Business, Property & Finance

Matters to Consider When Buying Residential Property

on Wednesday, 08 June 2016. Posted in Business, Property & Finance, Property

Matters to Consider When Buying Residential Property

Buying a residential property is for most people the most major financial decision they will ever contemplate. It is vital that you are fully informed and don’t rush into any agreement. In this Guide, Deborah Miller, Partner, in the Business Property & Finance team at Brookfields Lawyers provides a summary of the matters you should consider when purchasing a residential property.

1. Before signing an offer to purchase

Your sale and purchase offer should be checked by your solicitor before you sign and present the offer to the vendor, or the real estate agent. Your solicitor will advise you on any conditions or additional terms necessary to protect your interests. This can prevent errors and contradictory terms in the agreement that can cause unnecessary expense and conflict between the parties.

2. Before confirming that a sale and agreement is unconditional or when purchasing at auction

  1. Your agreement will most likely be subject to a number of conditions which can include:
  • Finance condition – this allows you time to confirm that you will have sufficient funds to complete the purchase. When purchasing at auction the approval for finance must be obtained prior to attending the auction, as all auction agreements are entered into on an unconditional basis. To grant approval mortgagees may want to review the agreement, the title and perhaps even the LIM report. Approval may not be granted if the property is the subject of a weathertightness claim, or if there have been unconsented works.
  • Approval of Land Information Memorandum Report (LIM) – this gives you the opportunity to obtain and approve a LIM about the property from the applicable council. The LIM records the development on the land and any alterations to the property that required Council consent. The LIM report may also indicate issues with the land or buildings, such as a risk of flooding, or noting that the property is the subject of a weathertightness claim. Your lawyer will be able to provide you with advice on the information contained in the LIM. If you do not approve the LIM you must give notice within 15 working days after the date of the agreement and the vendor will need to consider whether or not they will attend to the issues you have raised. If the vendor is not prepared to attend to the issues or does not notify you either way then you can end the agreement. You may also review the Property file held by the Council which contains all of the information that Council holds on record for the property.
  • Building Report – this gives you the opportunity to obtain a builder's report in respect of the property within 10 working days after the date of the agreement. A building report may indicate any structural issues with the buildings on the property. It is beneficial to provide the builder inspecting the property with a copy of the LIM report and any building plans held by Council, as the builder can then identify any unconsented alterations to the property.
  • Methamphetamine contamination reports – these are increasingly common as more properties are exhibiting positive readings for the presence of Methamphetamine.

They may also be other conditions which you may need in the agreement. Your lawyer will be able to advise you on this. If the conditions are not satisfied by the relevant date then either you or the vendor can cancel the agreement.

  1. Reviewing the Title – your lawyer will obtain a copy of the title to the property and advise you on any issues which you need to be aware of. For example:
  • The title to the property may show easements that benefit the property and easements that may be granted, such as rights of way. You need to identify and understand the rights of and obligations on the owner in respect of any easements and identify whether there is clear legal access to and from the property, or if an easement is incorrectly registered on the title;
  • Land covenants registered on the title which may present restrictions on the use of the property. These restrictions can be imposed by Council on the owner in granting a resource consent or as part of the developers' building scheme. An owner of the property will continue to be bound by the obligations set out in a registered covenant;
  • Any limitations of ownership, such as leasehold land or land that is limited as to parcel and any implications of these limitations on the owner;
  • Any specific legislative restrictions and the implications of such restrictions on the owners of the property;
  1. Title requisitions –If there are any issues then you can provide the vendor with a notice setting out the issues (this is called a requisition). The time frame for providing such notice is the earlier of 10 working days from the date of the agreement or the settlement date. The vendor will then need to decide whether they will comply with the requisition. If they are not willing to do so then they will need to give you notice to this effect and you can decide whether or not to waive the requisition or cancel the agreement. Your lawyer will be able to advise you on any requisitions and ensure that the relevant time frames are complied with.

(d) Tenancy Arrangements are noted on the front page of the agreement as either:

  • vacant possession, meaning that the property must be empty on the completion of settlement and the taking of possession; or
  • tenancy details are inserted which indicate that the property is sold subject to a tenancy. On settlement the purchaser will not take possession of the property as the tenants will remain in possession until the end of their term of tenancy.

(d) The deposit is usually payable on the unconditional date, or on entry into the agreement. The deposit paid will be deducted from the purchase price in the vendor’s settlement statement.   You should ensure you have sufficient funds available to pay the deposit when the agreement becomes unconditional.

3. Before settling the purchase of a residential property

When the agreement is confirmed unconditional and for registration of the transfer of title to occur, the following needs to be completed prior to settlement:

  • Pre-settlement inspection – the ADLS standard form agreement provides one further opportunity to inspect the property prior to settlement. It is important that you inform your solicitor of any defects that may have occurred to the property after the agreement was signed and your solicitor can then request that the defect be remedied prior to settlement.
  • Tax statements are now required from all parties to agreements dated after 30 September 2015. The tax statement provides to Landonline your New Zealand tax information and your tax information of any place where you may be a resident for tax purposes.
  • Land ownership in New Zealand is recorded on a register online, which is often referred to as Landonline. To ensure that your solicitor has the requisite authority to change the Landonline register, the following requirements must be completed prior to settlement:
  • An Authority and Instruction form must be signed by all parties to an agreement. This form grants your solicitor the authority to change the Landonline register. Your solicitor will prepare the form after you have given consideration to how you may wish to own the property. For instance, the property may be held in the names of the trustees of a family trust, a company or in your individual names. If you wish to own the property in your own names, you need to receive advice on whether you are best to own the property as joint tenants or as tenants in common.
  • Finance – on receipt of a copy of the unconditional agreement, your bank will instruct your solicitor on the terms of your mortgage and provide your solicitor with the loan documents to be signed. The loan documents will need to be returned to the bank in good time prior to settlement, together with a Certificate of Currency for Insurance from your insurance provider.
  • Settlement occurs when your solicitor pays the balance of the purchase price to the vendor’s solicitor’s trust account and the vendor's solicitor authorises release of the keys and the transfer instrument in Landonline. The transfer of title will occur when your solicitor submits the dealing in the Landonline workspace.

For more information or assistance on purchasing a property please contact Deborah Miller, Partner on (649) 979 2134 or .

DISCLAIMER

This information is intended to be general in nature. You are strongly recommended to seek your own legal advice in relation to the matters dealt with here.

© Brookfields Lawyers 2016 – All Rights Reserved

 

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