New Zealand contract law doesn't require family loans to be complex or expensive. However, they do need certain elements to be legally enforceable.

Essential elements of a valid loan agreement:

Written documentation. Whilst oral contracts can technically be valid, they're almost impossible to prove in court. Written documentation is essential, and it needs to be signed by both parties before any money changes hands.

Clear loan amount. The agreement must state exactly how much is being lent. If money is being provided in stages (such as for a build), the agreement should outline the schedule and conditions for each advance.

Repayment terms. The agreement needs to specify when and how the money will be repaid. This could be a fixed monthly amount, payments tied to specific events (such as property sale), or flexible terms based on the borrower's income. The key is that expectations are clear and documented.

Interest provisions. The agreement should state whether interest is being charged, and if so, at what rate. Even if you're charging zero interest, this should be explicitly stated. Note that charging no interest or below-market interest rates may have tax implications that you should understand.

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