Owning a property in New Zealand means that you are required to pay Property Rates to your local Council. Over the last five or so years, the rates charges have increased significantly (along with property insurance costs) and are a substantial part of our clients outgoings.
Each local authority sets the rates for their region based on the future expenditure required. And as things have become more expensive, the rates seem to fund less and less things (and often controversial items depending on your point of view).
Like taxation from the Government, property owners have a legal responsibility to pay rates, and there are a couple of things that you may not be aware of in relation to this legal reponsibility.
If you don't pay your rates, the Council can take the money from your mortgage.
We didn't realise that this was happening until we read this article in Stuff recently: https://www.stuff.co.nz/nz-news/360641227/councils-take-millions-dollars-mortgages-unpaid-rates
The article summary says:
A little-known law (the Local Government Rating Act 2002) allows councils to take unpaid rates from banks and other lenders that hold mortgages over properties.
It’s a power only used when all other methods of getting rates paid have been exhausted, but it’s used thousands of times every year.
Auckland Council used the law to recover $26 million in unpaid rates from more than 8500 properties last year.
Under the Act the Council must wait until November 1st of the following year before taking the money from the mortgage.
If a rates defaulter owns a property outright and has no mortgage, the council will use in-house rates chasers or debt collectors to get the money, and if that doesn't work they have the power to go to the high court for an order to sell or lease a property to recover the rates. https://www.stuff.co.nz/business/122707474/council-lists-pensioners-home-of-41-years-for-sale-over-unpaid-rates-which-he-says-is-news-to-him
If your rates aren't paid, it may be very difficult to get a mortgage or do anything with your mortgage.
Councils can add a 10% penalty to rates as soon as they are overdue and further penalties can be imposed (same law as in item 1). Auckland Council
There is a Government Funded Rates Rebate Scheme, a Rates postponement scheme for residential properties and flexible payment options.
Rates Rebate scheme (if you are on a low income and own your house - this can include a home in a retirement village). The maximum rebate is $790 and you have to apply every year. Eligibility depends on where you live your household income and a few other factors. This could be quite worth your time applying if you are retired and on a limited income.
Rates Postponement scheme This scheme enables you to put off paying your rates until you sell your property, or stop living in the property or when you die or on a date that is agreed with your council. If you rates bill gets near the value of your property (eg 80% of the value), the Council usually stops letting you defer your rates. Each Council has their own rules, and in general this is available to people on low incomes for people over age 65 - but there are a few other reasons - look at the link below.
However, it is important to know that you will pay set up fees, annual fees and interest charges on the amount that you owe, as well as a 'reserve fund levy', so this should be an absolute last chance option.
Flexible Payment options - we choose to pay our rates monthly, even though it costs a little more as it evens out our cashflow, but the default payment option is quarterly for most local authorities
