Here is the response from our lawyer to the questions I sent. You don't necessarily need to read it all, but here are some of the key points:
* If all goes well with the build we may be able to settle in early February, but it depends on everyone's lawyers (and banks if you are getting a mortgate) to work in with the timing. * If your solicitor or bank has been asking for the S&P agreement signed by UCOL, please get them to ask MacMillan directly for this. * Simon is advising against use of the units before settlement. This is something we may need to meet with him to discuss.
-------- Forwarded Message -------- Subject: RE: Timing of Toiora Cohousing units settlement Date: Mon, 30 Nov 2020 01:16:01 +0000 From: Simon Milne simon@mcmillanco.nz To: Alex King alex@king.net.nz CC: UCOL Directors ucol-directors@list.king.net.nz
Hi Alex,
Thank you for your email below and plaese see my comments in blue below.
Thanks
Regards
Simon
Simon Milne PARTNER AND NOTARY PUBLIC
McMillan&Co. LAWYERS ˑ MEDIATORS ˑ NOTARY PUBLIC
Level 5, Forsyth Barr House, 165 Stuart Street, The Octagon , Dunedin
9016;
PO Box 5547, Dunedin 9054
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*+64 3 477 2238* tel:+64%203%20477%202238 |
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*From:*Alex King alex@king.net.nz *Sent:* Monday, 23 November 2020 11:21 AM *To:* Simon Milne simon@mcmillanco.nz *Cc:* UCOL Directors ucol-directors@list.king.net.nz *Subject:* Timing of Toiora Cohousing units settlement
Dear Simon,
I am writing to give you an idea of some of our current thinking regarding the project. I ask a few questions in my text below. Hopefully they are straightforward, but let us know if they are complex and a meeting would be a more efficient?
Timing of settlement
Our S&P agreements (clause 23 in further terms) state settlement will take place on the 10th working day after the later of notice of title and code of compliance are issued. But this may be varied by agreement.
Contractually, the builders have until late February to complete the project, but indications from the build are that the work will be largely finished prior to Christmas.
Should building be successfully completed then and Code of Compliance be issued without problems, we would like to be in a position to settle according to the following programme:
* Buildings complete on 24th December. * Apply for Code of Compliance by 4th January * Draft a S&P amendment for a Friday, 5th February settlement date on 20th January * Confirm CoC and title are issued/available on 3rd of February * Settlement 5th February.
Our project manager assures us that the documentation required for code compliance is relatively straightforward.
We plan to have a followup meeting with our planner to refresh our understanding of our resource consent conditions, in case anything remains that may hold up subdivision approval. (We are meeting onsite at midday 25th November).
We also plan to check with the surveyor to check progress on the subdivision.
Assuming a successful build completion by December 24th and Code of compliance issued by 3rd February, is this a realistic timetable to enable issue of title and a 5th of February settlement?
Yes this timetable is possibly realistic but it obviously depends upon timing of a number of different factors as you have noted above. Therefore at this stage we cannot give any guarantees around the timeframes you are suggesting. The reason for having a 10 day settlement timeframe after issue of the CCC and the Titles is to enable purchasers through their solicitors time to organise themselves for settlement which will usually also require obtaining loan documents from their bank etc. Some purchasers may be able to settle earlier than the 10 working day timeframe others may require all of that time. My suggestion is that once we are in a position to be able to give the 10 working day notice of settlement we then invite any purchasers via their solicitors to settle earlier if they are in a position to do so.
Purchasers' issues raising mortgages
Some of our purchasers' banks have raised the following points when approached for mortgages:
* Title doesn't exist... we are assuring them it is well underway and title will be issued before the mortgage is required.
Yes correct – as noted above once Titles issue that will enable purchasers to then provide their bank with a copy of the new Title and will enable their bank to issue loan instructions. All banks are aware of this process when it is a development/subdivision where new titles are to issue.
* One bank (at least) is concerned about ongoing liability under shareholders' guarantee of the construction loan. It may be that we require some kind of release from this agreement at settlement, we will keep talking to the banks about this.
Yes we would envisage that this guarantee could be released on settlement which is when the Kiwibank loan will be repaid ( from the sale proceeds of all 24 Units).
* Purchasers' solicitors have noted they don't have copies of the S&P agreement signed by the vendor. Could you please arrange for these to be forwarded (this would be normal practice I expect?)
Please note that most if not all of the purchasers solicitors should already be holding a signed copy of the Agreement. We have had a request from one solicitor for a copy of the signed Agreement which we have provided and if any other purchasers solicitors request a copy we can easily provide that.
Use of development prior to settlement
The directors and group are keen to allow prospective purchasers to use their units after building completion but prior to settlement for the following purposes:
* Storage of household items * (for some people) renting/living in the units, and particularly if settlement is delayed beyond 8th February.
We would require a legal agreement, perhaps a standard residential tenancy agreement, to set out expectations and particularly liability for damage. We would want the purchaser to agree that any damage occurring to the property as a result of the tenancy would not be a reason not to settle, and also if the purchaser fails to settle, they would be liable to fix any such damage.
We don't need this drafted yet, but would instruct you next year should it be needed.
We would also communicate with Kiwibank who have an interest in our property before letting it.
I would not recommend allowing purchasers occupation prior to settlement being completed as this can be problematic. It can cause issues around insurance, will likely be an issue for Kiwibank, could be an issue for contractors who may need access to complete last minute works in order for the CCC to issue. If any purchaser was desperately requiring to move in or store items prior to settlement then yes this could be dealt with by way of a temporary residential tenancy but I would not recommend that as an option available to purchasers. It would be far cleaner if settlement ( and possession) is given on the settlement date which is when settlement funds are received.
Insurance and timing of commencement of Body Corporate
We require insurance from the date of building completion, when the building insurance lapses. Our broker indicates the insurance company will cover us from that date under the same policy that the body corporate will have once we move in.
Yes correct and noted.
Assuming the timeline above, what is the likely date of the deposit of plan under section 17 of the unit titles act, when the body corporate will come into existence? Is that likely before or after completion of the build?
The plan will deposit prior to completion of the build. It will be a matter of you liaising with the builders and your insurer as to exactly when your insurance needs to be put into place and the building insurance lapses.
If the body corporate is not formed before completion of the build, the company (UCOL) will take up the insurance in the first instance and transfer it to the body corporate at a later date.
Yes correct and noted.
Thank you for your consideration.
Yours sincerely, Alex King, Director, UCOL
