building consents are being processed, can negate any of the programme benefits that comes with using this method of construction.

What is changing?

The Amendment Act seeks to address these issues by creating a separate scheme for Modular Component Manufacturers (MCMs), which will operate adjacent to the standard consent process. 

Certification outside of BCA

The new consenting scheme creates a new accreditation body, new certification bodies and new certifications that can be applied for to produce modular components.

The accreditation body oversees the certification bodies to ensure uniform standards are rolled out. The certification bodies certify MCMs. MCMs are certified to produce a specific modular component or design and build modular components.

When considering a building consent with modular components, a BCA must accept a current manufacturer’s certificate as evidence of compliance with the building code for that modular component.  This is significant because it avoids the requirement for the BCA to undertake its own inspection (including, in respect of the off-site manufacture of the modular components).

New timeframes for building consent

Subject to the MCM and certification for the modular component complying with the requirements of the Amendment Act, the processing times for consent applications that relate to the installation of a single modular component will be reduced to 10 working days (down from 20 working days).

Risk shift

The Amendment Act shifts responsibility from BCA to the MCMs and certification bodies for providing the necessary checks and balances to ensure modular components comply with the building code.  Contemplating the shift in responsibility, the Amendment Act requires both MCMs and certification bodies to procure ‘adequate’ cover from civil liability.  It also allows MBIE to specify what suitable cover is. 

Nationwide application

The scheme introduced by the Amendment Act operates nationwide which should help solve any cross-territory issues which occur under the old system.

Will it make a difference outside of the public sector?

While the Amendment Act comes into effect on 7 September 2022, there will not be an immediate impact as there are no accreditation or certification bodies in place.  Applications for these will begin in September so it may be a while still until the impact of the changes can be properly assessed.  

In addition, as the opt-in for accreditation and certification bodies is voluntary, the effectiveness of the Amendment Act will depend on uptake.  Given that the compliance with requirements of the Amendment Act will involve cost and resource, we expect parties will only opt in to the scheme if there is a demand for the service which justifies the cost and resource.

On the issue of demand in the private sector, the major barriers remain.  These include public perception of modular construction as low or cheap quality construction and also a lack of funding options.  While improving the consenting laws is a step in the right direction for the uptake in modular construction, we expect the industry will need to address these wider issues before there is a major change in the uptake of modular construction in the private sector.

Published in August 2022 issue of Building Today magazine.

The Model is science’s best estimate of the likelihood and strength of earthquakes across New Zealand and the review is a big deal – it has taken two-and-a-half years and will reflect the significant advances in knowledge since the last update in 2010, including from international best practice and the Canterbury and Kaikōura earthquakes. The impacts of change will be significant: end-users of the Model, including MBIE, EQC, local authorities, NZTA, land use planners and the insurance sector all rely on the Model to estimate the impact of earthquakes on land, buildings, and infrastructure. This in turn underpins government policy, public and private sector investment decisions and helps to increase resilience. 

While many uses of the Model are forward-looking, the review will have immediate impacts on the property sector, particularly for building owners and tenants. One effect will be the update of structural design requirements under the Building Code, which the Model directly informs. The current structural design standard, NZS1170.5, was based on an earlier 2002 Model, so revision of the Model and design standards is overdue. The Seismic Risk Working Group is currently considering how new Model outputs will be incorporated into the building code, but, in general terms, an increase in assessed seismic risk can be expected to mean an increase in structural design requirements. Any changes there will have obvious implications for the design and cost of new buildings.

The most immediate and significant impact for the property sector, however, is likely to be on the seismic standard of existing buildings. In short, this is because an increase in Building Code requirements for new buildings will mean a decrease in the relative compliance of existing buildings. Existing buildings face being downgraded as new building standards move on.

How far existing buildings will be affected depends upon the degree of change to the Model and the Building Code, but the outlook isn’t promising. A recent paper by Professor Brendon Bradley of the University of Canterbury in the NZSEE journal (Probabilistic Seismic Hazard Analysis of Peak Ground Acceleration for Major Regional New Zealand Locations) shows that major changes in some areas are likely.

Bradley’s research showed that, for 24 locations across New Zealand, expected mean earthquakes magnitudes and peak ground accelerations were generally higher than current Building Code requirements under NZS1170.5. While some areas were unaffected, in others, such as Wellington, Gisborne and Napier, the differences were significant. Peak ground accelerations for Wellington, for example, were more than 50% higher than is currently assumed under NZS1170.5. As a result, changes to the Code and effective downgrades to buildings could be significant; some buildings may effectively fall below the 67% or 80% NBS thresholds often seen by tenants as red lines.

While specific changes are yet to be confirmed, we can make some predictions:

• What is the rating? As the last few years have shown, seismic risk is a key concern for tenants in higher risk areas. The Wellington market, in particular, is affected on an almost weekly basis by assessments based on revised seismic assessment guidelines introduced in 2017-18.  Tenants and owners will want to know where their buildings sit against revised standards, whether or not this is supported by seismic assessment guidelines.
• Is vacating an option? To date, tenants have been prepared to vacate when buildings have fallen short. However, with a rising standard, it may be different. If all existing buildings are effectively not as safe as we thought, tenants may be more likely to shrug their shoulders and stay. Downgrades across the market may also constrain relocation options.
• Knowing the risk is key. Due diligence on acquisitions and new leases will remain be critical and a “flight to quality” will continue. Expert advice is also key – having a lawyer (and often an engineer) who can navigate and explain the complexity is important.
• Legal provisions will be in the spotlight. Rights for tenants to abate rent, vacate and even terminate leases due to low NBS ratings have become the norm. Whether or not these rights are effective – if tenants want to exercise them – will be tested.
• Experts and government have a role to play. The market has adapted relatively quickly to seismic issues, but understanding of risk still has a way to go.  Engineers have more work to do to educate the market on the appropriateness and limits of NBS as a proxy for safety. Equally, government needs to ensure that a transparent and effective measure, reflecting the public’s desire for reliable consistent ratings of buildings, is available.
• Higher standards and more upgrades? Some existing buildings have reached the economic and technical limits of upgrade capacity, but demand will mean that building strengthening projects continue. Anecdotally, some agencies have already begun insisting on increased design assumptions to take account of the anticipated building code changes.

The updated National Seismic Hazard Model is due to be released in August/September 2022.  Brace for impact.

June 2022