'Squatters', evictions in mortgagee mess

A land law specialist says New Zealand may need a law change to strengthen buyers' rights in mortgagee sales, following a series of angry stand-offs that have locked buyers out of their new homes.

But Auckland University law lecturer David Grinlinton also says that if banks were required to ensure vacant possession it would further disadvantage those people who are worst hit by the recession.

Lawyers say that at the very least, people hoping to snap up a mortgagee bargain should first check properties were unoccupied. The warning comes as Terralink figures show that in April, 215 houses were sold by mortgagee sale. That's one in 25 sales - the highest monthly figure in 15 years.

In a recent case, a family was forced to pay the mortgage on a house they bought at auction but could not move into.

In May, Mereana and Steven Pawa paid $151,000 for a house in Moerewa in the Far North at an auction forced by the Bank of New Zealand. The couple and their five children wanted to live in the house on weekdays, and stay at their existing property over weekends so that Mereana - a school principal - would not have to commute 600km a week to work.

But the former owner, Pouri Cooper, refused to move out.

The Pawas' lawyer, Judith Dickens, said the two-month court battle had been stressful and financially tough for the Pawas. Cooper has now been forced by the courts to leave and pay them nearly $4000.

Under the Property Law Act 2007, once a new owner becomes the registered proprietor, the previous owner is trespassing if he/she remains. But to get rid of them, buyers have to go to court to get an order for possession, which police can enforce.

Grinlinton said stand-offs could be avoided if the law was changed, requiring banks to ensure vacant possession. But he said there were also social issues at stake: "It's an economic downturn, mortgagors are finding it pretty hard to make ends meet, and often through no fault of their own they find they can't meet mortgage obligations."

Dickens said Cooper had been a "squatter", and the law was inadequate over buyers' rights.

"Mortgagees get their money, then leave it to the poor purchasers to gain possession in a tedious process through the courts - often causing financial and personal hardship - whilst the defaulting owner continues to enjoy 'rent-free' accommodation."

According to the Pawas' affidavit, Cooper warned he would not move out because he had right of land ownership as tangata whenua. Two days after settlement day, the Pawas obtained a trespass notice but Cooper still refused to budge. At a hearing in July, the district court ruled Cooper had no defence, but six days later he went to the High Court, which dismissed his appeal. The Pawas moved in earlier this month.

That follows another scrap over a Kaikohe property sold at mortgagee sale. Glenn Hannah cannot get into the business premises he bought in April because members of Nga Uri o Tupoto Maori Inc have been claiming tangata whenua status over the land. A high court hearing on an eviction order has been adjourned until Friday.

- © Fairfax NZ News