Protection when the agreement is signed

What safeguards are there when the agreement’s signed?

The standard contract form provides warranties from the vendor, and if these are breached, you do have remedies. 

1. Some of the more complex vendor warranties concern the Resource Management Act, requisitions and notices from tenants. The process of asking/objecting to a seller’s defective title is called a “requisition” There are time limits to this but your solicitor will take care of it.
2. Before you pay on settlement day you have to have a final inspection, if the property is bought with vacant possession, to check if any work or repairs the seller promised to do, are done.
3. Chattels are movable property e.g. curtains and dishwasher that would usually stay in a home unless otherwise specified. On settlement day, these must be in the same condition as when your offer was accepted, subject to normal wear and tear.
4. There must be no arrears regarding water and electricity accounts or annual rates payable to the city council.
5. If the vendor has done some work on the property, it must be done according to the specifications of the Building Act.
6. All the permits and consents must be complied with.

What other precautions can I take?

Property check/survey

Just as when you buy a car, or clothing, it’s “let the buyer beware” so the onus is on you to check out the quality of the land, buildings, fixtures and chattels under offer. The way to do it is to instruct a property surveyor/inspector.

The precedent’s been set in the courts that a report must be prepared by a person qualified to give such a report and the survey must be done in good faith, checking the quality of the property in accordance with basic inspection methods and reporting principles.

If the property report shows problems then you must notify your solicitor and me. Remember, you can’t just change your mind and try to use the property check as an excuse to get out of the contract.  You must be able to show that your objection was reasonable. What is reasonable is an objective test; it is what someone else in your shoes would do under the same circumstances.

There is no automatic right to renegotiate the price but in practise parties do try to accommodate one another. If you are not going to proceed you will have to let your solicitor know and when you are bona fide you could get your deposit back.

Registered Valuation

This is a report prepared by a qualified property valuer, who uses various indicators to judge the property’s value. Most of this information is historical and when the market is volatile, care should be taken to ensure the valuation remains current.

The other rules are the same as those for the property check report.

Finance clause

Usually the buyer will organise his or her own finance. It is not uncommon to have finance approved in 24 hours when you submit all the relevant documents to the bank (or other financial institution). According to the common law you must use all reasonable endeavours to fulfil this condition.

The bank may require some evidence of your assets and liabilities and a statement of income and expenses. They will need a copy of the accepted agreement i.e. signed by the buyer and seller and the Certificate of Title. The bank might ask for a valuation report from a Registered Valuer and you will pay for the costs (for a standard 3 bedroom house it is around $500)

The other rules are the same as for the property check report.

Obtaining a Land Information Memorandum (LIM)

Local authorities must, on application and payment of a fee ($150-$250), produce a report of all the information on the council’s records regarding a property. This is a very important document and I always advise my customers to get one.

The information will include the following:

1. It will specify if there are any protected buildings or trees on the property.
2. The permits for work done and it will show code of compliance certificates.
3. Outstanding requisitions or requirements the current owners have not complied with.
4. The zoning of the property in question and the zones of the adjoining areas. This is very important if you are thinking about buying a large piece of land with the intention to subdivide it.
5. Planning designations for example road works in front of the property or in the area.
6. Flood prone or ponding areas.
7. Identify other known hazards.
8. The possibility of soil subsidence.
9. Drainage, storm water and sewer provisions on the land.

Obtaining a Certificate of Title

The Certificate of Title is the name of a record held at the offices of the Land Information New Zealand and a copy is available to anyone on payment of a fee. It tells who the legal owners are, the land area, the legal description and encumbrances noted on the Title. 

Protecting your interests

A registered caveat will prevent the property owner from selling the land to someone else, or deal with it in any way that could affect your interests or rights.  This does not cost much, but your solicitor can do this for you when you pay a substantial deposit.

Engineers Report

When you are buying bare land make sure you ask for an engineer’s report to make sure the land is suitable for your purpose and use.