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Spring 2009 newsletter
- •Employment agreement pitfalls
- •Mortgagee house sales
- •Don’t be a guinea pig
- •Three brains a better than one
- •Other stuff
Welcome to the Spring issue of our newsletter – the change of season seems to bring with its arrival a positive glow. We have received an encouraging number of property deals - with more on the board for the month of September than we have seen for quite some time.
The year so far has been challenging for many, and we have seen our clients appreciate a no-nonsense practical approach in the face of such demanding circumstances. Long-term planning for most is tricky as the environment is quite volatile. The articles in the issue are a reflection of this as we bring to you pro-active approaches to help.
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Employment agreement pitfalls – things to avoid.
In an ‘ideal world’ we would all get along with no disagreements or ‘bad’ behaviour in the workplace. Sometimes good relationships sour, and it becomes difficult (if not impossible) for two parties to resolve things on their own. Often, this can be avoided if there is an employment agreement in place in the first instance. Employment agreements are not a ‘one size fits all’ solution.
- •Make your employee’s rights and basic entitlements known to them.
- •There are different types of employment types.
- •The employment agreement is for the role NOT for the employee – what does this mean?
The majority of organisations these days want to foster good employer-employee relationships. We recommend the best place to start is with an employment agreement which must be in writing – it is a little like a ‘prenup’ – everyone knows where they stand. Both the employer and the employee then have a firm understanding of what is required from both parties, and what is to happen should an employment situation need to be addressed.
There are often instances where a collective agreement is not appropriate. This is usually the case where one employment ‘standard’ contract will probably not cover off all the conditions specific to an individual’s situation. For example, there may be a requirement for flexibility of hours or overtime rates, not just the basic and essential ingredients and clauses.
There are several employment agreement types such as the Independent Contractor, full or part time, casual and fixed term.
•It is important that the terms of agreement state the length of the term, and that the term is for the role, not for the employee.
•It is also important to state why (in the conditions of a fixed-term arrangement) the employment will end on a specific date as stated in the employment conditions.
•Always place in writing that your prospective employee has the right to seek independent legal advice before signing their contract
You may recall the situation between TVNZ and Susan Wood in 2005 which demonstrates the importance of these three major points. TVNZ left themselves open to dispute over the contract it had with Susan Wood because they had not correctly managed these factors.
What are your employees entitled to?
Any written employment contract needs to have a full and detailed job description written into it. Include measurable goals and key performance indicators.
An employee is entitled to certain basic rights – these are outlined by the Department of Labour. There are some fundamental principles that most of us are aware of - minimum holiday period, bereavement leave and sick days are just an example of some of the conditions that must be covered.
Consider the possibility and advantages of having a probationary period. This could provide an easier way to manage and terminate the relationship – consider it a bit like an ‘engagement’. The new 90 day probationary period does provide a benchmark for such an arrangement and there are very stringent conditions around this.
Misunderstandings can be costly.
Even with good intentions and a sound employment contract, situations can arise whereby either the employer or the employee needs to seek assistance or advice to resolve a potential issue - there is a solution. Sometimes a facilitator can help keep the lines of communications open, assisting both parties in reaching an agreement.
Keep things on an even keel.
It is important to understand the basic rights your employee has and what their entitlements are. The employer has certain obligations, and we recommend you encourage your employee to read their agreement carefully (including seeking independent legal advice), understanding all that is outlined in the document. An annual review of employment circumstances and contract conditions is often advisable, with both parties working together in complete agreement.
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Arguably, the purchase and/or sale of property is likely to be the biggest and most valuable transaction a person will ever make, and therefore the property agreement one of the most important documents to be signed. With the aim of helping consumers and their agents with the process of documentation, the Real Estate Institute (REINZ) has introduced a new ‘Plain English’ sale-and-purchase of property agreement. In consultation with a team of writing and legal experts, the end result is a series of documents with the intention of minimising ambiguity and complexity, as well as avoiding ‘frivolous’ excuses for cancelling agreements, according to the REINZ chief executive Christine Le Cren.
But, exactly how robust is this? Given the potential importance of a property deal, you would assume that it is important that both the seller and the purchaser know EXACTLY what they are getting themselves into, with most having legitimate intentions during the process.
Plain English or double-Dutch
Because the Plain English form is a legally binding document, there is concern in many legal quarters that the form (although well intentioned) is simply not as rigorous as the Auckland District Law Society Agreement for Sale and Purchase of Property. The ADLS/REINZ standard form has been around for over 20 years, evolving within an environment of scrutiny from a number of legal, academic and real estate experts. It is currently in its 8th edition as a result of rigorous process and case law. It is also interesting to note that the ADLS property practitioners observe ‘that the REINZ Plain English form appears to favour the purchaser’.
Pioneering can be costly
Although it is perhaps more tempting to use a form that is easier for a layman to understand, there is simply no case law upon which the new form has been tried and tested. There is the introduction of new principles into settled areas of vendor and purchaser law. Therefore, many of the pioneering users of the form may unwittingly become involved in a more expensive and timely undertaking than they had bargained for as they inadvertently become ‘test cases’.
The stance at PGL is a preference for the ADLS/REINZ form to be used so that risk to vendors and purchasers alike is minimised, and certainty within the agreement is maximised. In any case – we strongly recommend you talk with us or seek independent legal advice BEFORE signing any agreement.
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New kid on the block
Mike Ireland is our newest staff member here at Paul Gallagher Legal, having started with us in June 2009 as a Solicitor. Mike has a comprehensive working knowledge of conveyancing, sale and purchase of small business and relationship property, having gained knowledge from working for various private practice legal firms and in the Government sector.
Born on ‘the other side’ in Ponsonby, Mike moved with his family to the sunnier shores of Birkenhead while still in nappies. A self-proclaimed ‘shore boy’, Mike attended Westlake Boys High School and Northcote College in the late 70’s where he played rugby – part of the school team. After graduating from high school, he did the ‘big OE’, with two years in the UK and Europe and a year travelling around the USA on the back of a Honda 650. Catching up with friends and family, Mike spent some time in Kentucky with some ‘salt-of-the-earth’ locals.
Mike decided to attend Auckland University on his return from his trip away, completing his Law degree in the late 80s. Cutting his teeth working for a private law firm, he then moved onto working for the Commerce Commission as an investigator – part of the enforcement of legislation promoting competition in New Zealand markets, spending six years honing his research and investigative skills.
Taking a role as a Solicitor at the Public Trust, Mike worked for three years undertaking a variety of tasks, including wills, trusts, administering estates and asset planning. Mike left the Public Trust to grow his own practice working as an Associate Solicitor for Rennie Cox, where he spent 7 years gaining experience with all aspects of Property and Commercial Law.
Eventually Mike found himself providing assistance to an experienced criminal defence Barrister before coming to work with us here at PGL. We consider ourselves fortunate to have Mike as a member of our firm and are confident his depth and breadth of experience will be invaluable to our existing and potential clients alike.
A recent ‘empty nester’, Mike has had his 20 year old daughter recently leave home to go flatting - he is relishing the peace and tranquillity of his own company – and control of the remote! An avid runner for the past 30 years, Mike still plays 15 aside, full contact rugby for the Marist Presidents Graduate Rugby Team where he has played as a wing for the past 12 years.
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Congratulations to Glen McLeod of Edge Mortgages – winner of the NZMBA Mortgage broker of the Year 2009 for the North Auckland Region.
And a ‘skyte’ for Paul Gallagher. Paul has recently been asked to chair the Disciplinary Committee of the NZ Mortgage Brokers Association. This deals with either breach of ethics or public complaints. Watch out Glen!!
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Mortgagee house sales
Transcending geographical boundaries, condition of the dwelling and income of the owners – there is the mortgagee sale. Most would not wish this eventuality on their worst enemy. However, with mortgagee sales hitting levels of more than twice the number as at the same time a year ago (as reported by TNVZ July 2009), it is as much about good luck than good management in the current financial climate.
- •Did you know there are different conditions with a mortgagee sale vs an unforced sale?
In a recent high profile mortgagee sale, in the four weeks between the auction being completed and the new owners moving in, the home was stripped of various items, and there was wilful damage to the remaining property. There are three main players in the mortgage scenario, each looking for different outcomes, each having a potentially different mind-set:
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•The mortgagee – party looking to recover funds by forcing the sale of a property. Typically a professional lender such as a bank or institution, and generally seeking a forced sale as a last resort, they are looking to recover monies owed and do not have a mandate to get the ‘best possible price’ so long as their debt is recovered.
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•Owner / occupier of the property – party who currently owns the property and owes a ‘mortgage’ i.e. funds to the mortgagee. It is likely that this party will be a reluctant participant in the process and therefore be upset or disgruntled.
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•Potential purchaser of the property – party looking to bargain purchase.
Not your average house deal
Bearing this in mind, as the process of a forced sale unfolds, there are likely to be situations arise that are not typical of the usual house transaction. A recent high profile mortgagee sale was the Herron family home. As reported in the NBR earlier this year, the Devonport family home of Stuart Herron was sold at mortgagee auction. In the four weeks between the auction being completed and the new owners moving in, the home was stripped of various items, and there was wilful damage to the remaining property was. Understandably the new owner was very distressed.
So, what are some of the differences with a mortgagee property sale?
Buying at a mortgagee sale is ‘as is’. This means that the usual warranties are taken out of the sale and purchase contract. There is no guarantee of the state of the house or property upon settlement - or if the current occupants are going to ‘go quietly’.
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The purchaser may not even be able to view the property beforehand, thus making a first-hand, personal evaluation of the property difficult.
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The current owner has the right to pay the outstanding debt right up until settlement date – making for uncertainty until that moment, with no penalties if this happens.
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The property needs to be insured by the new owners the instant the agreement is signed as the mortgagee ceases to be responsible for the property from that moment onwards.
It’s not all ‘bad news’ with a mortgagee sale. However, the rules are different and therefore it is important to obtain legal advice before committing your future to a mortgagee property. Conversely, if you are faced with a forced sale, know what your rights are – come and talk with us first.
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Three brains are better than one!
Join our lunch time workshop - specifically for employers.
Business does not exist in a vacuum and many times we have the need to work with other professionals in allied sectors of the commerce community when assisting our business clients. Over the past 6-12 months we have noticed a significant increase in the number of enquiries from employers centred around quite specific employment-related topics, especially in the current economic environment.
Because of this, we recently got together with two other professional bodies to collectively bring experience and expertise to manage today’s business challenges. We recently ran our first combined lunchtime workshop, inviting only 10 attendees – maximising our ability to focus the delivery of information to our clients’ potential needs.
The topics of discussion were around some general employment-related topics with experts delivering information in the following areas:
- Paul Gallagher - The pitfalls of employment contracts and managing staff dismissals.
- Virginia Stallard - Employment requirements for PAYE, ACC and general record keeping.
- Glen McLeod - Employer KiwiSaver, what are the benefits of joining?
We had very positive responses from people attending the session with attendees enjoying the relaxed, yet professional approach.
‘I think that the concept is a good one and topical for many, certainly helped me to help a client deal with some particular issues’
A number of clients have registered their interest in attending a future workshop which will be held over a weekday lunchtime with light refreshments, tea and coffee.
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