We applaud the Government decision to shorten up the time property owners are required to assess and strengthen Earthquake risk buildings and unsupported facades.
As Housing Minister Nick Smith is reported in the Christchurch Press today “The practical implication is there are about 2000 buildings in more earthquake-prone areas of New Zealand that will have to be fixed – taking it down to a total of 2.5 years for assessment and 7.5 years for fixing.” The “Bower Amendment”, which will drive this in legislation and focus on the highest risk structures and areas is a welcome amendment.
Halving the time property owners are required to assess and repair buildings is a great start to securing the safety of everyone living or visiting New Zealand. But safety should not be the only concern.
Who bears the cost?
The cost of carrying out these repairs will be borne by property owners, whether they be Local or Central Government owned, owned by Charities and Not-For-Profits, as well as the Private Sector. It is this latter group that we now turn to.
Where possible property owners will pass the cost onto tenants, assuming the buildings are leased out. The cost of that will invariably be passed onto their clients or customers in turn.
For some property owners the best financial decision will be to demolish and start again, which as many of us know will or could be cheaper than costly retrofitting work.
However, with many listed heritage buildings, the option of demolishing is not available. Just ask property developer Mark Dunajtschik, who has lost his bid to have his 85 year old category 1 listed historic Harcourts building in Wellington demolished.
Fairness - Tax reform urgently required
Since the Government removed deductions for depreciation on buildings and improvements property owners have had to bear the cost of physical works but still be taxable on the increased income (if any) that is derived from those works. Many business advisors and commentators have called for changes to be made in this area, all to no avail.
If the Government does not address this tax anomaly this will have a detrimental effect on the New Zealand economy. Older buildings will be abandoned, not just heritage ones. Rejuvenation of town and city centre’s throughout New Zealand will fall even further as this is where the problem buildings are clustered. Who in their right mind would buy a building with major physical works to be completed with no tax deduction? Tenants and customers alike want to visit a safe and attractive building and area – if this turns out to be a new commercial building across town, then that is where they will flock.
Remember, property owners aren’t asking for public money here, just a tax deduction for expenses that are legitimately spent on deriving taxable income.
If this affects you, and it will, it is time to talk to your local MP about seeing fairness as well as safety be taken into consideration.
Want to know more about how the absence of these tax reforms will affect your business, then contact us at [email protected].
The comments in this paper are the personal opinion of the writer and are not necessarily the opinions of Shellock Consulting Ltd.