Kāinga Ora’s Financial Assistance Scheme for residential earthquake-prone buildings

Unfortunately, many homeowners in Aotearoa New Zealand are facing the challenge of owning earthquake-prone homes.

In response Kāinga Ora has launched a scheme designed to offer financial assistance to homeowners with residential earthquake-prone buildings.

Who is this scheme intended for?

This initiative aims to assist individuals who own and live in residential units or apartments located in high seismic risk areas and are experiencing financial difficulties. It is specifically created to prevent owner-occupiers from being compelled to sell their property because they cannot afford the expenses required to strengthen their building.

Who is eligible to use this scheme?

To qualify for this scheme, applicants must meet the following criteria:

• Citizenship and Residency: Be a New Zealand citizen, or ordinarily resident in New Zealand, or overseas persons allowed under the Overseas Investment Act 2005;
• Owner-Occupier Status: Be an owner-occupier of the household unit for the duration of the loan, or a former owner-occupier with the condition that they return to live in the property or sell it within two years of its removal from the earthquake-prone buildings register;
• Financial Hardship: Demonstrate either the inability to obtain financing for the work from a Reserve Bank of New Zealand registered bank or non-bank deposit taker, or if financing from one of these entities is possible, it must be conditional upon selling the unit when it is no longer earthquake-prone or would result in significant financial hardship for the owner; and
• Financial Standing: Maintain an acceptable financial standing, which means not being in default on a mortgage, charge, or other security, not being subject to a Court Order or Tenancy Tribunal Order, and not being currently insolvent.

What is the requirement for an eligible unit?

This scheme applies to units purchased either before 1 July 2017, or before the date when the building was confirmed as earthquake-prone. The unit must be located within a building situated in a high seismic risk area, comprising two or more stories and containing three or more household units (or be a household unit within a mixed-use building). Additionally, the unit must be within a building for which the relevant territorial authority has issued an earthquake-prone building notice.

The loan and interest

Eligible applicants can apply for a low-interest deferred repayment loan of up to $250,000. These loans will be secured by a mortgage, charge, or another form of security against the unit's record of title (or equivalent). The interest rate for the scheme will be set at 50% of the Reserve Bank's monthly average of five-year fixed interest rates.

When does the loan need to be repaid?

In most cases, the loan becomes repayable upon the earliest of the following events:

• The date of property sale or disposal (including after the death of the last owner-occupant);
• Twelve months after the death of the last owner-occupant;
• The date on which the last owner-occupant stops occupying the property as their primary place of residence (other than due to their death); or
• The date set out in a notice from Kāinga Ora requesting loan repayment after a default occurs.

The scheme also allows for voluntary loan repayments without early repayment fees.

It is important to note that the application window for this scheme is set to close on 30 June 2027.

An application form can be found online on Kainga Ora’s website. It is crucial to ensure that all the required documents are provided and that the eligibility criteria are met.

If you are considering entering the scheme, it is advisable to seek advice from a legal professional to assess your unique situation.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.