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Ministry of Justice provides property settlement guidance

07 April 2020

The Ministry of Justice has published online information on Property settlement guidance for lawyers during COVID-19. This brings together information from a range of sources including the New Zealand Law Society | Te Kāhui Ture o Aotearoa and Land Information New Zealand.

The key focus of the guidance for lawyers is that every situation is different and lawyers should provide a range of options to assist their clients to find a mutually acceptable agreement.

The ministry has also provided information for non-lawyers, Guidance for residential property settlements.

In its lawyer guidance, the ministry says not all property settlements are affected by the response to COVID-19. It says every situation is different.

"Some settlements can still go ahead during Alert Level 4 or have already been completed. For example, it may be possible to complete a sale during Alert Level 4 where the property is vacant land or sold as a rental property with tenants remaining and the buyer is still able to pay. Many, however, have agreed to defer their settlements until after we transition to a lower Alert Level."

Considering the situation after New Zealand moves off Level 4, the ministry says the detail of the measures that will be in place as we transition to Alert Levels 3 and 2 is still being worked out.

"But these problems are likely to continue to some extent in each case.  For example, movement of people will still be limited at Alert Level 3 if, for example, the area has a cluster or community transmission. Also, it is not yet clear at which Alert Level furniture removalists would resume operating. We will update this guidance as more information becomes available."

What should lawyers do now?

The ministry says as many lawyers are already doing, you will need to support your client by giving them options for how to proceed under their current, specific situation. The ideal solution is to negotiate and reach an agreement with the other party.

"Finding a mutually acceptable agreement is the best approach to avoid legal disputes and court proceedings which can be time consuming, stressful and expensive. When advising your client, you should consider that the measures being taken against COVID-19 and the requirements of particular Alert Levels are neither party’s fault."

The Law Society's interim guidance on a property settlement clause is noted and the ministry says one option this recommends parties consider is agreeing to defer the settlement to the 10th working day after a reduction to Alert Level 2.

"The option suggested by the Law Society may not be the best for every client’s specific circumstances and interests," it says. "There are many other approaches. Other options that may suit the parties’ particular circumstances could include:

  • deferring settlement to a different time (noting that not everyone can move on the 10th working day after a reduction to Alert Level 2);
  • a price adjustment;
  • lowering the interest rate for late settlement;
  • the buyer renting the property back to the seller after settlement.

"Every situation is different. You are best placed to provide advice on the range of options available for your clients and how to go about reaching an agreement with the other party."

Guidance for clients

In its client guidance, the ministry says "it is best to discuss what to do with your lawyer". It says the ideal solution is to negotiate and reach an agreement with the other person involved. Real estate agents are also able to help with these negotiations.

"Many lawyers are working from home and can support their clients. Lawyers can provide advice on rights, obligations and risks and consequences of possible actions in the current, particular situation of their clients. Lawyers can support their clients to find a compromise.

"Finding an agreement that works for everyone is the best way to avoid legal disputes and court proceedings which can be time consuming, stressful and expensive.

"People should consider that the measures being taken against COVID-19 and the requirements for particular Alert Levels are no one’s fault."

Last updated on the 7th April 2020