Buying and Selling Property

Property Law

Buying a House

Your house is probably your largest investment.

It is critical when buying a property that you get it right. Come and see us or get the agent to provide us with a copy before you sign the sale and purchase agreement. Once the agreement has been signed there is little a lawyer can do to “get you out of” a bad agreement or protect you from unexpected problems with the property or the agreement.

What do you need to check?
  • Title-This should be done by your lawyer. There are a number of things that can affect titles and restrict your use of the property, such as easements, consent notices, land and building covenants and building line restrictions. Land covenants are very common on bare land and can put a huge number of restrictions on your use of the property e.g. the type of house that you can build, your ability to subdivide, height restriction etc. Unless you have the title searched you will not know what restrictions apply to the property you want to buy.
  • Council Requirements- The best way to check these is to get a land information memorandum (LIM report)from the council. A LIM report contains information such as building consents for the property, Council requisitions, archaeological sites, known hazards and planning rules. In particular a LIM will assist you in detecting any un-permitted works on the property.
  • An alternative is to search the Council property file yourself. There is a small Council charge for this. A LIM is preferable as it contains more information relevant to a property than just the property file.
  • Building reports- A report from a property inspector is important both for new and old homes. The recent problems with “leaky buildings” highlight the importance of these reports. Many property inspections also check the Council file for you.
  • Drugs testing-Methampetamine testing on rental properties is now very common especially with rental properties.  Increasingly agreements are being made subject to a clean drug test being obtained.
  • Engineering issues- Is the property on a steep bank or does it have a large retaining wall? This may restrict what you can build and where and determine if any special foundations are required. This information will often, but not always, be contained on the council files or in a consent notice registered on the title.
  • Finance-make sure that you clearly understand what the bank or broker is offering you. Check what conditions are imposed on the offer of finance. We can advise you on the terms of your loan and mortgage and help you structure your finance appropriately.
  • Cross leases and Unit titles-These are more complex ownership structures that the more common freehold section and require additional checks such as the terms of the cross lease or the body corporate rules. For example with unit tiles you need to check the recent minutes of the body corporate meetings to ensure that the development is not in a dispute or litigation over leaky building issues. Alterations and additions to buildings on these properties can create major problems. We strongly recommend you see your lawyer before you agree to purchase any property of this type.
  • Ownership structures-we can advise you on the best way to purchase your property-tenants in common, joint tenancy, via a trust or company.

What do we do?
Our job is to ensure you “get what you paid for” and that there are no problems with it. The basic steps are:
  • Checking the agreement to ensure there are no conveyancing issues such as making sure that your sale and purchase tie up.
  • Checking the title for any defects
  • Preparing the documents for the transfer of title
  • Liaising with your bank, preparing the finance documents and getting them signed
  • Settling the purchase on the day
  • Registering you as the owner of the property
  • reporting to you

Selling a House

Selling you house is a big decision. You need to be sure that the agreement is right and that the purchaser is bound to any agreement. The agreement has a lot of fine print so you need to be sure you understand what you are signing. 

Once the agreement is signed there is not much that a lawyer can do to “get you out of it”. Before you sign any Agreement we suggest you contact us so that we can:

  • Check the form and content of the Agreement to ensure that it correctly records your intentions and meets your requirements as to dates and payments. There are a number of clauses we can make to the agreement to protect you e.g.you may wish to add further conditions (e.g. an escape clause allowing you to cancel the Agreement should you receive a better offer.

  • Explain to you the effect of the conditions of the Agreement so you fully understand your rights and obligations under the Agreement eg. the standard agreement has a clause in it where the vendor warrants that any work done on the property has a permit from the local Council and that a Code Compliance certificate has issued for this work.

We strongly urge you not to sign any Agreement until you have spoken to us first. 

If you have dealt with a Real Estate Firm, they will forward a copy of the signed Agreement directly to us after it is signed. We will then contact you to discuss any matters which need to be dealt with. If you have any queries about the transaction we will be happy to clarify them for you. 

We will then attend to the conveyancing steps required to complete the sale on your behalf. This includes searching the Certificate of Title to identify all interests registered against the property that need to be discharged (e.g. mortgages, caveats, and other charges). Sorting out any conditions that need to be satisfied. 

We also prepare a statement of the amount the Purchaser is to pay to us on your behalf on settlement, which includes rates apportionments to the possession date.

What you need to do prior to possession date:
  • Sign the Authority and Instruction Form for electronic conveyancing and the tax statement.
  • Help us to organise the handover of keys
  • Leave the property in the same condition as it was when the purchaser signed the Agreement.
Attorney at law helping the client to sign legal papers

Buying Off The Plan

Over the last few years purchasing property, particularly apartments, off the plan has been a successful mode of investment for some people. There are a number of companies still marketing new apartments and standalone houses off the plan.While we believe this investment strategy can work for some people, would-be purchasers need to be aware of the significant risks associated with it.
 
Delay between signing contract and settlement
One of the issues with purchasing off the plan is that there is a significant time lag between signing the contract (often unconditional) and the building being completed. In a rising market this can have a positive effect in that the property is likely to have gone up in value before you are asked to settle. The reverse occurs in a falling market in that you are locked into a purchase price which may be well above the market value of the property. When you come to settle you may have to put in far more money than you anticipated because the valuation for the bank may not be as high as anticipated.The time lag may also mean the building costs increase in the meantime and the developer may ask for further monies.We have seen this happen in both apartment developments and in standalone houses.
Independent Advice
We think one of the real issues with purchasing property off the plan is the use by developers of the “one stop shop” method. This is where purchasers are given the hard sell and then immediately handed over to financial planners, mortgage brokers and solicitors recommended by the developer, sometimes on the same day. The danger is that these professionals are not entirely independent and may not fully explain to you the risks of the venture or the nature of the contract. Before you know it, you are bound to an unconditional agreement. Always insist on consulting your own accountant, lawyer and mortgage broker. Never rely on the developer’s “independent” valuation.

Form of Agreement
Contracts for off the plan properties will often contain clauses which are favourable to the developer. Remember, they draft the contract for their own purposes not for your benefit. Some examples of these are:
  • The developer being able to significantly change the development or change the specifications without your approval;
  • Clauses that limit the liability of the developer or limit claims against it;
  • Provisions that allow the developer to lock the body corporate into a management contract for a significant term without any review provisions;
  • Clauses which waive the provisions of the Resource Management Act;
  • Clauses which allow the vendor to require settlement without a code compliance certificate having issued for the property;
  • Lack of a sunset clause which allows you to get out of the property if the building is not completed by an agreed date.
Pitfalls
Some of the other issues we have seen in off the plan contracts are:
  • Very general specifications which allow the developer to down-spec the development and construction;
  • Building plans without measurements on them, so it is difficult to see the size of the apartment;
  • Rent guarantees – this is where the developer guarantees rent for a set period of time. The difficulty with this is that you end up paying for it by way of an inflated purchase price and there is no guarantee that that level of rent will be sustainable once the guaranteed period is over. We have seen a number of cases where the market rent is significantly less than the guaranteed rent;
  • Deposits - To attract you to a development, developers often ask for only a small initial deposit, say $5,000.00. In some cases, these attractive financing options are paid for by the purchaser in inflated purchase prices. Regardless of the size of the deposit you should always insist that your deposit is held in a solicitors or real estate agents trust account until the title for the property issues (all agreements off the plan will be conditional under S225 Resource Management Act so will essentially be conditional until title issues). The BlueChip experience showed that unless you insist on this, the deposits can disappear if the company goes into liquidation.
Summary
While purchasing off the plan can allow you to purchase property at a discount, there are significant risks in doing so.

Our best advice is to come and see us for an unbiased opinion on your proposed purchase before you sign the contract.

Residential Property

Abernethy Broatch Law specialises in all aspects of residential property, including buying and selling houses and investment properties, easements, subdivisions and neighbour disputes.

 Commercial Property
If you need specialist advice on buying and selling commercial property, leasing, financing, unit titles or any other aspect of Commercial Property we can help.
Law specialist in Tauranga

Buying at a Mortgagee Sale-the Pitfalls.

A mortgagee sale occurs when the Bank needs to realise its security to cover outstanding mortgage repayments. The property can often be purchased at a very low price because of the forced nature of the sale. There are however some downsides to purchasing at mortgagee sale:

  • The sale usually, but not always, occurs by way of an auction. The sale contract usually contains special terms that remove your usual rights and favour the Bank. Unlike the normal sale and purchase situation, when the standard Law Society/REINZ contract is used, there is usually no scope for negotiation by you on the terms of the contract.
  • The main issue is the Bank usually will not guarantee whether you will get vacant possession on settlement. You may end up buying the property with the mortgagor “in place” or with a tenant who appears from nowhere claiming the right to occupy the property at a very low rental. You will then be left to sort out the mess after settlement, perhaps having to terminate the tenancy or apply to the Court for occupation.
  • There is also no guarantee of the property's condition. Even if you have the benefit of viewing the property before settlement, it may not be in the same state on the settlement day. Further, the Bank can only sell you the land and buildings, not the chattels, you may find the mortgagor has stripped the property before settlement.
  • In a regular transaction, you will get standard warranties from the vendor, for example that the construction or subsequent alteration of the dwelling is permitted and meets council requirements or that the vendor will correct defects in the cross lease title. A mortgagee auction contract will include no warranties from the Bank , you will have no recourse against the Bank if unauthorised structures are later found on the property.
  • Even though the contract will specify a settlement date, settlement may be delayed if there are claims from people alleging an interest in the property. This can happen when a spouse or partner of the mortgagor claims a half share of the property under the Property (Relationships) Act 1976. They can lodge a caveat on the property's title, preventing the sale concluding. The Bank will need to negotiate with them in order to sell you the property.
  • You should be particularly careful when buying a unit tile at a mortgagee auction. Unit titles can have issues with additions and alterations, problems with property managers and “leaky building” problems. You should always ask for the minutes of the last annual general meeting of the body corporate and obtain a LIM and builders report.
You should try to find out as much as possible about the property before they take part in the auction. If you are considering buying at a mortgagee sale action talk to us as soon as possible before the auction so that we can do proper due diligence on your purchase.

  • In a regular transaction, you will get standard warranties from the vendor, for example that the construction or subsequent alteration of the dwelling is permitted and meets council requirements or that the vendor will correct defects in the cross lease title. A mortgagee auction contract will include no warranties from the Bank , you will have no recourse against the Bank if unauthorised structures are later found on the property.
  • Even though the contract will specify a settlement date, settlement may be delayed if there are claims from people alleging an interest in the property. This can happen when a spouse or partner of the mortgagor claims a half share of the property under the Property (Relationships) Act 1976. They can lodge a caveat on the property's title, preventing the sale concluding. The Bank will need to negotiate with them in order to sell you the property.
  • You should be particularly careful when buying a unit tile at a mortgagee auction. Unit titles can have issues with additions and alterations, problems with property managers and “leaky building” problems. You should always ask for the minutes of the last annual general meeting of the body corporate and obtain a LIM and builders report.
You should try to find out as much as possible about the property before they take part in the auction. If you are considering buying at a mortgagee sale action talk to us as soon as possible before the auction so that we can do proper due diligence on your purchase.
Get in Touch With The Experts in Residential and Property Law Today
Call 07 574 8752. 
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