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Encumbrance Fees - New, and Overdue

A Press release today, and copied below reports the implementation of a new encumbrance fee to cover the cost of ensuring that owners of properties - principally on the East Coast, who often use additional facilities on their properties on which no development contributions or rates have been to paid, to load up with friends and relatives over holiday periods.

Clearly, there is the temptation to engage in a 'cat and mouse' game with council staff who seek to ensure that these facilities are not being rented, leased or in any other way infringing the special conditions on which these encumbrances are granted. The remainder of the population who comply with the rules should not be required to subsidise these free loaders. So this a good move - $85 will not break the bank, but you can bet on a raft of complaints.

The District Plan allows for property owners to establish an independently habitable portion of their dwelling for the use of family and friends by registering a Memorandum of Encumbrance on the property Title.

The Memorandum of Encumbrance restricts the use of the dwelling to family members and friends only and requires that no part of the dwelling is separately rented, leased or used as traveler's accommodation.

What is the alternative?

The alternative is that the owners would need to apply for a resource consent for more than one house on the site and pay rates and development contributions on the second dwelling.

For example, in Whangamata the annual household rates are  $1875 and development contributions are $34,934 plus additional reserve contributions.

Council decision to recover the cost of monitoring

Encumbrances are initiated by the property owner and there is a cost to the Council to comply with Council's part of the agreement. 

Recently a decision has been made by the Council to recover the costs of monitoring the compliance of these encumbrances to make sure those that have a second dwelling are indeed using it for family members and friends only.

The Council also issues Encumbrances for things like conservation covenants.

Monitoring costs

The monitoring fee of $85.00 introduced on 1 July 2011, covers the administration costs of sending out statutory declarations (which need to be signed by a JP) and monitoring compliance, an annual reconciliation to ensure correct rates are levied, the maintenance of the Encumbrance register and a contribution towards the monitoring visits to a selection of properties on the register each year.

The Council is also randomly selecting a number of properties every year to check their Encumbrance.

Mayor Glenn Leach said "I don't have a problem with charging a small fee to administer and check compliance of these Encumbrances. The general rate payer shouldn't have to subsidise this at all. It's also reasonable for the Council to monitor the Encumbrances to make sure rate payers aren't getting ripped off".



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