Archive | Land use

Working group recommendations on construction industry payments

Minister accepts recommendations as basis for bill, with further work yet on some detail

The Law Commission released a study paper entitled Protecting Construction Contractors which recommended the enactment of legislation along the lines of legislation recently introduced in New South Wales to protect construction contractors from non-payment.

This legislation would make “pay-when-paid” and “pay-if-paid” clauses ineffective and provide a fast-track adjudication process for the resolution of disputes.

The Ministry of Economic Development undertook further policy analysis and consultation and the industry working group was established.

The working group rejected alternative options such as compulsory payment bonding, compulsory insurance, compulsory licensing of participants in the construction industry, a scheme of statutory trusts or charges, and covenanting.

Basic scheme

The working group was unanimous on the basic scheme of the legislation, believing that at a general level it had to apply to every part of the contractual chain. A concern was that a proposed solution might apply from the head contractor down, whereas to be effective it must also apply to property developers and other principals at the top of the chain.

As part of this concern, the working group considered that the act should apply to construction contracts with the Crown and should apply to all construction contracts whether they are written or oral.

The key features of the scheme would be:

A: Every contract must provide an adequate mechanism for determining what payments are due under the contract and provide a final date for payment of any sum that comes due.

B: The act would provide default provisions that would apply where the contract was silent on the matters above. These provisions would provide for such matters as payment intervals, amounts to be paid, mechanisms for determining amounts payable, and the final date for those payments. Unless a contract provided otherwise, a contractor would be entitled to claim for and be paid monthly progress payments based on work performed.

C: Every contract must require a payer to give notice to the payee specifying the amount, if any, of the payment proposed to be made, and reasons for non-payment of any part of the amount due, not later than five days after the date on which a payment becomes due.

D: Every contract must contain an obligation that a party may not withhold payment of any amount unless they have given effective notice (in the form contained in paragraph (c) above).

E: Either party would have the right to refer a dispute arising under the contract to a fast-track adjudication process for resolution. A simple example would be if the payee disagreed with the reasons given by the payer for why an amount had been withheld.

F: The adjudicator’s decision would be binding but not final, unless the parties agreed to that in writing, in which case there would be a right of appeal from the adjudicator’s decision.

G: The Act would give a payee the right to suspend work if an amount is not paid when it falls due and the payer has not provided effective notice explaining non-payment, and where there is any non-payment of an adjudicated amount.

H: Any provision making payment under a contract conditional on the payer receiving payment from a third party should be made legally ineffective (this would effectively prohibit “pay if paid” and “pay when paid” clauses).

Detailed design issues

The working group also agreed on several detailed design issues of how the scheme will work in practice, but some issues were not fully explored.

The main items on which there is agreement are:

A: The period for adjudication should be between 10 and 28 days, with the ability for that period to be extended by 14 days with the consent of the referring party. As with all the timing issues, the working group believed further work would need to be done to ensure the timing under the act was consistent with existing general conditions of contract as contained in NZIA SSCI and N7S 3910:1998.

B: The adjudicator should be provided with a power under the proposed legislation to consolidate adjudication proceedings. It is important that the proposed bill creates a nominating authority that will provide adequately and appropriately qualified and experienced adjudicators to ensure parties are not joined in inappropriate situations, such as where the resolution of a relatively small dispute would be unnecessarily delayed by the joinder of a larger dispute.

C: The adjudicator’s decision should be binding but not necessarily final. There should be a right of appeal from an adjudicator’s decision to arbitration (if the contract so provides), or to the court.

D: The adjudication process should be confidential.

E: Retention payments are a necessary part of the construction industry, and performance and maintenance retention payments should be included within the scope of the bill. The bill should include a clause that, where a contract provides for sums to be withheld as retention payments, the sum withheld should not exceed a reasonable assessment of the costs that would arise, should another party be required to undertake that work. NZS 3910:1998 would help determine what is a reasonable assessment.

F: The question of legal representation should be left to the discretion of the adjudicator, with the inclusion of a clause similar to one in section 64(3) of the Commerce Act that the proceeding “shall provide for as little formality and technicality as the requirements of [the] act and a proper consideration of the [matter] permits”. The adjudicator would then determine when it is appropriate for the parties to have representation, while still ensuring the process does not become unnecessarily complicated.

G: Where an adjudicator has given a decision in a party’s favour, that party should be entitled to a “security interest” over the land or chattel of the person for whom the work has been carried out if the money is not paid within a prescribed time after the adjudicator’s decision.

This was a response to the concern that the abolition of “pay-when-paid” clauses would require head contractors to pay subcontractors when they themselves had not been paid. The ability for a head contractor to register a security interest or lien over the assets of the principal would help ensure that money is coming in at the top of the contractual chain so it can then filter down to the rest of the chain.

H: The adjudicator’s powers in the British act are preferred over the New South Wales legislation as they are more comprehensive and provide for the adjudicator to be able to appoint experts, assessors and legal advisors, give directions on the timetable for adjudication, for example.

The working group said more work was needed to compare the British adjudication procedures and the British Arbitration Act with the precepts in the New Zealand Arbitration Act to assist in the application of a consistent judicial process.

I: Adjudicators should have the power to appoint experts. The responsibility for notifying other parties should rest with the parties to the proceeding and not the adjudicator.

Detailed design issues not agreed on, and requiring further work by the ministry and industry are:

A: The New South Wales legislation only provides for payment disputes to be referred to adjudication, while the British act refers all matters in dispute to adjudication. The issue of whether the adjudication process should be limited to payment disputes or should apply to any dispute between the parties was not resolved.

Master Builders expressed concerns about the adjudication process dealing with all matters in dispute rather than just payment disputes.

B: The issue of what should be done where the adjudicator’s decision is that a sum of money must be paid and the payer intends to appeal that decision was not resolved.

C: While it was agreed that the registration of a security interest should only be possible after an adjudicator’s decision, the exact detail of the mechanism for achieving this and the property to which such an interest could attach was not resolved.

D: Also not resolved was the issue of whether adjudicators should have the power to opt not to answer questions and instead to allow an expert to answer those questions, in contrast with judges, who are required to answer all questions put to them.

Continue Reading

Property forum gives Manukau a glow

Positive outlook (with some hiccups) for south of the region

Manukau City’s growth rate is running at 5% while the nation is on 3%, so it’s not hard to see why the patch of Auckland that contains New Zealand’s main international airport should be the centre of continued investment.

In an egalitarian country, controllers and planners would like to see investment dispersed evenly so we all get a share of the good times. But investment is magnetic, seeking out better-than-average returns.

So although Manukau has a very high unemployment rate, the city spreading across the south of the Auckland region has to be a natural first investment stop.

That’s the message the city’s mayor, Sir Barry Curtis, promotes every second of the day. And although Manukau’s third annual property forum began with vintage Sir Barry, others took the microphone yesterday to put a wide range of numbers into the debate.

Chris Bayley, who with David Poole runs the Bayleys Real Estate franchise in East Tamaki, presented a mostly positive picture showing commercial and industrial vacancy down markedly from a year ago (commercial from 7% to 5.7%, with Howick down from 15% to 7.7% and Manurewa from 9% to 3.3%, industrial from 7.1% to 3.9%, with East Tamaki down from 8.6% to 5.1%).

But he said growth had also slowed, from 2.6% to 0.3%. Industrial floorspace had increased by 93,400m² but there was actually negative movement in the commercial market because tenants were taking up space in existing buildings, not expanding into new ones.

Mr Bayley believed the completion of the East Tamaki arterial route and Te Irirangi Drive would strengthen the Manukau City Centre and benefit the Wiri industrial area, because of improved access, while Botany had already become the new focal point, with plans lodged for development at a number of high-profile locations.

If much of the talk at a forum like this revolves around developing and leasing traditional styles of space, an explanation of how a new style of business park fits in has to help in changing people’s perspectives.

Richard Stilwell, a director of McConnell International Property, has gone through the huge preparatory stage for the 193ha Highbrook business park covering the former Ra Ora Stud land on the Waiouru Peninsula, on the Auckland City side of the East Tamaki industrial zone.

Business and office parks in Auckland have tended to be small versions of these concepts, mostly not containing features that would be expected elsewhere. The concept evolved from industrial estates, with the second stage seen as rather sterile environments. In the current version, 100ha was seen as the minimum size, landscaping could be a bigger element than the commercial component and the master plan generally reflected that of a small town.

Provision of community facilities would make such parks challenge the cbd as a place to be. Mr Stilwell said Highbrook would have a town centre, but with services for industrial park occupants rather than the traditional commercial and retail outlets of major towns.

Public park will cover 60ha, commercial land 110ha, and there will be commercial neighbourhoods. Mr Stilwell said the keys were development controls and co-ordinated management.

ASB Bank economist Rozanna Wozniak talked more generally about housing issues than about Manukau specifically, although because of Manukau’s growth rate (a population rise of 6000 a year) the effects have to be more pronounced than elsewhere.

“I think it is going to be a tough winter,” she said. The crucial concern is what the Reserve Bank does on interest rates — the bank believes it has got the country back to a sustainable 3% growth rate after rising to 4.7% in the second half of last year, while many other economists felt the brake had been applied too quickly.

Ms Wozniak expects the 90-day bank bill rate to peak around 7.5%, taking floating mortgage rates to 9.5%, followed up by short-term fixed rates. Rates for 3-5-year terms should stay around 9%, floating rates are likely to stay the more expensive and long-term fixed rates are likely to fall first.

She said the Reserve Bank would not be interested in bringing interest rates down until the currency stabilised, but there had already been house price falls and the rate of consent applications had fallen sharply.

As one example of house price movements (Ms Wozniak is due to release the ASB’s regular housing report on Monday), she said prices in Pakuranga fell 4% in the first quarter of this year.

“We would like to see the Reserve Bank take a time out on interest rates. The [housing] market is in a stalemate. We know that supply has increased faster than demand in the last couple of years [but] I don’t think we have a serious supply problem in Auckland and the rate of building growth is slowing.”

Ms Wozniak said the price adjustment was appearing in prices of existing houses, and in the low-middle bracket rather than mid-to-upper, while premiums were still being paid for new homes.

While the housing market may be downbeat, Manukau council staff are upbeat over a number of factors which they see as giving their city a positive edge in achieving growth.

Leigh Auton, environmental management director, said several infrastructure projects would improve access around Manukau. The public transport links were being designed, with a rail track from the main trunk line to Manukau City Centre early on the agenda. The link mode to East Tamaki had not been determined, and the mode form Botany to Pakuranga would be either light rail or a bus lane.

Plans for a link from the Southern Motorway across the Waiouru Peninsula should be lodged in July or August, with notification no later than October. It has a preliminary cost assessment of $59 million, including two interchanges for the peninsula and Princes St, Otahuhu.

A $100 million design-build project for the motorway link between the Southern Motorway at Manukau and Puhinui should go to tender early next year, for work to start in the next construction season and completion in 2004.

Within the council, a customer workshop will be held in June with building companies and land developers. Kevin Wilkie, in charge of building consents, said the council wanted to move from “a post-process policing role” to being part of the development team. At the same time, by encouraging more self-certification, council staff would become auditors of planning proposals rather than bureaucratic regulators.

Continue Reading

On the road to a supercity

ARC to have 2 infrastructure planning & overseeing entities under its wing

It wasn’t touted as a move towards creating a supercity, but the new governance proposal for Auckland transport – and accompanying new governance plan for other infrastructure – amounts to just that.

The Government proposed to Auckland’s politicians today that an Auckland Regional Transport Authority be set up as a subsidiary of the Auckland Regional Council.

The Government wants local bodies to come back with a response by the end of January, enabling it to introduce legislation in April for a start on the new structure on 1 July.

2nd plank of the governance structure is an outfit tentatively called Auckland Regional Holdings, to govern other regional infrastructure such as the assets of Infrastructure Auckland.

The transport authority is to be appointed by a panel made up of 1 representative from each of Auckland’s 7 territorial local bodies, a matching 7 from the regional council plus the ARC chairman. It’s stipulated that the appointed board will not be drawn from local government, with politicians & staffs expressly excluded, but will have a business focus.

ARC chairman Gwen Bull hadn’t seen details of how the 2nd entity would shape up, but assumed selection would be similar.

She also figured that she – and successors in the ARC chair – would command a far bigger enterprise. “I think the ARC next time around will be a very different body,” she said. “It will have 2 [subsidiary] boards. Infrastructure Auckland disappears.

“We will have to buy in expertise that we do not have at present.”

Funding & decisionmaking back together

Most importantly, “the funding & decisionmaking have been put back together. The legislation of 10 years ago [separating policy from operation of businesses such as buses] has really had us operating with 1 hand tied behind our back.”

Importantly, too, the regional growth strategy (put together by the non-statutory body, the Regional Growth Forum, which is administered by the ARC) will become a statutory document. That will give the ARC more power when it deals with a block of land such as the Whenuapai air base, where “the Government did not engage with us at an early stage,” Mrs Bull said.

The proposal for the transport authority is that it plans for Auckland transport, bids for funds (from the ARC, funds of the dismantled Infrastructure & Transfund) and contracts with suppliers. It would fund all roads other than state highways, including co-funding all local roads in conjunction with local bodies.

Local bodies would continue to be responsible for maintaining & developing their local roads and would contribute to developing the region’s annual roading plan, but wouldn’t submit their own applications to Transfund. The new authority would do that for them.

Auckland Regional Holdings’ role

Auckland Regional Holdings would take over Infrastructure Auckland’s roles of managing investments & transport assets “in the long-term interest of the Auckland region” and distributing funds for transport & stormwater projects.

It would hold future transport or other infrastructure the ARC might acquire. It would take over Infrastructure Auckland’s interest in Ports of Auckland Ltd, Northern Disposals Ltd and America’s Cup Village Ltd.

All that is supposed to happen from 1 July.

Prime Minister Helen Clark said at the media briefing: “It is not this Government’s policy to further destroy regional governance. Auckland has suffered from a demolition job that was done on its regional government at the start of the 90s. That’s part of the problem.”

Separate story: Christmas present: new tax

Continue Reading

Shore council seeks regional rates review

2nd prong attacks transport levy basis

North Shore City Council came up with a series of resolutions at its monthly meeting on Wednesday night seeking a review of regional council rates and challenging the way the transport levy has been applied.

Because of mounting community concerns – you have to ask why any of the region’s councils had to wait for a public revolt before acting on rating proposals which have been in the public realm for months – anyway, because of these concerns, the Shore council wants to “obtain specific analysis & audits” from the Auckland regional Council on levels of rate increases “compared to the additional benefits & services to be provided to each of them.”

The Shore council also wants the Auditor-general to urgently review the regional rating policy, to see if rating on capital value & other aspects of the regime are fair & equitable.

In a series of 6 more resolutions, the council called on the regional council to hold a special meeting by 1 August “to reconsider the whole rating situation” and to defer the 1st payment, due on 6 August, until 15 September.

The council wants the regional council to reconsider rates payment options, including the ability to pay instalments by cheque without attracting a penalty.

Shore mayor George Wood is to call a meeting of all Auckland MPS (constituency & list) to discuss the regional rates, support for a review of the system “and of appropriate government support for Auckland’s transport needs.”

The next resolution goes beyond the particular rating issue to the greater debate on infrastructure funding – central versus regional versus local government funding/responsibility.

In this resolution, the council agreed to ask the transport minister to justify heavy rating in a short period for Auckland’s public transport system “due to lack of funding over many years by central government from the petrol tax revenue taken from the Auckland region.”

As debate on an issue such as this wouldn’t be complete without a puerile “me too, not fair” element, the Shore council also decided it should ask the transport minister to provide information on how Wellington got an extensive electric train system from central government funding, and why Auckland should be treated any differently.

Continue Reading

London Borough of Islington

Rail link & canal regeneration

Cllr Juliet Yates, who chairs Auckland City Council’s city development committee, presented the committee with 16 pages of notes at its December meeting from her visit to the international waterfront conference held at Canary Wharf in London.

This is the 4th of 4 parts to her report featured on this website:

This was a very interesting visit and exceptionally well organised, with a Kiwi (Raj Maý-Bula) meeting me at hotel, travelling (tube and bus) to Islington and taking me back to the hotel.

We met with the planner (Mark) who took us through the Kings Cross redevelopment, which is a new Channel Tunnel rail link and the redevelopment framework for the former railway yards at King’s Cross Central. After visiting the model in the information room we walked around the area. Where the tunnel link is completed this will be a new international port and terminal. The Eurostar train shed is a glass building ¼-mile long.

Then the construction site (former rail marshalling yards) will be freed up and the redevelopment stage II completed (50 acres).

The “framework” is a basic structure of major public routes & public spaces, and indicates where buildings, land uses & activities will go. There has been a vast degree of public consultation and I met with the information and enquiries manager who deals with continuous questions/complaints.

There is a strict requirement for public consultation in order to get government signoff for a project. The council has to detail the how & who, and extent of consultation.

I met with the head of regeneration (Steve Mason) and 2 city councillors for lunch. We discussed the planning process and political decision-making. 54 councillors, 3 for a 7000-population ward – committees but main role is as an advocate. I was taken around the planning department and met members of each team (15 Kiwis out of 80 staff).

I spent some time discussing the planning process with Graham Loveland, assistant district planning. This was very informative.

We then visited a canal regeneration project called City Road Basin. This is a basin at right angles to a well used canal. Currently there is a wide public park on 1 side, plus a boat club (small, dilapidated, pontoons with a few dinghies on punts) and some buildings.

It is very pleasant to look at – the proposal is to get a public walkway around the basin but this will lose ½ the park as part of a land swap. 2 tall towers are also proposed. The planner in charge (Richard, originally with MFE Canterbury and then DOC) says he does not know how the public will react to the fact the council is working so closely with the developer and so may lack credibility in the processes.

Land values beside the basin area are already escalating. A new apartment building in the canal has 2-bedroom apartments at approximately £4-500,000 beyond the bridge (borders with the next borough council) the canal has 4- 6 storey apartment buildings lining it. Older buildings, at water’s edge, no parks (towpath is now a cycle path). Looks dark & uninviting.

More of Cllr Yates’ notes: Cllr Yates’ notes on waterfront conference

Berlin and

Regeneration around Kings Cross station

Continue Reading

November 2001 strong month for building consents

Big spike in apartment numbers

November 2001 was the strongest month for building consents through out New Zealand in the past two years, with 2148 consents granted, just behind the 2182 in November 1999.

In Auckland, the 1038 consents (48% of the total) was the biggest number since May 1999.

It was also by far the biggest month for the granting of apartment consents — 501, double the number granted in October, way above the 129 in November 2000 and the 281 in November 1999. Statistics New Zealand includes consents for 10 or more units/project in its new apartments series, so the many groups of small apartment projects are excluded.

Statistics NZ said in its media release on Monday the trend had been upward since January 2001. That was a reasonable expectation after the 1999 boom was followed by a quieter 2000, ending with a very low 1285 consents granted in December 2000.

Upward trend started at very low point

So the trend began from a very low point. Even so, the number of consents exceeded 2000 in only two months during the year to November 2001, and the total for that year, 20,327 consents, was still 2.2% below the previous year’s total.

With a rise in the immigration level in 2002 — after net monthly immigration gains for several months in 2001 — and continuing good national economic health, it’s reasonable to expect the 20,000 annual total will be exceeded by 1-2000 this year.

Number is one thing, value another. The 2148 houses granted consent in November 2001 will cover a total 360,000m², with a total construction value of $298.4 million. The 501 apartments has a total construction value of $31.2 million.

November cost & size averages low

The average value/unit is low: $138,920 compared to $155,256 in October, $159,476 in September, $146,353 in November 2000, above the $137,947 in November 1999. For the November year, the average value was $150,047, compared to $143,294 in 2000 and $162,778 in 1999.

The average apartment value is also low: $62,275 in November compared to $86,166 in October, $109,202 in September, $78,378 in August, $66,666 in November 2000, $84,341 in November 1999.

A large number of small & cheap apartments (which, in short time, will become cheap flats as the word “apartment” is again applied to loftier structures) naturally reduces the averages.

The average new dwelling area was 167.6m² in November, compared to 176.1m² in October, 188.9m² in September, 177m² in November 2000, bigger than the 165.2m² in November 1999. For the year to November, the averages were 176.6m² in 2001, 172.1m² in 2001 and a low 162.8m² in 1999.

The average cost/m² for all new dwellings (houses & apartments) also jumps around — $828.89 in November, $881.76 in October, $844.16 in September. For the November year, the figures were $849.82 in 2001, $832.40 in 2000, $827.76 in 1999.

The November building consent figures were the first release for the year by Statistics NZ. The December figures are due to be released in three weeks, on 28 January.

Continue Reading

Consents hold up, except in Auckland

Apartments go from record to virtually nothing

Residential building consents continued to be issued at a high rate in October – 2508 for the month, and an annual tally of 29,221.

But the extraordinary number of apartment consents issued in October 2002 – 1526 at an average $78,440 – skews some of the comparisons. Also, this October, the numbers of apartment & Auckland consents fell away.

The value of apartment consents in October 2002 was extremely low, and that flowed through into a low overall average cost of all new dwelling consents ($134,144). It also flowed through into a low average size of dwelling (143.02m²).

This October, there were only 109 apartment consents, and they came at an average $162,385, more than double the average of a year ago. Without a high number of cheap apartments, the average cost of a dwelling was 39% higher than a year ago at $186,922, the average size was 36% higher at 193.78m², but the average value/m² was up only 2.8% to $964.61/m².

Compared to September, the October averages were up 11.2% for the cost of a dwelling, up 12.7% for size and down 1.4% for costm², indicating a fair amount of volatility.

For the October year, the 29,221 consents came at an average $173,050, up 8.3%, at an average 182.98m², up 2.4%, and for an average $945.71/m², up 5.8%.

Consent numbers dived in the Auckland region, mainly because of a collapse in the Auckland City figure. Compared to 1945 consents in the region last October, this time there were 750.

Apart from a fall in the Wellington region, from 292 to 192, most other regions experienced rises – Northland from 86 to 126, Waikato from 246 to 327, Canterbury from 272 to 389, Otago from 81 to 167.

The Auckland City fall was from 1228 consents to just 96. North Shore also fell, from 95 to 88, Waitakere fell from 173 to 130, but Manukau rose from 217 to 273.

2 of the Auckland region’s 3 districts experienced sharp falls – Rodney from 147 to 76, Papakura from 53 to 24. Franklin rose from 43 to 81.

Continue Reading

3km city rail tunnel proposed

McKeown says tunnel, Avondale-Southdown link & Shore connection all feasible

Auckland City Council is investigating digging a 3km $400 million rail tunnel connecting the Britomart transport centre to the western line at Mt Eden.

The tunnel, for either conventional or light rail, would run from Britomart, up Albert, Vincent & Pitt Sts, under the central motorway junction and connect with the western rail line between Dominion Rd and the Mt Eden station, at the city end of Mt Eden Rd.

Stations, accessed from the street, could be located at Wellesley St & Karangahape Rd.

Transport committee chairman Cllr Greg McKeown said the proposal was at an early investigation stage, but it had been determined the tunnel was technically feasible.

Cllr McKeown also wants to see the Avondale-Southdown rail link established. The corridor exists. He said the option of a tunnel from Britomart to the North Shore had also been identified as technically feasible.

Cllr McKeown said there was a need to “think further ahead, faster” on the rail network issue.

“If this [tunnel] is finally determined to be both buildable & fundable, it would create a great inner-city rail loop which would link Britomart, Mt Eden & Newmarket.

“It would provide important links with the western line & the North Island main trunk line at Newmarket and would increase the capacity & efficiency of the Britomart station & the rest of the network.”

National & regional funding would be required to move the project forward.

Continue Reading