With the restrictions of the Level 4 lockdown lifted, it became business as unusual for Real Estate Agents and others involved in the property market. Personal movement was freed up, enabling pre-existing settlements to take place and Agents to carefully manage new viewings. At Langley Twigg, our move over the past two years towards a paperless office has really paid off. It has meant that, operating from offices at home, we could review contracts, have them signed by electronic means, and, with appropriate remote witnessing, enable our clients to settle.
Langley Twigg enjoys a substantial share of the Napier and Hastings conveyancing markets and are accordingly well placed to provide a number of observations:
What does this mean for the rest of this year as we emerge from the Covid-19 pandemic? No doubt your crystal ball is as good as ours. Some will see it as a “dead-cat bounce”. However when we consider the conditions that made for a strong market in the first three months of this year, we note that many of these still exist. Commentators have noted the likely resilience of the Hawke’s Bay economy with its low dependence on international tourism, attraction for domestic tourism, and strengths in agricultural products that are in demand in both home and export markets. Add to this the climate and lifestyle factors that make living in the Bay desirable, and we can’t help feel bullish about our little corner of the world.
On March 25 New Zealand went into COVID‐19 Alert level 4, causing huge and unparalleled interruption to our lives and businesses. Many businesses have spent the last four weeks trying to find ways to effectively work from home while others have been unable to operate at all.
With the Government announcement that the country will move to Alert Level 3 at 11:59 on 27 April, many employers will be looking forward to getting their businesses up and running again and many employees will be looking forward to returning to work. However, we aren’t out of the woods yet and there are many businesses that face two more weeks of alternative working arrangements or no work at all. This will leave many employers have some important decisions to make.
Does Level 3 mean that my employees can start returning to their usual workplace?
Government guidance says that if you can operate your business remotely using alternative working arrangements, then you should continue to do so. If you operate a business where working remotely is not possible, e.g. hospitality or retail, you will be allowed to re‐open at Level 3 provided that there is no direct contact with the public. Orders will need to be made via phone/online ordering and using contactless delivery or collection. If in doubt about your ability to open, you should seek further guidance from the Ministry of Business, Innovation and Employment.
What health and safety requirements should I consider at Level 3?
As an employer you are required, by the Health and Safety at Work Act 2015 (HASAWA), to minimise health and safety risks to your workers. Where you have employees returning to the work at Level 3 this means putting systems into effect to reduce the risk of COVID‐19 transmission in the workplace. What this looks like in practice for your business will be fact specific to your workplace but as a general rule you will want to maintain people ‘bubbles’ and minimise personal contact. You may also want to:
If your employees are working from home you still have obligations under the HASAWA to ensure that health and safety risks are minimised, including both physical and mental health of employees. You may wish to check that your employees have all the equipment they require to work safely from home, that they are taking appropriate rest breaks, don’t feel isolated and are still able to have contact with their colleagues.
I’m looking at re‐opening my business at level 3, but I won’t be able to give my employees their usual hours, what can I do?
Changes to an employee’s terms and conditions of employment can only be made via consultation with the employee and in accordance with employment law. As with many employment situations open communication and good faith are key to achieving a successful result, as well as a legally correct one. If you think that you cannot provide your employees with their usual hours of work you should consult your employees, giving them the opportunity to consider and respond to any
proposed change before decisions are made. It is also important that where changes to an employee’s terms and conditions of employment are made those changes are documented.
I don’t know if my business can continue to sustain losses, likely even when we move to level 3; can I restructure?
The Government is encouraging employers who are facing difficulties, and who are looking into redundancy options, to consider applying for the COVID‐19 Wage Subsidy (Wage Subsidy) to help keep workers employed during this time. However, as an employer it is your prerogative to run your business as you see fit. If that means that the business cannot sustain some or all of its employees due to COVID‐19 that is a decision that only you can make. It is important to remember that you must always act in good faith, consult with employees and follow employment law; employment law requirements have not been put on hold because of the pandemic. We recommend that if you are considering redundancies that you seek legal advice.
If you have received the Wage Subsidy but are still considering redundancies you will need to remember that you may have given a declaration (when applying for the Wage Subsidy) that included a commitment to retain employees for the 12 week wage subsidy period. If you have received the Wage Subsidy, and made that declaration, then good faith would most likely require you to retain the employees for the duration of the wage subsidy period.
If you have received the Wage Subsidy, and proceed with a redundancy process, you may be required to pay back the unused balance of the Wage Subsidy for those employees whose employment ends within the wage subsidy period. If you have received the Wage Subsidy, but are now considering redundancies, you should seek further legal advice.
The COVID‐19 pandemic has been challenging for everyone but it is important to remember that your obligations as an employer have not changed. Any decisions regarding your employees must be made following consultation with your employees and following employment laws. If you are concerned about the effects of COVID‐19 on your business and what it could mean for your employees, we suggest that you speak to one of our employment law team.
We have always emphasised the importance of having a Will and Enduring Powers of Attorney (EPAs) in place regardless of age and circumstances. The Coronavirus outbreak is a strong reminder that if you are over the age of 18, these documents are essential.
While many legal documents have formal requirements for signatures to be witnessed, there are particular requirements for EPAs and even stricter rules for Wills. Wills and EPAs are not valid unless they are signed and witnessed correctly. Given the current Government restrictions on movement and social distancing rules, that could prove a challenge.
Having your Will signed and witnessed safely while complying with the law
In an effort to relax the signing and witnessing formalities during this unprecedented situation, the Government has made a temporary law change to modify the requirements for signing and witnessing Wills.
While Wills must still be in writing and signed by the Will maker in the presence of two witnesses, the law change now allows Wills to be signed and witnessed using audio-visual links such as Zoom, Skype or Facetime.
How? There are a few steps to be followed:
The changes made are temporary. The modification order will expire after the Epidemic Preparedness (COVID-19) Notice 2020 (the Epidemic Notice) is lifted, and the law will return to normal. However Wills signed while the Epidemic Notice is in force following the requirements outlined above for signing and witnessing are valid Wills and there is no need to sign a new Will after revocation of the Epidemic Notice.
What happens if you can’t have a Will validly signed and witnessed?
We acknowledge that many people are not going to be able to achieve having their Will signed properly while in isolation. Some may have no access to audio-visual links or they may have no one to witness their Will while in isolation. Many people will be in isolation with those they would want to benefit under their Will and the rule that any beneficiary may not witness a Will has not been relaxed.
The Will may still be signed by the Will-maker (without being witnessed) and kept in a safe place until after restrictions have ended. Bear in mind however that Wills that don’t comply with the formal requirements are not valid until signed and witnessed by two witnesses.
If the Will-maker dies before the restrictions are lifted and before validly signing and having the Will witnessed, the Wills Act allows the High Court to make an order declaring a Will to be valid even if it doesn’t meet all the formal requirements. The judge can do so if satisfied that the document expresses the deceased person’s intentions. The process for probating such a Will is more complex but it is the best alternative particularly for the elderly and the vulnerable who are currently in a position where they cannot validly execute a Will.
Enduring Powers of Attorney - signing procedures
EPAs are invaluable documents meant to allow a prompt management of your affairs in case of an accident, loss of mental capacity or while you are outside of New Zealand. An EPA for property will provide authority for someone to carry out certain functions for you such as paying monthly bills or buying or selling property. An EPA in relation to personal care and welfare will only come into effect should you lack the capacity to make those decisions yourself and in that situation, your attorney will be working with your health professional or doctor to make decisions in your best interest.
If you lose capacity without having EPAs in place then a court application process needs to be followed before your affairs can be managed. This can be a lengthy and expensive process
Signing procedures for EPAs are fairly complex. There are four categories of persons signing each individual document: (1) the donor; (2) the witness for the donor (who must be a lawyer, legal executive or authorised officer of a trustee corporation); (3) the attorney or attorneys (including successor attorneys), the signatures of each of whom must be witnessed separately; and (4) each attorney’s witness who must be a person other than the donor or the donor’s witness.
The remote signing and witnessing procedures for EPAs should be carried out in the same practical manner as for Wills using audio-visual links. The standard EPA forms will need however to be amended to reflect the fact that they have been executed and witnessed remotely.
If you haven’t reviewed your Will and EPAs in a long time, now it’s the time to do so to ensure they reflect your current wishes. If don’t have these documents, please consider making arrangements to have them in place as soon as possible.
Form of Lease
Before considering the impact of the restrictions imposed by Alert Level 4 on commercial leases, it is important to review the terms of the lease for the premises. Most commercial leases entered into after 2012 are on the 6th edition ADLS lease
form. However, a number of leases on the earlier editions are still in place for tenants that have been in occupation of their premises for a long time.
The standard terms of any of these forms of lease may have been amended so the specific lease and any deeds of renewal, variation or assignment need to be checked.
The 6th edition deed of lease contains a provision in clause 27.5 to state that if there is an emergency (defined in clause 47 of the lease to include an epidemic), and the tenant can’t access the premises to fully conduct its business because of public
safety reasons (including a prohibited or restricted access cordon), then a fair proportion of the rent and outgoings cease to be payable for the time that the tenant is unable to gain access to the premises.
This clause will apply unless the tenant is an “essential service” which is permitted to remain open during the Alert Level 4 restrictions.
The period starts from just before midnight on 25th March 2020, so in practice, rent and outgoings abate from 26th March 2020. For some businesses, it could be considered that the period starts from Alert Level 3 on 23 March 2020 but given the
proximity of the dates, most parties are applying clause 27.5 from the unequivocal date of 26th March 2020.
There is little case law to give guidance as to what is a “fair proportion” of rent and outgoings. This is likely to be because there is a general recognition that the parties need to be pragmatic and to work together in these circumstances.
However, there is one case in which the Judge considered the assessment of a fair proportion of rent payable by the tenant pursuant to clause 27.3 of the ADLS 6th edition lease, arising from damage to the premises caused by the 2013 earthquake in the Wellington region.
In that case, the tenant (the owner of a bar in central Wellington) claimed a rent abatement as a large number of windows in the premises needed to be replaced after the earthquake. The Judge allowed the tenant a full abatement of rent for the two months that the tenant’s business was substantially disrupted resulting from scaffolding being erected on the exterior of the building whilst the new windows were installed. The Judge did not allow any abatement for the period of 14 months from
the date of damage until commencement of the works, as there was no evidence that the damage affected the tenant’s business operation from the premises during that time. However, as it was a summary judgment proceeding, the Judge noted that he could not assess exactly how much the tenant may have been entitled to by way of rent abatement as there was no valuation evidence directed to that issue; the two month’s rental abatement was proposed by the landlord at the hearing.
Furthermore, the facts of that case differ from the current circumstances, as the repair works which impacted on the tenant’s use of the premises were undertaken by the landlord and the Judge noted that they were carried out pre-Christmas which
worsened the effect on the tenant’s business, whereas here, the Alert Level 4 restrictions are beyond the control of either party.
It is worth noting that the Judge allowed two months’ full rent abatement even though the tenant was still operating from the premises and did generate some income over that time, albeit that the tenant said the patronage of the bar dropped by over 50%.
Commercial and Practical Considerations
In our view, there are a number of commercial and practical considerations to be taken into account when determining what proportion of rent (if any) should be paid during this time:
The first schedule to the 6th edition lease contains a “no access” period. Clause 27.6 allows for either party to terminate the lease if the premises are unable to be accessed for the period specified. The default period provided in the lease is nine
months unless the parties have agreed an alternative timeframe. It is unlikely that the Alert Level 4 restrictions will remain for nine months but all leases need to be checked and the relevant dates noted.
Although tenants often hold business interruption insurance, and the landlords hold “loss of rents” insurance, there are often exclusions and restrictions to these policies (including epidemics) and these policies are usually tied to a claim under a material damage policy, which will not apply as the premises are not damaged. We do recommend clients contact their insurers however, to check the terms of any policies.
Earlier Edition Leases
Even if the tenant occupies the premises under an earlier ADLS lease edition which does not contain a “no access” provision, a landlord should consider granting the tenant a rent abatement, particularly if any of the considerations listed above are
A landlord needs to consider the long term relationship with the tenant in negotiating any proportion of rent payable by the tenant during the Alert Level 4 restrictions. As the tenant does not have any access to the premises to fully conduct its business, the proportion of rent (if any) payable by the tenant is likely to be small. Payment of outgoings by the tenant (particularly security services) are reasonable however, to ensure that the tenant’s chattels are kept safe during this time.
If you have a property settlements planned over the next 4-5 weeks or have had settlements delayed due to the current lockdown, this article answers some of the questions that we have been asked by our clients on what the next steps are and what the process will be.
There are three types of settlement dates:
1. Specific settlement dates
For those of you with these dates, if we are still at either Level 4 or Level 3 still prevents the practical settlement attendances from happening, then we will liaise with the other lawyers involved about amending those dates pursuant to 2 or 3 below (should you wish to do so). The legal position as to whether settlement must take place during this time is not clear cut and often depends on the specific circumstances (particularly where it is the sale or purchase of a tenanted property). Legally we are still able to settle if required but it is the practical implications that need to be taken into account. If you require or would like a delay in settlement then we would like to think that the other party would be (using Jacinda Adern’s call to “be kind”) and are likely to also prefer delay.
2. Settlements x number of working days from the Alert Level dropping to 2 or lower
It could be some time until the government drops the level to 2 or lower. In those situations where you would like to settle as soon as practical, we will contact the other party about amending the dates to category 3 below. The level 2 settlement date was based on recommendations from the Property Law Section and those dates were mainly used when negotiating a change in the settlement dates during the early stages of the lockdown.
3. Settlements x number of working days from the Alert Level dropping to 3 provided the practical settlement attendances are still possible (physically moving, connection of utilities etc).
These settlement dates were used for those negotiations later on in the lockdown period as an early drop to Alert Level 2 became less and less likely. Thursday’s announcement from the government didn’t really clarify things regarding whether final inspections, seeing lawyers to sign paperwork and moving in/out of a property could still take place. Hopefully more guidance will become available so all parties are clear about what is and is not allowed.
For those of you whose settlements fall under categories 1 and 2, please consider whether you would like to settle under category 3 instead and we will contact the other party and look to negotiate an amended settlement date. In most circumstances we expect the other party in the transaction would like to do the same. However, bear in mind that the legal obligation for the other party to do so is unclear.
Practical steps which you can take in the meantime:
Most importantly Langley Twigg is still operating “business as usual” (albeit from the comfort of our own homes). In the majority of situations the transfer/loan documentation can still be signed via Skype/Zoom/FaceTime (Even using the “House Party” App) and we have access to all files remotely.
In the meantime, stay safe, tick off the rest of the items on the household chores list and make the most of the time you have with those lucky enough to share your “bubble”!
Langley Twigg's team of Hawke's Bay lawyers keeps you up to date on all the latest legal news.
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