PDF final - Queen City Law

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queen city law

www.lawyer-monthly.com

Construction Law and the Property Sector in the Antipodes – New Zealand Marcus Beveridge owns New Zealand-based, award-winning boutique law firm, Queen City Law, based in Queen Street, Auckland. This firm has won New Zealand’s Boutique Law Firm of the Year several times over the last few years and has also won awards as New Zealand’s top Construction Law firm in 2008, 2009 and 2010. In late 2010 Queen City Law won New Zealand’s combined Construction and Property Law Firm of the year award.

The firm has acted for developers of a significant number of high rise projects in Auckland with associated capital expenditure in the vicinity of NZ$1B. The firm enjoys an extremely loyal client base and has a reputation for getting intricately involved in property projects from the very commencement of a project and adding bottom line value. This month, Lawyer Monthly asked Marcus to share his thoughts on Construction and Property in New Zealand in July 2011.

Christchurch’s recent earthquakes In terms of the property sector, the cost of repair to property is currently expected to be NZ$10B. I would not be surprised to see this figure escalate and notes that the funding for this work will come from the New Zealand Government, insurance companies internationally and the private sector. I believe that Christchurch very much needs the urgent input of visionary developers and planners to get Christchurch back on its feet quickly with as little bureaucratic interference as possible. In circumstances such as Christchurch finds itself it is critical that all stakeholders work in as collaborative development manner as possible and get the job done.

Marcus Beveridge

Leaky Buildings throughout New Zealand As funny as it may sound this disturbing issue is very much an area of growth in NZ with current estimates for repair work ranging from NZ$10-20B. Considerable long term litigation has taken place of behalf of the ‘victims’ of affected properties and recent settlements with local government are now including the appointment of approved contractors, architects and construction lawyers. This

july 2011

www.lawyer-monthly.com predicament reflects badly on all and in some cases has had tragic results. The High Court in Auckland is back-logged with claims and it is hoped that a substantial number of properties will be repaired over the next couple of years and that such repairs will not form the basis of second generation claims.

Developers / Global Credit Crunch A significant number of New Zealand’s best known developers and leading finance companies offering mezzanine funding and other products have become insolvent over the last three years, resulting in billions of dollars of investors funds being wiped out. Our trading banks (virtually all Australianowned) have also taken some big hits in the property sector but continue to make huge profit.

This has created a plethora of civil litigation winding its way imperceptibly through our Courts – however most of the capital is gone and there are unlikely to be many pecuniary winners.

In such a climate new projects therefore necessitate basic discipline to have any chance of getting off the ground and currently require significant developer equity (NZ banks currently like their property developer clients to be in a 30 per cent LVR position), a robust due diligence by the mortgagee and in any event, as much certainty as possible of a clear exit for funders. In Auckland city itself, the number of cranes on our landscape is currently very low but some change is imminent.

However, retail banks are now lending up to 95 per cent on residential properties (again) and it is expected the residential market will become more active, particularly as 100,000 new homes will be required in Auckland to accommodate its growing population.

Rugby World Cup - October 2011 I am pretty confident the All Black’s will bring home the bacon this year, as they are of course well overdue. In a sense, the Rugby World Cup is but a blip on the long-term radar but the construction of new stadia throughout the country has been one of the good things in the construction sector and there will of course be positive off-spins in terms of tourism, immigration and direct investment.

Assuming the AB’s do win the World Cup, it is likely that the National Party will again form the government in this year’s election.

Legislative Framework New Zealand enjoys a very sophisticated legal system and the legal framework relating to property and construction law is constantly being refined and updated and the case law is fluid. The Construction Contracts Act 2002 and the Building Act 2004 are now very much the law of the land and there are a myriad of regular changes to property laws impacting on taxation, regulation of building

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practitioners, constant changes to standard form sale and purchase agreements, specific fast-track laws for Christchurch, the imposition of the new Super City in Auckland, changes to the Resource Management Act 1991 and other planning changes, heritage and earthquake strengthening issues and a myriad of other considerations, all impacting on property lawyers knowledge baskets almost on a daily basis. The disciplines of property and construction law are of course a science all unto their selves like other disciplines of the law and 2011 has, to date, proved to be a whirlwind of a year.

The Future New Zealand enjoys one of the most deregulated economies in the OECD and there are very few barriers for foreign investment in NZ. In the property sector Singapore, Hong Kong and Australian companies have traditionally invested heavily in NZ. More recently, significant capital flows have come from China and found a home in NZ’s property sector and there is currently considerable focus on our farming sector.

Given the ravaging and insolvency of a large number of NZ’s most well-known developers over the last few years, an almost perfect storm scenario exists for those bold enough to actively invest in the property and construction sectors.

I am very confident that Queen City Law will continue to be at the forefront of major property developments in Auckland. The firm is well-positioned to exploit the unusual shape of NZ’s property sector, including very recent legislative changes allowing NZ’s 11,000 lawyers to act as agents on property transactions. The firm has cleaned up so many of NZ’s law awards because of its client-centric approach to the business of law and has continued to expand during recessionary times.

These are not the times for the faint-hearted, but unlike the crash of the late 80’s where local companies had no money, this cycle is different. The property market is after all about timing and for those who are cashed up and able to exploit distressed asset scenarios and pick the bottom of the cycle, the results could well be spectacular. A number of NZ’s smartest property commentators think that time has now come. LM