A lifestyle property near Haumoana is the unexpected global headquarters of developer David Frampton’s Majic Jungle Software.
Through Majic Jungle, David built The Blockheads simulation app that has been downloaded and played by millions of mobile gamers around the world.
A game developer since 2003, David moved from Wellington to Hawke’s Bay in 2012 after a search for the perfect place to relocate his home-based business. It needed to be somewhere he could spend time with his young family and indulge his other passion: surfing.
“Because I work from home, I could be based anywhere, so we drove around the country and checked out a bunch of possible spots before deciding to settle here,” he says.
“Surfing definitely influenced things. I had to find somewhere with some decent surf. It’s surpassed all expectations, I’ve found it really good.”
The location also allows him to indulge another hobby: building and flying quadcopters.
David’s broadband link to the rest of the world is a standard ADSL copper line connection that he says meets his working needs.
“The only downside to living in Hawke’s Bay is there aren’t the numbers of people here who are doing game development. There were more in Wellington whom I could network with, so I’m missing that a little,” he says.
One way he keeps connected is through attending industry conferences.
“It’s just as easy to jump on a plane from Hawke’s Bay and get over to San Francisco or wherever for a conference as it was from Wellington.”
As well as maintaining The Blockheads, David is currently ramping up work on a new PC game with a virtual reality component, which he’s given the working title of ‘Ambience’. He hopes to have it out for testing by late this year.
Another major development is brewing at Majic Jungle HQ. After several years of having three young kids at home, David is building an office on the property so he can “get out of the house”.
At least the commute to work won’t take too long. David’s broadband link to the rest of the world is a standard ADSL copper line
National Environmental Standards for Plantation Forestry (NES-PF) will come into effect on 1 May 2018 in an attempt to get greater consistency across the country
Plantation forestry is New Zealand’s third largest primary sector. According to the Ministry for the Environment and the Ministry for Primary Industries, it employs over 26,000 people and generates around $5 billion in export earnings each year.
Together with these positive social and economic effects, plantation forests also provide environmental benefits such as improving water quality, controlling erosion, and providing a temporary carbon sink. On the other hand, plantation forestry activities can adversely affect the environment if not well managed, with the greatest risk occurring when land is exposed during harvesting or earthworks.
Rules contained in Regional and District Plans to manage such effects vary however, and while some of these variations reflect local differences and community priorities, they can cause problems for the many forest owners who manage forests in two or more regions or have forests that straddle council boundaries.
This has the potential to result in increased costs, uncertainty and inconsistent environmental outcomes. In response, and given the dominance of forestry from both a geographical and economic sense, enter the ‘National Environmental Standard’ approach allowed for under the Resource Management Act 1991 (RMA).
National Environmental Standards (NES) are regulations made under the RMA. They set out technical standards, methods or requirements relating to matters under the RMA and unlike Regional or District Plans pertaining to different regions and towns, they are intended to provide consistent rules across the country by setting planning requirements for certain specified activities.
Rules within an NES prevail over rules in a Regional or District Plan except where a NES may specifically allow more stringent rules to be developed if specific issues in a Region or District require this.
The National Environmental Standards for Plantation Forestry (NES-PF) will come into effect on 1 May 2018, and will follow five existing NES’s, these being:
National Environmental Standards for Telecommunication Facilities
National Environmental Standards for Electricity Transmission Activities
National Environmental Standard for Assessing and Managing Contaminants in Soil to Protect Human Health
The NES-PF will apply to any forest greater than one hectare that has been planted specifically for commercial purposes and will be harvested.
The main risks that the NES is seeking to manage include wilding conifer spread, erosion, and disturbance to waterways, particularly while fish are spawning.
To manage these risks, its Regulations cover the following 8 core plantation forestry activities that have potential environmental effects:
Afforestation (planting new forest)
Pruning and thinning-to-waste
Earthworks
River crossings
Forestry quarrying (extraction of rock, sand, or gravel within a plantation forest or for operation of a forest on adjacent land)
Harvesting
Mechanical land preparation
Replanting.
The regulations applying to these activities are based on good forestry practices, and include:
Setbackswhenplantingnexttorivers,lakes,wetlands,and coastal areas – these unplanted strips protect against erosion and sedimentation from afforestation
Managementplansforearthworks,forestquarrying,andharvesting activities to identify environmental risks and how they’ll be managed
Identification and maintenance of stormwater and sediment control measures for forestry activities.
Like the structure of District and Regional Plans, if forest operators can meet the conditions, the activity is permitted. If not, they must seek a resource consent from their council. In some areas of high erosion susceptibility however, stricter requirements may apply and some forestry activities will not be able to be carried out without resource consent.
This is a serious piece of legislation, and to this effect, Councils will be able to charge to recover the costs of monitoring permitted activities that have a high risk of environmental effects if conditions are not complied with.
The sector will certainly experience change – Councils will require greater resourcing, foresters are likely to require assistance from private providers and monitoring requirements are likely to increase, and may involve on-going programmes.
Hawke’s Bay woman Robyn McLean is having fun with her new business venture that is a game changer in women’s health.
Robyn and long-time friend Mary Bond, based in Wellington, have launched the Hello Cup Company producing a range of menstrual cups – something that has released them from their bugbear of buying single-use tampons.
Hello Cups not only save money but also have huge benefits when it comes to the environment.
“As mothers we knew there had to be a better option for our daughters than expensive and wasteful tampons and pads. The Hello Cup is that option.”
A single cup will last at least five years and holds three times the amount of a tampon. While most cups on the market are made from silicone, Hello Cups are made from medical-grade plastic, which means they are fully recyclable at the end of their lives.
Robyn and Mary, a registered nurse, came up with their first business idea about 15 years
ago when they both had their first child around the same time. The initial idea was to sell children’s clothing, but around the same time there seemed to be an explosion of children’s clothing retailers and they decided it probably wasn’t the best idea.
“We kept talking about joining forces and starting a business over the years but it had to be the right business. We’ve finally come up with something that suits us both. Being a nurse, Mary really cares about people’s welfare and I had a hunch this would be something that we could do together and really make a difference to the lives of women, not just in New Zealand but around the world.”
Robyn had been interested in using menstrual cups for a while but it wasn’t until she was in need that she finally gave one a try.
“I went into a pharmacy in Havelock North and enquired about menstrual cups. The pharmacist was a user of one and was really encouraging and enthusiastic so I bought one and it was instantly life-changing.
“It seems crazy that women have been led to believe for so many years that there is
really only a couple of options in tampons and pads. Not only do they create a hideous amount of waste, but they are unaffordable for so many women.”
After a bit more research Robyn decided she wanted to buy a New Zealand-made cup. When she found there weren’t any, she went to Mary with her latest business idea and the rest, as they say, is history. Period!
The product development phase included trying to source high-quality medical- grade plastic to make the cups, quality and comfortable design of the cups, a manufacturer and then a great brand name.
The medical-grade TPE (a type of plastic) is purchased from Germany and they are fortunate to have found a manufacturer in Napier who is able to produce the cups to their exacting standards.
“You don’t want anything dodgy going up there, so there was no way we were going to cut corners. Our design is quite different
o others on the market. We have specifically designed it to be as comfortable as possible with as little ridges,” says Mary.
Robyn says having the manufacturing team in Hawke’s Bay has been a huge bonus. “It’s so awesome to have the Hello Cups made in Napier. It proves that Hawke’s Bay has everything you need.”
The inspiration for the brand name ‘hello.’ was based on a desire to have a positive perspective to something that is a dreaded monthly hassle, says Robyn. “It also plays on the full stop being called a ‘period’ in America, which if we expand into that market, will make more sense to them probably than Kiwis!
“We wanted to have some fun and get woman to embrace their period. We’ve done this with the brand name as well as some of the marketing taglines such as ‘bloody brilliant’ and ‘no strings attached’.”
Periods are not a typical conversation topic but for Robyn and Mary, they’re talking about the Hello Cup daily together and to happy converts throughout New Zealand. They’ve both quickly become experts as well as period counsellors!
Robyn sees a massive future in the Hello Cup. It’s quickly become a passion and they’re already looking at new products. In 2018 a sports Hello Cup and a Teen Cup will be added to their product range.
TheSportsCupwillbefirmer,asfitfemales often have stronger pelvic floor muscles, while the Teen Cup will be smaller and
softer and a good option for first-time cup users. Hello Cups currently retail for $49 for a single and $69 for a box containing both sizes.
Robyn, a former journalist and public relations practitioner, will be putting her communications and marketing skills to good use. She will take care of the marketing, including social media and responding to non-medical enquiries.
Mary is responsible for distribution and putting her medical training to use in responding to medical-related enquiries.
“We get some incredibly personal questions from women and so it’s amazing for them to be able to talk to a registered nurse who can answer their questions from an informed medical perspective.”
To get the word out about the Hello Cup, a marketing plan includes reliving their youth and heading to university orientation weeks across the country.
They see huge opportunities with the secondary school and tertiary markets. The cups last at least five years, so that means a student can have one for their secondary schooling and then get another that will last for their entire tertiary study.
“We hear dreadful stories of girls not going to school when they have their periods because they can’t afford it. A single cup will last them their entire high school years.”
The only speed bump Mary and Robyn have hit so far was agreeing on whether they
used the word vagina on their website or something less formal.
“Being a nurse, Mary was keen to stick to the name given in medical texts. I preferred vjayjay and fanny.”
To overcome the issue, their website features a ‘vagina switcheroo’ tool, whereby visitors are able to type their preferred name into a box that will then change the text throughout the site to the user’s chosen name.
“We love what women come up with,” says Mary. Twinkle cave, magic box and foo foo are a few examples.
With more than 7 billion tampons and pads going into the world’s landfills each year, menstrual cups have a huge future.
“We think menstrual cups will be the norm for the next generation and we are planning on taking the Hello Cup to women not just in New Zealand but around the world.”
Widely known in the business community as the co-founder of NOW, Ben Deller delights these days in telling people he is a student.
Having left the successful telecommunications company early last year, the 38-year-old is now dovetailing business consultancy work with part- time postgraduate studies at EIT.
Ben enjoyed his 14 years heading NOW’s sales and marketing team, but over time, he says, the focus became less about innovation and more about management and scale.
Having broadened its customer base, the company was continuing to expand beyond Hawke’s Bay. It needed an injection of capital to achieve further growth. In 2015 Spark bought a stake and, over a period of 12 months, Ben started looking at what else he might do.
“I was working with some really smart people,” he says, “and one in particular – she has a master’s degree – suggested I study, as she had, purely for the enjoyment.”
Learning by chance about EIT’s suite of postgraduate programmes, he worked through his study options with School of Business Associate Professor Jonathan Sibley.
Ben had good reason for feeling tentative – his first experience of tertiary study hadn’t gone well. After leaving Lindisfarne College, he abandoned Bachelor of Medical Laboratory Science studies after just a fewweeks.
“It really wasn’t my thing, but it’s taken a long time to pay back that student loan,” he ruefully reflects. The move to Palmerston North wasn’t a total write-off, however. He reopened a disused nightclub and attracted DJs from around the country in staging “a lot of parties”.
Jonathan suggested Ben attempt a course that took his interest to determine how he felt about study aligned to his passion for business. He enrolled for a leadership course taught by applied management Robbie Field and “absolutely, thoroughly, utterly enjoyed it”.
Tackling one course each semester, he is now on the way towards gaining a Master of Applied Management.
Ben says he wouldn’t keep coming back to EIT if he didn’t see the value in study – “I’m learning skills beyond those I already had.” His wider skill set comes into play in advising clients of Workshop X, the specialist consultancy he established to grow business ventures here in Hawke’s Bay.
And EIT is also gaining from Ben’s enthusiasm for study. He has agreed to feature in a light box advertisement to be prominently displayed in the Hawke’s Bay Airport.
“It’s going to be odd seeing myself on a poster board,” he says with a grin.
When discussing a client’s financial planning needs, and specifically what portfolio to establish, an adviser is required to navigate through the client’s specific needs and goals. This is with an ultimate view to provide a portfolio from within the specific discipline and processes that will meet the client’s expectations, while importantly avoiding as much risk as possible.
While focusing on the growth of a portfolio is primarily what an adviser is often engaged to do, especially with historic low bank rates as we face now, a better and more client centric approach is to ensure the clients goals (fiscal or not) are incorporated into their financial plan.
Traditionally, this has been done by aligning these clients’ needs and goals to a risk profile. In turn, this risk profile is aligned with a Strategic Asset Allocation (SAA) where a mix of asset class sectors been applied.
For example, a balanced portfolio has 60% growth assets (shares etc) and 40% income assets (bonds and cash etc). Another layer on this is where fund managers see the market as it sits and apply tilts that underweight or overweight certain assets; this is called the Dynamic Asset Allocation (DAA). Again, for example, a Model Portfolio, for a Balanced Investor, has 57% growth assets and 43% income assets; in effect, a 3% variance.
This process has allowed financial planners and investment advisers to construct a portfolio that sits within their allowed variances of the SAA, while still trying to construct a portfolio with sub-asset classes to meet their goals. This also requires the adviser to be in tune with their client.
While many of these features can be achieved via the portfolio construction and the review / rebalance process, there is a ground swell of movement where such funds can build in the rebalancing function for the client. While these solutions may not make up the entire client portfolio, they certainly may be incorporated into the wider asset management structure.
What is also appealing for some investors, in some cases, are Absolute Return funds. Absolute Return is the return that an asset achieves over a certain period, expressed as a percentage that an asset achieves over a given period. Absolute Return differs from Relative Return because it is concerned with the return of an asset and does not compare it to any other measure or benchmark. Therefore, the saying “you can’t eat relative returns” rings true.
In practice, an Absolute Return fund invests into asset classes its sees appropriate for the time. While it may have an SAA, its DAA may vary totally and as such, it may be a highly traded fund.
Therefore Goals-based funds tend to have a lot more focus on protecting downside risk. This is particularly important for retirees because we all saw what happened in the Global Financial Crisis with more traditional balanced funds. They followed the market straight down . With the growth of KiwiSaver account balances to a point where they provide meaningful income levels for their clients, I see that Goal-based products will provide a natural transition out of the multi-sector funds once income is started to be drawn. This will form a part of the advice process and KiwiSaver Scheme and fund selection process.
While there has been a trend to low cost passive funds in what has been an extended bull market, we see clients now looking to better downside protection in an uncertain market.
In AMP Capital’s article – An Introduction to Goals Based Investing, they say that “The goals-based approach to investing is different as it represents a real shift in the way financial advice is given and the way investment solutions are designed. You could say it’s about turning financial advice and investment products on their head. However, it is important to note that the principles of diversification and risk management are still an important part of the portfolio construction process”.
Investing for sustainable, long-term wealth creation in a changing investment environment requires a different way of thinking. Success in today’s market calls for a more flexible approach and the ability to respond swiftly to change. This means a more dynamic approach to asset allocation and a focus on specific outcomes so investors can achieve their investment goals.
A good adviser will seek the appropriate mix for their client based on their goals. A Goals-based approach is built around helping people accomplish their goals, rather than focusing solely on investment management and performance. Therefore, you can assume that a goal-based fund may indeed be part of the appropriate mix for clients moving forward.
Co-working (shared worked spaces) is gaining in popularity in the Bay, with a wide range of businesses and people co- located in shared spaces.
While it is common to attract start-up businesses, self-employed professionals or freelancers, for others it’s an opportunity to reconnect outside of working from home, or to further develop a not for profit or social enterprise.
Cultivate Hawke’s Bay is a new collaborative space in Taradale established by Haylee Wren this year with a specific focus on small business and not-for profit support. Haylee wanted to create a friendly approachable community within an intimate office space and has seen immediate uptake from a range of organisations.
Co-working spaces provide immediate access to a network of businesses and offer the opportunity to mix with a diverse range of people. It’s all about innovative like-minded people working on their own businesses in the same space as others so that collaborating, idea-sharing, and working together occurs naturally between them.
The Chook House in Waipukurau, was an early entry into providing a shared work space in the region; designed to build a community to motivate and inspire small business owners and freelancers in the heart of Central Hawke’s Bay.
The greatest asset of any co-working space is its members with each shared space having its own culture. A recent reviewer of Oh My Goodness community space in Hastings
comments, “Such a beautiful space to spend a day working away on my laptop – so spacious, a swing and table tennis with baker, Scott and beautiful food. Feels like home, a community place.”
As well as making financial sense, the other value-adds can be the likes of facilities management, reception services and Wi- Fi. Someone owns the lease and provides the infrastructure, freeing up community members to focus on building their business, without the distraction of day-to-day details.
Another example is the Hawke’s Bay Business Hub in Ahuriri, which has been operating for two years. Out front, the Business Hub is open for any business person to pop in for a few hours and work at the casual drop-in tables in the café-style area, taking advantage of the free Wi-Fi and the informal business connections that can be made in the shared space. For confidential appointments, there are meeting rooms, training and event spaces, and a boardroom available to book.
Sixteen business support agencies are co- located at the Business Hub.
Business Hawke’s Bay Acting CEO, Carolyn Neville, says that one of the key successes of the hub is the collaboration that occurs between member organisations. “The connection, collaboration and community that comes from working in a shared space is to the benefit of the businesses and the people that we work with.”
This has sparked a new initiative within a key action in Matariki, the Hawke’s Bay Regional Economic Development Strategy.
Business Hawke’s Bay is exploring how business support and growth programmes can be provided through linking with the region’s co-working spaces. “The first step is to create a regional directory of existing and new co-working spaces. With many new spaces opening up, or under development, this will enable people to find a community that meets their needs,” says Carolyn.
“The next step is to connect with the people who work in those spaces. You can grab a desk or chair anywhere, and that is all that some people need. But for others, the support and opportunities to learn, share and grow are equally as important.”
To find a co-working community, or to list your shared space on the new regional directory, go to the Hawke’s Bay Business Hub website, hbbusinesshub.co.nz.
Due to the new earthquake-prone building legislation, building owners across the country could be facing a mandatory structural assessment to determine whether or not their buildings are earthquake prone.
No longer will owners of older buildings be able to postpone structural assessments as the new legislation gives clear guidelines on time frames. Local councils are required to assess their building stocks to determine if they consider a building to be potentially earthquake prone based on a set of assessment parameters, such as age, building material, location and size. Once a letter of notification is received, owners will have 12 months to engage a structural engineer to undertake an assessment.
Hastings District Council has indicated they will start sending out letters in 2018. Napier City, Wairoa District and Central Hawke’s Bay councils have yet to confirm time frames but they too have a deadline of 2022 to complete their reviews.
Gerard van Veen of Hastings District Council has stated that the new profiling rules effectively reduced the number of potentially earthquake-prone buildings in Hastings compared to the old policies. “Initial estimates identified 1,200 buildings, which has now reduced considerably under the new legislation.”
Strata Group director Guy Lethbridge has been involved in seismic assessments and upgrades since the 2007 Gisborne earthquake and says the extended time frames for the council profiling, structural assessments and even the 7.5-to-15-year time frames to upgrade reflect the pressure the new policies will put on the councils and the engineering and construction industry.
“In an already busy construction environment, getting through the volume of expected assessments will be challenging.”
With tenants now more aware of building rating, it is rare for landlords of older buildings not to be asked for an indication of building strength.
“National franchises have already set minimum thresholds for buildings they currently or intend to occupy, so knowing your building strength will become a landlord expectation.”
The assessments are required to report the existing building strength as a percentage of an identical building constructed to modern day standards. Any building with an outcome of less than 34% is likely to be rated as earthquake prone and will require strengthening to achieve an outcome of greater than 34% NBS.
“While a strength outcome of, say, 35% will deem the building not earthquake prone, tenants are typically targeting a higher threshold of 67% NBS.”
The new legislation, Building (Earthquake- prone Buildings) Amendment Act 2016, came into effect on 1 July 2017 and with it came extensive criteria of what a Detailed Seismic Assessment (DSA) report must cover.
“The new reporting structure means more consistency in evaluating and reporting earthquake-prone buildings. In the past, engineers have been criticised for a spread of assessment outcomes on the same building and it is hoped that under the new regime, this range of outcomes will be reduced.”
The Act states that councils will be required to identify priority buildings such as schools, hospitals and emergency response buildings by 1 January 2020 and if assessed as earthquake prone, then any improvements must be carried out within 7.5 years. All other buildings, such as commercial buildings, are to be identified by 1 July 2022 and rectified within 15 years. Residential buildings are not included in the assessment criteria.
Guy says most of the post-1931 earthquake Art Deco buildings in Hawke’s Bay will contain unreinforced masonry and owners of these buildings should expect a letter from council.
“We would encourage building owners to do their own assessment based on the profiling parameters. If you are unsure then contact your council or an engineer for advice.
“In our experience, many building owners have not taken the news that their asset will require capital investment well; however, once the reality has set in that an upgrade is mandatory then they take a fresh new look at the building.
“Many of the older building stock are no longer fit for purpose and finding new tenants is difficult. By incorporating some layout changes and external facelift work as part of the upgrade, the building will stand out from its neighbour. We work with our clients to get the building ready for market.”
Strata Group has been involved in assessments across the East Cape and has observed that the Napier and Hastings building stock is better than the surrounding districts.
“The 1931 earthquake and subsequent fire destroyed many of the older buildings in Hawke’s Bay and the replacement buildings were of a higher standard. Buildings in other areas still have pre-1931 building stock, which generally result in lower strength outcomes.”
The 20-strong Strata Group team has already completed a large number of building assessments, both under the previous Act and now under the new amendment. Strata Group has assessed buildings such as the Hawke’s Bay Opera House, which is currently undergoing strengthening, as well as Napier’s Civic Administration and Library buildings.
“These high-profile cases have prompted a great deal of debate around true risk and perceived risk. The Building Act has given engineers an assessment benchmark, an assessment process and specific reporting parameters. We hope the public don’t shoot the messengers if the news isn’t good.”
Guy says building owners who don’t know the strength of their buildings potentially reduce options around sale and purchase, refinancing, tenant lease negotiations, insurance premiums and general peace of mind.
“We appreciate that potential unforecasted costs of hundreds of thousands of dollars to upgrade your building is a bitter pill to swallow, but the option to bury your head in the sand is no longer available.”
Guy’s parting advice is that building owners who think their building will be profiled as potentially earthquake prone should talk to a local structural engineer and get an indication of time and costs of an assessment. The risk of not doing this is you may be at the end of the queue and that could present a risk of losing your tenant.
Whether you want to grow, to retain market share or even explore exit options, it’s important that you have a good idea of what’s going on in your business now.
Sometimes this can be difficult when you have more than one stakeholder, as is the case with many small to medium sized businesses with multiple owners.
Certainly, it is important to have different skills and ideas in business – but these need to eventually come together if you want to move forward. If your business is suffering from misalignment, it’s going to be difficult to achieve the goals you’ve set.
Over the years, we’ve seen a lot of businesses striving to move forward. Generally we have found that the business owners acknowledge that they will need a plan. They have all the information available, but they don’t have time to look at where their business is currently sitting, let alone react to it.
A lot of issues with the business are generally known issues but remain unresolved because one of the most important things they don’t find time to do is come together to strategise.
At a more fundamental level this is about a misalignment of core values, the elements that form the foundation of a business’ vision, identity, culture and brand, and underpin all decision-making.
One of the first steps to moving forward is gauging the degree of alignment amongst your different partners on key issues. The idea is that once these have been laid out on the table, you’ll be able to have a real discussion and eventually come to resolutions on how to move forward.
So how to measure alignment when you’re already challenged in finding time to come together?
And, for those business that don’t have their own existing board structure, getting access to independent expert advice to facilitate that process can be very difficult.
Which is where a simple diagnostic questionnaire can be useful. We’ve developed such a questionnaire based on our many years’ experience working alongside owner-managed Small Businesses and have put it into a Business Review package.
There’s a short diagnostic questionnaire and a longer one that takes around an hour which really drills down into the nitty-gritty of your business. The questionnaire will work best if each stakeholder does it independently, and from there, the key issues currently facing your business become evident – and the degree of alignment on each one.
That feeds into a diagnostic report. The areas of pressure could be anything from tax, wanting to sell, not making enough money, not getting on with your fellow partners, having no succession plan, disagreement over investments in new technology – the list goes on.
The important thing about this process isn’t just getting a report, but working on a very targeted solution.
I can cite two cases of businesses that have been through this process. One was a medium-sized business operating in the IT space. They had two shareholders, one minority and the other majority, but there was serious misalignment on who their target market actually was. The Business Review program was used to agree on a target market (in this case they decided there were more than enough consumers in New Zealand and so stopped chasing deals in Australia) and since then they’ve gone from strength to strength.
The other case involved a husband and wife partnership. The program helped them realise that they wanted to leave the business, so had to make sure it could still run without them. We helped them to clarify which parts of the business needed work and so their exit strategy was successful.
Ultimately, it comes down to the age-old issue of too much working in the business not enough on the business – a self-replicating cycle that’s magnified when multiple partners are involved.
The reality is that the solutions can be easy once the issues are diagnosed. Particularly with the wealth of digital tools we have that facilitate real- time business information and communication.
The ‘leaky homes crisis’ is an ongoing construction and legal predicament in New Zealand. A perfect storm of trending building design features and the use of untreated timber culminated in many homes built between 1994 -2004 that suffered from weather-tightness problems. Hawke’s Bay has its share of homes built in this era but to date there has been relatively little impact on the value of these homes when they have come to sell.
There are many reasons why homes from this era were leaky. A major one was the increase in the use of cladding systems such as fibre cement sheet and EIPS1, more commonly known as monolithic cladding, that relied on a paint finish as the primary defence against water ingress. Such cladding systems allowed for little construction or thermal movement so that fine cracks that appeared insignificant, and would have been relatively insignificant in traditional claddings such as weatherboard, allowed continuous ingress of moisture into the framing which were ideal for rot. A further exacerbating factor was the change to the New Zealand Standard for Timber Treatment in 1995, allowing the use of untreated Pinus radiata timber for wall framing. As this timber has little natural resistance to rot when wet, damage occurs more quickly.
Hence, nearly a decade on it appears there continues to be a stigma associated with homes built in this era, especially if they display cladding and design features associated with weather tightness issues. Therefore, any home with a monolithic cladding became a red flag for buyers, especially in the bigger city property markets. We are beginning to see this stigma shift to Hawkes Bay homes built in this era as we see more buyers from out of town enter the local property market, irrespective of any weather tightness issues or their actual condition. Not only has our office had this experience, we have also had feedback from Real Estate Agents who confirm that over the past 18 months it has become increasingly difficult to sell property with this cladding type. Furthermore, it is having a definite impact on the consideration vendors are receiving. However, how much of an impact remains to be quantified?
In late 2016 researchers2 from Massey University released a paper entitled Leaky Building Stigma: Can it be Eliminated by Remediation. The purpose of the study was to examine whether meeting the regulatory standards for remediation work eliminated the negative stigma effect on remediated properties or whether the stigma remained. The study’s findings indicated that for monolithic- clad dwellings, the price discount due to leaky building stigma is significant. Depending on the severity of the leaking problems, there is about 11% reduction of value, on average, for general market stigma and an additional 5% -10% for post-remediation stigma.
Earlier this year, our office valued a home with a monolithic cladding system. There were no signs of the home leaking, however (in a strong market) the home sold for 11.26% below our valuation. As a Trustee I am also involved in a sale of a property with a monolithic cladding system. The house has not sold yet and is not leaking but certainly carries the stigma of such. We have had two contracts fall over due to outside advisors strongly recommending their clients seek a home with a different cladding type. Based on both offers to date it would suggest a 9.5% reduction on valuation however this may yet be greater as the home has not sold yet. Therefore, the above research may prove to be relatively accurate in its estimates of value discounts.
Whilst Hawke’s Bay has had its share of properties affected by the ‘leaky home’ syndrome, it has not been on the same scale as that of other cities, especially Auckland. It remains to be seen if our out of town buyers will continue to influence the perceived stigma of homes built in this era on our local property values.
On death a person’s assets form their “estate” which is subject to the wishes or intentions of the deceased’s Will or if they do not have a Will by the “rules on intestacy.”
While many would acknowledge that they should have an up-to-date Will, it is surprising how many people do not have a current Will or one at all.
Regularly reviewing your Will is as important as initially making one to ensure that your Will reflects your current circumstances and any changes in your life such as the death of a close family member, the creation of a trust or establishment or entry into your own business.
Some matters to consider when creating or reviewing a Will are:
1. Identity of your Executors and Trustees. Who would you like to administer your estate or are those currently selected still appropriate?
2. Funeral directions. Do you wish to make such directions or change any existing directions?
3. Changes in your personal circumstances. Unless your Will was made in contemplation of marriage then any Will you have will be automatically revoked when you marry.
You also need to consider your Will if your relationship ends. If you separate with the intention of ending the marriage, provisions in your Will relating to your spouse will remain valid until the marriage is legally dissolved (that is, you are divorced), only then the gifts are null and void.
4. Changes in assets and liabilities. For example, if you have acquired a new asset, such as a business, then you may wish to give the business (or the shares) to a specific person. If you don’t make a specific direction then (if you have a Will) it will simply form part of your estate and go to the beneficiaries.
5. Changes to your family. If you have had children then you may wish to appoint a testamentary guardian.
6. Death of a family member or beneficiary. For obvious reasons this may necessitate a change to your Will.
7. Setting up a family trust. If you have or have set up a family trust you will need to ensure that your Will reflects this and (if appropriate) refers to it.
8. Gifts to charities or organisations. You may wish to leave money to a favourite charity or organisation.
9. Specific gifts. If you want to leave an important item such as jewellery or a family heirloom to a particular person then this should be specified in your Will.
If you die “intestate”, i.e. without a Will, then your estate is subject to the “rules on intestacy” which prescribes to whom, and in what proportions, your estate will be distributed, which may not reflect your wishes.
To help illustrate the point, let’s consider an example:
John and Jane are married, with a son and two daughters. John and Jane have a jointly owned home and a joint bank account. John also has his own construction company. John’s son, James, operates the business with him and it is John’s wish for James to take over the business from him when he retires.
John dies unexpectedly and he does not have a Will.
The home and bank account will pass to Jane by survivorship, however the business will fall into John’s estate and be governed by the “rules on intestacy”.
The business is valued at $515,000.00.
Jane will receive all of John’s personal possessions (basically everything other than land, buildings and money) and shares valued to $275,000.00, which is made up of:
• The legally prescribed set amount of $155,000.00; and
• A 1/3 of the balance of the estate of $120,000.00.
James and his two sisters will each receive shares valued to $80,000.00 (being the other two thirds of the balance of the estate).
This does not reflect John’s wish to pass the business to James and in addition leaves control of the business to Jane (53.39%) while James (and his two sisters) would only have 15.53% each. Significantly James would only be a minority shareholder and would not be able to prevent the business being sold by his mother and sisters.
Finally, another advantage to having a Will is that it usually costs more and takes longer to administer an intestate person’s estate.
If you do not have a Will or have not reviewed your Will for several years then I advise that you discuss this with your lawyer sooner rather than later.
