Payments from the Crown for the purchase of property in the Canterbury red zone

A client affected by the Canterbury Earthquake whose property has been designated in the red zone may accept a Government offer to purchase their home and/or land.

When the offer is accepted, the Crown pays for the purchase price of their home and/or land in the red zone.

The Canterbury Earthquake Recovery Authority (CERA) administers these payments on behalf of the Crown.

Payments made by the Crown for the purchase of red zone properties are not to be treated as income or a cash asset for the period set out below when determining entitlement to a main benefit and other assistance paid under the Social Security Act 2018. Examples include:

• Accommodation Supplement
• Away from Home Allowance
• Community Cost Programme
• Course Participation Costs
• Funeral Grant
• Home Help
• Residential Care Subsidy
• Seasonal Work Assistance
• Special Benefit
• Special Needs Grants
• Special Transfer Allowance
• Student Transfer Allowance Grant
• Temporary Additional Support

This includes any income earned from the investment of the payment.

The exemption period is 48 months from the date of full settlement for their home and land (see below) where the client intends to use the payment to:

• repair or rebuild their home or
• purchase a replacement home

In all other cases, except for clients applying for or receiving Residential Care Subsidy or Temporary Additional Support, the exemption period is 12 months from the date of full settlement for their home and land (see below).

For clients who are applying for or receiving Residential Care Subsidy and Temporary Additional Support, where there is no intent to use the payment to repair or rebuild their home, or purchase a replacement home the payment is not exempt.

Clients whose property has been designated in the red zone may opt to settle with the Government for the purchase of their home and land, or their land only.

In cases where the client settles with the Government for the purchase of their home and land one or more payments may be received from the Crown. The date of full settlement is the date of the final payment from the Crown.

Where the client settles with the Government for the purchase of the land only, the client will claim the damages to the home through the Earthquake Commission and insurance company. In these cases the client may receive one or more payments from the Crown and one or more payments from:

• their insurance company and/or
• the Earthquake Commission

Full settlement is the date the client receives the final payment that is due to complete the purchase/settlement of damages to their home and land.

Example a client accepts the Government offer for the purchase of their land and agrees to an offer of settlement from their insurance company. The client receives payments as follows:

The date of settlement for the home and land is 4 April 2014.

The client intends to rebuild, therefore these payments would not be included as a cash asset until 4 April 2018.

When a client receives a payment you need to create a 'must view' note in CMS.

The note should state:

• the client has received a payment from the Crown for the purchase of the home and/or land which is in the red zone in Canterbury that must not be considered as income (including any interest earned off the payment) or as a cash asset
• the date the client received the payment
• whether the client intends to use the payment to repair or rebuild the home or purchase a further home
• whether this is the final payment of the settlement and if so, the date the exemption ends
• any assistance a client may be receiving or makes an application for will need to be reviewed after 12 or 48 months of receiving the payment

At the end of the exemption period any remaining amount that a client has will be treated as a cash asset, and income earned from investment of the remaining amount will be treated as chargeable income.

Note where the exemption period allowed was 12 months, and the client now intends to:

• repair or rebuild their home or
• purchase a replacement home

you must extend the income and cash asset exemption for a further 48 months.

For more information see:

• Payments from the Canterbury Earthquake Commission (Red Cross)
• Payments from Earthquake Commission and insurance companies (Canterbury Earthquake 2010 and 2011 aftershock)
• Residential Care Subsidy Exempt assets
• Temporary Additional Support Cash assets