by Kiri Williams

20 March 2024

With the increasing unaffordability of property and squeeze on the property market in New Zealand at present, many New Zealander’s are turning to owing a tiny home. While this can be a great option to fulfil the ‘kiwi dream’, it is crucial that tiny homeowners secure their interest in the property or right of occupation of the land on which the tiny home is built to avoid running into problems further down the track.

Often to cut costs tiny homes are built on land owned by a friend or one of the family without formal documentation recording the occupation of land.

Before weighing up which option will suit, consideration by all parties will need to be given to the following matters (this is by no means an exhaustive list and every scenario will need to be considered on a case-by-case basis, and what is favourable for one client may not suit another):

1. Is the tiny house going to be movable, relocatable or affixed to the land?
2. Will there be a defined area of occupation, including exclusive use and common use areas?
3. What are the finances and future plans of each party? Is a party looking at retirement, having a family, or considering moving abroad?
4. The percentage and split of costs of any shared outgoings or maintenance and repair of shared areas (driveways) and the preferred method of payment of these?
5. Is the tiny homeowner expected to pay annual rent, a one-off payment or to purchase a share in the land?
6. Whether the tiny house owner needs additional security by registering a mortgage over their interest in the land?
7. What happens if one party wants to sell or passes away? and
8. Discussion about the preferred dispute resolution process.

Another consideration before you start your tiny home journey is to find a reputable building company and builder. We recommend you do your due diligence and have your Lawyer look over the building contract before you sign it.

Some options available to tiny homeowners wanting to secure their interest include:

1. Entering a Lease arrangement with the owner of the land:

A lease would provide the tiny homeowner with exclusive possession and control over a defined area of the land in exchange for payment of rent to the landowner. The terms of the lease would set out the area leased, annual rent charged, the duration of the lease (noting that the lease must be for a period of no more than 35 years, otherwise it is deemed a subdivision of land); and additional terms governing the right of occupation.

If the landowner sold the property, the lease would run with the property and the tiny homeowner would be able to remain on the land until the expiry of the term of the lease. However, if the property is sold subject to the lease, it may be  less desirable for prospective purchasers and for  the tiny homeowner having to live very close to a third-party purchaser with whom they have never met.

Some of the downsides also include the practicalities around the tiny house being relocated upon the expiry of the lease and the make good provisions under the lease, such as the cost of restoration of the land (to the condition it was in at the commencement date of the lease).

2. Licence to occupy:

The landowner could grant a licence for the tiny homeowner to occupy the land. There would be no need to survey the area and the tiny homeowner’s interest would not be registered on the Title. Rather the rights and obligations of each the tiny homeowner and landowner would be recorded in a Licence to Occupy Agreement. The tiny homeowner would usually pay an ‘outgoings fee’ for use of any shared facilities on the land, but be responsible for any services that separately charged and used by the tiny homeowner.

This could be a favourable option if the tiny house is relocatable.

A downside is that a licence can be cancelled by either party giving notice to the other, which will create uncertainty of tenure for tiny homeowner and the Licence is usually non-transferrable, so if the property was sold the Licence would be terminated.  Further the tiny homeowner could not borrow against the value of the tiny home or land.

3. The purchase of a share in the land/property:

Another option is for the tiny homeowner to purchase a part share in the property and both parties enter into a Property Sharing Agreement governing their use and ownership of the property. The property sharing agreement would record each parties’ rights and obligations in respect of their use and enjoyment of the property, including how expenses are shared, how each party may sell or transfer their share and any joint or several obligations in respect of the mortgage registered over the title.

Each parties’ share would be formally registered over the Title which provide security for the tiny homeowner and the property would not be able to be sold without the tiny homeowner’s consent.

Some of the pitfalls of this option are that the bank may require the tiny homeowner to be tied into the original land owner’s mortgage registered over the title; the costs involved getting the property valued, discharging the existing mortgage, the cost of ‘buy in’ by the tiny homeowner as well as re-mortgaging the property and the cost involved in preparing a property sharing agreement.

Another point to consider is the difficulty in agreeing on a value of the tiny home if it is not going to be removed and how any capital gain on the sale of the property will be split.

4. Buying a bare section to build the tiny house is a low-risk option for a tiny homeowner to realise their dream:

Having your own land provides you with security of tenure and ownership. When the land is yours, you of course have complete control over the tiny house build and use of the land. Further, you can decide to sell the property at any time, relocate the tiny house or have it form part of the property, meaning that you can realise any capital gains and improvement value on the sale of the property following the build of the tiny house.

The downside of this option is that it may fall outside of the tiny homeowner’s budget. Land is increasingly more expensive to buy and might not be available or suitable for a tiny house build.

We recommend that all parties seek independent legal advice early on in the process to ensure the best outcome and adequate security of assets. If you would like to discuss this further and the protections and processes available to you, please get in touch with the team at Pitt & Moore on 03 5488349.

By Oliver Jones-Allen

12 May 2021

The current housing market is becoming increasingly difficult to break into for first home buyers.  A lot of first home buyers are now looking to purchase land and build packages, generally from developer companies, some of which fall under the First Home Grant cap. This cap changes depending on the area of the country where the purchase occurs. For a new build costing under $600,000 in Nelson, for example, a couple who earn less than $150,000 combined (after tax), can apply for a grant up to $10,000 from the government as a contribution towards the purchase price.

These land and build packages have the distinct advantage of not only allowing a buyer into the housing market, but also being able to move into a new home upon completion of the build.  Buyers can also take advantage of the lower deposit required for the purchase of a new build. There are many important aspects to a land and build package which people must be aware of when entering into these contracts. A few key areas are highlighted below:

Firstly, there are two separate agreements while being one ultimate end goal.  There is a purchase agreement for the land where the purchaser is often buying off the plans, prior to title issuing for that property.

Secondly, there is a build contract which is with the builder for the build of house itself.  The building contract outlines the structure of payments to be paid throughout the build, as well as all timeframes, responsibilities and conditions of the construction.  In respect of payments, these are often made at certain stages of the build. For example, the first payment is likely to be made when the foundations and floor are completed; the second stage might be when the framing goes up; etc.

It is important to note that included in the building contract, are the specifications of construction. This outlines all materials, including all fixtures, fittings, taps etc, to be used during the course of construction.  It is crucial that these specifications are assessed with a fine tooth comb by the buyer, as once the contract is signed, these are the products and specifications which the builder will use to complete the build. Any addition or change to the specifications, will likely result in an increase in cost to the buyer.

Ultimately, many first home buyers are under significant financial pressures and stringent budgets. Being thorough in the early stages of the purchase can allay issues further down the track of the build process. Communication between the building company, bank, lawyer and buyer is integral to ensure all requirements have been met.

The biggest issue we see with first home buyers is being under pressure upon the issue of title or upon entering an agreement to purchase an existing home.

5 tips to make the purchasing process less stressful:

1. Have finance pre-approved by the bank up to a maximum amount;

2. Obtain pre approval of Kiwisaver withdrawal eligibility;

3. Obtain pre approval of first home grant withdrawal eligibility (if applicable);

4. Complete necessary on boarding requirements with lawyers so there are no delays; and

5. Use your lawyer, it is a confusing process, ask questions to put your mind at ease!   

Talk to us

The property market has showed no signs of slowing down, if you are looking to purchase a first home, investment property or a piece of land, please don’t hesitate to get in touch with Oliver Jones-Allen to discuss how Pitt & Moore Lawyers can assist you.

By Clare North

23 March 2021

The Government has this week released its housing policy package aimed at increasing residential housing supply and easing demand by property investors.

The key features of the package are:

1. A $3.8 billion Housing Acceleration Fund
2. Increased accessibility to First Home Grants and Loans for first home buyers
3. Extension of the Bright-line Test
4. Removal of the interest deductibility for investors
5. Government support for Kāinga Ora borrowing
6. Extension of the apprenticeship initiative

For property investors:           

• The Bright-line test is being extended so that if you buy and sell a residential property within 10 years you may have to pay income tax on any profit made on the sale. The existing shorter timeframe of five years will remain in place for new builds and the existing exemptions for the sale of a main/family home, inherited property and the sale of deceased estate property will continue to apply however if you rent out your family home for a period of twelve months or more, then your family home may also be subject to the Bright-line Test. The new rules will apply to property acquired on or after 27 March 2021.

• The removal of the interest deductibility means that you may no longer be able to offset interest expenses against your rental income when calculating tax payments. While the Government is still to consult on the detail of the legislation (in particular, a possible exemption for new builds), the new rules are set to apply from 1 October 2021 to property acquired on or after 27 March.

• Interest on loans for properties acquired before 27 March may still be claimed as an expense. However, the amount which may be claimed will be gradually phased out over the coming years.

For first home buyers:

• A First Home Grant can provide up to $5,000 for individuals and up to $10,000 for two or more buyers to assist with the purchase of an existing home. Purchasers of new builds can claim up to $10,000 for individuals and up to $20,000 for two or more buyers.

• Under a First Home Loan, a deposit of only 5% of the purchase price is required. First Home Loans are available from selected banks, building societies and credit unions, and are underwritten by Kāinga Ora.

• The maximum income you can earn but still receive Government assistance will be increased from 1 April 2021 from $85,000 to $95,000 for individuals and from $130,000 to $150,000 for two or more buyers.

• From 1 April, price caps on homes that can be purchased using Government assistance will also be lifted across the country to reflect rising house prices. The cap for properties located in Nelson and Tasman is being lifted to $525,00 for existing properties and $600,000 for new builds.

Further announcements are expected from the Government over the coming months as consultation occurs and the policy is rolled out.

Talk to us

For more information or professional advice on this topic please contact Clare North.