Winter 2013 Newsletter

Homeowner Beware!

For most homeowners in New Zealand, their home insurance has always been an unspecified ‘replacement’ cost based on the floor area of their home. However, following the Christchurch earthquakes, insurers are now adopting a new home insurance policy whereby all home insurance policies will be based on an ‘insured sum’.

The policy change is a result of major reinsurers (the insurance companies who insure our local insurance companies) requiring greater clarity on risk and the maximum costs to rebuild the homes they insure. Many insurers claim that the changes are about providing certainty and managing affordability for homeowners, and that costs of premiums for home owners will not change.

The result is that the onus is now on homeowners to get their home valued correctly as the insured sum will be the maximum amount the insurers will cover in the event of a claim.

The Insurance Council of New Zealand and the majority of insurance companies have published information online, and provided fact sheets and valuation calculators to inform homeowners and assist them to calculate the insured sum for their home.

In order to determine the sum to be insured, homeowners must determine the cost of completely rebuilding their home. Accordingly, it is paramount for homeowners to be aware of the unique features of their home. These include:

The insured sum does not include the value of the land on which the home is situated, or what it would cost to buy your home. Therefore the purchase price, rates valuation, or other estimate cannot be relied upon to determine the home’s value or insured sum.

In addition to calculating the value of the sum insured, each year homeowners must also determine the adequacy of the sum insured and keep their insurers updated upon renewal of their insurance policy. This is crucial for homeowners who complete renovations or changes to their home to guarantee that those works (and the possible increase in value) are covered by their insurance policy.

Obviously, this is a significant change to the duties of the insurer, and shifts the onus to the homeowner to correctly value their home and the insured sum. Homeowners need to be proactive, as many insurers have already transitioned all new home insurance policies to the ‘sum insured’ base, and all existing policies are likely to change at the time of renewal. One of the main consequences for homeowners, if they fail to adhere to the new policy, is that a default sum for the home will be calculated by the insurers which may not reflect its true value or the costs likely to be incurred in replacing the home.

For most people their home is their most valuable possession, consequently homeowners need to be aware of the terms of their insurance policy, and be proactive in contacting their insurer to ensure their home is adequately protected. If you have any queries regarding your home insurance policy you should contact your insurer immediately. If you have any issues regarding insurance claims, it is prudent to obtain legal advice.

 

Relationship Property After Death

Part 8 of the Property (Relationships) Act 1976 (‘the Act’) deals with the division of property where a marriage relationship or de facto relationship ends (after 1 February 2002) because one of the parties has died.

The basic scheme of the Act for relationships ending on death is that surviving spouses or de facto partners have a choice between two options; Options A and B, outlined as follows.

The Options

Option A is the ability to apply for a division of the relationship property under the Act and Option B is not to apply for a division of the relationship property and instead rely upon the provisions of the deceased’s Will.

Choosing one of the options is a formal process that must be made by completing and signing a written notice. The notice must include or be accompanied by a certificate signed by a lawyer certifying that the lawyer has explained the effect and implications of the option chosen. It also needs to be lodged with the administrator of the estate.

There are also important time limits that apply to the election of an option. Where the estate is small enough not to require a grant of administration, the choice must be made within six months of the date of death, or, if administration of the estate is granted within that period, then within six months of the grant of administration. In all other cases it is within six months of the grant of administration. The time limit is important because the administrator of the estate may distribute the estate if no election has been made within the six month period, and once distributed it cannot be undone.

If Option A is chosen there is also a time-frame for the filing of the proceedings in court.

There is one important distinction between spouses and de facto partners in regard to the choice of options. Spouses have the right to choose Option A irrespective of the duration of the relationship, whereas de facto partners have that right only if their relationship lasted for three years or more; unless the court is satisfied that there was a child of the relationship or the surviving partner made a substantial contribution to the de facto relationship, and not having Option A would result in substantial injustice.

 Option A

Generally speaking, choosing Option A means the equal sharing regime applies and that your lawful entitlement takes priority over the terms of the Will and you do not receive what has been provided for you under the terms of the Will.

 Option B

Under Option B the surviving spouse or partner elects not to apply for a division of the relationship property, but to inherit any provisions made in the deceased’s Will or available under intestacy provisions.

Option B is the default position if the survivor does not choose Option A within the time limit as detailed above, and in the manner prescribed.

 Summary

The election of Option A or B may result in vastly different outcomes and therefore it is crucial that you obtain proper legal advice about this election and the time-frames that apply to this election.

 

Snippets

Website

Our website and facebook page has had an update including new photos of Graeme McLelland, Sarah Jury and Louise Smith.  Please feel free to have a look at www.mcleods.co.nz.  We also regularly add articles of interest to our facebook page, please like us on facebook so you receive notifications of these postings.

 Staff Changes

Graeme McLelland’s legal executive Fianach Reeves has moved on.  We wish Fi all the best in her new endeavours.  Eimear Nelley (previously at reception) is bravely stepping into her shoes.  Did you know Eimear is an Irish-qualified Solicitor who has played rugby for the Irish Womens Rugby Team?  Check out our facebook page for more information.

Graeme McLelland is also back in the office at 110% after undergoing open heart surgery in July.

Those of you who know Graeme will know he has always prided himself on being fit and healthy, and has managed to be back at the office only 3 weeks after his surgery (half the recommended recovery time).

 

All information in this newsletter is to the best of the authors’ knowledge true and accurate. No liability is assumed by the authors, or publishers for any losses suffered by any person relying directly or indirectly upon this newsletter.  It is recommended that clients should consult a senior representative of the firm before acting upon this information.

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McLeods Lawyers — 21 Hobson Avenue, Kerikeri, Bay of Islands, New Zealand — Phone +64 9 407 0170 — Email law@mcleods.co.nz

The information on this site is not comprehensive legal advice. Please contact us for advice and information suited to your needs.