Begin forwarded message:

From: Stephen Edge <Stephen.Edge@kiwibank.co.nz>

Subject: RE: Personal Financing

Date: 12 January 2021 at 10:22:40 AM NZDT

To: "Maria Callau (maria@sur-architecture.com)" <maria@sur-architecture.com>, "Susan Jack (susanjjack@gmail.com)" <susanjjack@gmail.com>, "Alex King (alex@king.net.nz)" <alex@king.net.nz>, "Catherine Spencer (cmspencer.nz@zoho.com)" <cmspencer.nz@zoho.com>

Hi all,

 

After much thought and reflection I am of the view the Covenant needs to be removed and the BC Rules simplified to a standard format, i.e. all reference to decision making and co-housing does not appear at all in the standard BC rules. By doing this the individual unit titles will be clear and the BC rules will be “standard”. This will remove the obvious current “road-blocks” for prospective lenders, not just for current owners, but for all future unit purchasers who may also run into the same problems in the years to come if the Group doesn’t change things now.

 

My experience to date suggests co-housing Groups all have different approaches in how they set things up so there is at present no consistency across the co-housing sector. This means each new co-housing project will face similar challenges with the banks for years to come.

 

In my view the Earthsong approach using Sale & Purchase agreements (SPA) makes sense as a way to bind people into a co-housing agreement. This obviously relies on trust and a commitment to sell units to like-minded people but it seems logical to me this will work.

 

The clause in the SPA may still trigger some negative responses with some lenders but having clear titles and standard BC rules removes all the automatic flags and simplifies things.

 

From my reading of the resource consent there is no requirement imposed by Council to register any specific Covenant against titles. The Council just states “The residents shall be actively engaged in a cohousing scheme…..” which of course you are.

 

I believe, over time as more co-housing projects come on to the market, banks will become more familiar with them and how they work but for now I don’t think the timing is right to try and change the banking market. In my opinion this will be a road simply too long and hard for you guys.

 

Please note the above is my personal view as things presently stand because Kiwibank has no set policy on these matters. The final decision on what to do is for the Group to decide upon.

 

Cheers, Stephen

 

Stephen Edge Senior Manager Property Finance
DDI 07 571 3846 | M 027 8395 057  | F 07 571 3845
www.kiwibank.co.nz  Kiwibank Limited, Level 1, 41 The Strand, P O Box 13333, Tauranga 3110
This email, including any attachments, is confidential. If you are not the intended recipient, any use, distribution or copying of this email or the information contained in it is prohibited. If you have received this email in error, please notify us immediately and delete it.  Please consider the environment before printing this email.

 

 

 

 

 

 

From: Stephen Edge
Sent: Thursday, 7 January 2021 11:36 AM
To: Maria Callau <maria@sur-architecture.com>; Susan Jack <susanjjack@gmail.com>; Alex King <alex@king.net.nz>; Catherine Spencer (cmspencer.nz@zoho.com) <cmspencer.nz@zoho.com>
Subject: Personal Financing

 

Hi all,

 

HNY!

 

I haven’t made any final decisions yet but I thought I would give you a brief update on my present thinking which I have bullet pointed below:

 

• The Covenant and the unique Body Corporate Rules are still proving problematic.
• The idea of a running a pilot model inside Business Banking is not finding the necessary support I need.
• There’s no issue of course if people don’t need to borrow money against their units but when they do lenders can’t ignore the Covenant and the BC rules. Because these are different the bank(s) are treating them as being out of policy.
• Changing banking policy is not easy to achieve and I think this will take a lot of time, which of course we don’t have. All the major banks seem to have the same stance.
• There’s no Covenant registered against titles at Earthsong although they do have unique BC rules.
• Present thinking is the Covenant needs to be removed and the BC rules need to be simplified to standard wording only.
• Earthsong use clauses in Sale & Purchase Agreements to obligate present owners and future unit purchasers to sign a co-housing agreement. This seems to be an effective way to ensure units are sold to likeminded people but keeps the title clear of covenants and could keep the BC rules simple.
• The co-housing agreement then becomes the primary document that the community uses. The title and BC Rules are kept “simple”.
• The clause used in the Sale & Purchase Agreement could still trip people up when trying to raise mortgage finance because it will refer to the co-housing agreement but if the title and BC Rules are standard I believe this is a much simpler for lenders to deal with.

 

The above will give you a snap shot of what’s in my head at present but to be honest I’m still thinking it all through.

 

I will be back in the office from next Monday by which time I should have finalised my thoughts.

 

Cheers, Stephen   

 

Stephen Edge Senior Manager Property Finance
DDI 07 571 3846 | M 027 8395 057  | F 07 571 3845
www.kiwibank.co.nz  Kiwibank Limited, Level 1, 41 The Strand, P O Box 13333, Tauranga 3110
This email, including any attachments, is confidential. If you are not the intended recipient, any use, distribution or copying of this email or the information contained in it is prohibited. If you have received this email in error, please notify us immediately and delete it.  Please consider the environment before printing this email.