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Issues for Trusts during the Covid-19 lockdown

Issues for Trusts during the Covid-19 lockdown

In this article we highlight some of the current issues relating to trusts and in the private client space more generally. 

Issues for Trusts with Commercial Properties

A key issue in the trusts space arises for those trusts that are in business and rely on rental income as their main source of income, such commercial trusts.  We are not aware of any income relief currently being offered by the Government for commercial/trading trusts in the businesses of leasing properties. On the flipside however, relief may be available to tenants by way of employer support or a wage subsidy so that they are able to continue paying their rent.  Trustees of commercial trusts will need to engage with tenants and advisors to address issues around current rent payments and set expectations around when full rent is to be paid.   For further information about the impact of COVID-19 on commercial leases read here and see here for information about Force Majeure clauses.

Trusts with Residential Rental Properties

The Government has announced that rent levels in the case of residential tenancies will be frozen for half a year due to the spread of the coronavirus in New Zealand.  This means that the rent under a residential tenancy cannot be increased during this time.  What does that mean for those who are living in a rental property?  Firstly, if tenants have lost their jobs and need support, they should talk to their landlord or property manager as soon as possible to work out a payment plan or to see what financial support is available to them.  Secondly, unless the tenant has come to an agreement with their landlord, rent still needs to be paid during the lockdown period and during the six-month freeze.

Trustees will need to take advice from their property manager or engage with their tenants directly in regards to whether a concession as to rent for affected tenants may be made.  The lease needs to be checked carefully before coming to any agreement.  Again, Government relief may be available to tenants and this should be taken into account when negotiating with the tenant.

Further measures have been implemented by the government to prevent the termination of tenancies during the lockdown period to facilitate self-isolation and staying at home requirements. Tenancies will not be terminated during the lock-down period, unless the parties agree, or in very limited circumstances. Tenants who had previously given notice to terminate the tenancy can revoke their termination notice if they need to stay in the tenancy for the lockdown period however, tenants can still terminate the tenancy if they wish. Fixed term and periodic tenancies will not end unless specific grounds apply, for example the tenant wishes that the tenancy to comes to an end.

Family Trusts

Luckily, the traditional family trust is largely unaffected by the current pandemic situation however, there may be restrictions in carrying out some aspects of trust administration.  Much of the ordinary trust administration such as signing trustee resolutions and reviewing financial accounts can continue; however, access to a scanner or ability to sign on-screen will be needed as face-to-face contact should be avoided and non-essential postal services are on hold.

Other Private Client Matters

The current lockdown environment means that any face to face contact with clients (in person) is not permissible and this is creating roadblocks in the case of documents that need to be signed in person or require a witness.  In the case of wills, which are arguably an “essential” document, two people who are independent of the will maker must be physically present when the will is signed.  Conceivably, it would be possible for, say, two neighbours to witness the will being signed from their veranda or through a window.  The will could then be signed and the pages initialled by each of the witnesses keeping the necessary physically distance.   The same approach could be used for Enduring Powers of Attorney documents.   However, this could easily be a breach of the ‘bubble’ rule and involves people from different households coming near each other.   At all times the safety of ourselves and the people around us must be paramount and front of mind. 

It may not be possible to sign a will or other document that requires a witness at this time however, your written will instructions or draft will approved by you could be used as evidence of your wishes in the event you pass away before a will is signed.   

In the UK a major overhaul of probate legislation is on the agenda as the government is urgently looking to change the requirements around witnessing wills in the wake of the coronavirus outbreak.  No such initiatives are currently under review by the New Zealand Parliament however, the New Zealand Law Society is keeping the coronavirus situation under review and monitoring the advice it receives from the Foreign and Commonwealth Office.

On a slightly more positive note, these challenging times are requiring us to think even more creatively as we work with our clients to continue to meet their legal needs.

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