Sale and Purchase of Properties

BUYING OR SELLING A PROPERTY

Contents

1. Get the most from your property experience.

2. Do the right thing – see us first.

3. Stay in control.

4. What is the process?

5. Our role as your lawyer.

6. Checks – what needs to be done and who will do it for you.

7. Loans – so many choices!

8. Buying a property – ownership and other issues.

9. Your property checklist.

10. How much can you afford to pay for a home?

11. Other sale and purchase costs.

12. Frequently asked questions.

13. Commonly used terms.

14. What else can we do for you?

1. GET THE MOST FROM YOUR PROPERTY EXERIENCE

New Zealanders like to own their own homes and for most of us it will be our biggest investment.

Whether you are buying or selling for the first time or not, you will want the experience to be positive and rewarding. You can avoid a lot of potential stress, cost and frustration by following the following basic steps.

2. DO THE RIGHT THING – SEE US FIRST

See us and make sure that whatever you sign is right for you before you sign it. Remember:

  • You usually can’t change an Agreement after you have signed it.

  • Your Agreement might be with your agent (an authority to sell) or with the property buyer or seller.

  • You can save money and anxiety by seeing us first.

  • We can help you prevent small problems turning into big ones.

3. STAY IN CONTROL

Whether you are buying or selling a property, you are the one who must be satisfied with the outcome – not the agent, not your family or friends. Stay in control of the process and let us help you to:

  • Understand what we can do for you.

  • Understand the buying and selling process.

  • Avoid pitfalls.

  • Work out your financial limitations – how much can you borrow, how much can you afford to repay.

  • Find out the other costs of buying and selling a property.

  • Complete any other legal work you might need such as making a will, preparing Enduring Powers of Attorney, setting up a trust, taxation or property relationship matters.

  • Understand the agent’s role, who they work for, how they are paid and how you can get the best value from them.

4. WHAT IS THE PROCESS

The Beginning

Seller

Talk to us about your options and the outcomes you want including choice of agent, selling methods and price.

Decide what you should do to make the house more saleable and get on with those jobs.

Select a real estate agent and confirm the sale method (multiple listing/sole agency/auction/tender) and price range.

Buyer

Talk to us. Consider price range for the type of property you want and how much you can afford to borrow.

Complete the checklist in Part 9 to identify the things you are looking for in a property.

Identify key real estate agents, check out their listings in publications and websites.

You find that dream home.

Seller and Buyer

Remember do not sign the Agreement before we have had a chance to discuss it with you.

The Middle

Seller

We can help you negotiate the price, settlement date and conditions to achieve the best outcome for you.

You sign a final agreed offer - after talking with us, as this becomes the binding Agreement. Don't sign more than one Agreement unless it is absolutely clear that the subsequent Agreement is a back-up that will take effect only if the first one falls through.

Make sure the deposit you receive is sufficient to cover any commission to the real estate agent that will fall due when the contract becomes unconditional (even if the purchaser fails to complete the purchase).

Resolve any problems with the title and Land Information Memorandum (LIM) report with the buyer (Yes, problems do happen!).

Check that all the conditions have been met.

The contract is declared unconditional.

Buyer

We will help you negotiate the price and conditions you want. We will advise you of any research you should do on the property.

You sign a final agreed offer - after talking with us, as this will become the binding Agreement.

Consider your loan options - we can help you apply for a loan.

Get the title checked.

Get a Land Information Memorandum (LIM), a valuation and if required a builder's or engineer's report.

Try to resolve and title or LIM problems with the vendor.

Check that all the conditions have been met.

The contract is declared unconditional.

The End

Seller

You sign the authority that enables us to transfer title to the buyer.

We will organise repayment of any mortgage.

Organise the keys for the handing over.

Organise your move and change of address. Advise phone, power and other utility companies of your moving out date and have meters read.

Allow the buyer to re-inspect the property before settlement.

Move out on settlement/possession date or other agreed date.

Buyer

You sign the mortgage documents and loan agreements for the mortgage.

We will confirm the amount required on settlement and assist you to arrange payment.

Organise your move, change of address and phone, power, gas and other utility connections.

Before settlement, carry out the final inspection of the property you are buying.

Move in on settlement/possession date or other agreed date.

Seller and Buyer

A property transaction is like an iceberg. You, as the client, will see only a small part of the work that needs to be done to complete the deal. Behind the scenes we will make sure that it goes through with the minimum of fuss. We will look after your interests every step of the way.

5. OUR ROLE AS YOUR LAWYER

We will protect your interests and ensure the smoothest, simplest, most efficient transaction for you, whether you are buying or selling.

Unlike others involved at various stages of a property transaction, we will:

  • Give you independent advice.

  • Act to protect your interests.

  • Understand the process well.

  • Have experience in negotiating for buyers and sellers.

  • Know potential pitfalls and traps.

  • Know you and your personal circumstances (or are prepared to find out).

  • Know the law.

  • Understand that buying and selling can be an emotional and stressful time and try to steer around that!

Remember, get our advice before signing anything. Documents can be emailed or faxed to us when there is any urgency.

When you come to see us, take a list of the questions that you want to ask. The final decision in all matters will be yours. Make sure you have enough information to make the right decision.

6. CHECKS – WHAT NEEDS TO BE DONE AND WHO WILL DO IT FOR YOU?

There are many checks you can make to be sure that what you are buying is really what you want. We will know what checks to make and who can make them for you.

For example you will want to know:

  • Are there any problems with the title? Get a title search.

  • Are there any problems with the buildings? Get a builder’s (and/or engineer’s) report.

  • Have all Council requirements been met? Get a LIM report.

  • Is the price good value for this property? Get a report from Quotable New Zealand or a registered valuer.

We can assist with any research required about the property, including advising you on any reports you obtain. This work is insurance against disappointment and perhaps substantial additional costs if you have to fix something later.

7. LOANS – SO MANY CHOICES!

There are a lot of choices for loans to buy property. We can provide unbiased advice about the best source of finance for you and about related matters, including:

  • How long the term of your loan should be.

  • The interest rate – whether floating or fixed and if fixed for how long.

  • Whether you pay interest only for a period or principal and interest together.

  • Whether you should make your repayments fortnightly, monthly, quarterly or annually.

  • Whether to take out mortgage repayment insurance.

  • Whether to take out redundancy insurance.

  • What home insurance you should have – full replacement or indemnity and with whom (the cheapest is not always the best).

Some of these decisions affect how long it will take to pay off your loan and how much interest you will pay overall.

8. BUYING A PROPERTY – OWNERSHIP AND OTHER ISSUES

Get these things right the first time. A change required later will mean extra cost.

Should you own the property in your own name, a trust or a company? There are taxation and other issues here. There are also taxation and other implications if you are buying property as an investment.

You might buy the property as a single person, as a married, civil union or de facto (including same sex) couple, with a friend or in a business partnership.

Ask us:

  • Should you buy the property in joint names?

  • Should you buy the property in equal shares or unequal shares?

  • What does buying the property as tenants in common mean?

  • Do you need a property ownership agreement?

  • Does a will make any difference to the form of ownership?

  • How do wills and trusts work together?

  • How does the Property (Relationships) Act affect you or anyone you buy the property with?

Take another scenario –where your family is prepared to help you financially:

  • Should your family lend or give you the money?

  • If it is a loan, how will it be protected and how will you pay it back?

  • What are the implications of a guarantee?

The decisions you make right now might have important consequences later on when you decide to sell the property or your relationship ends.

9. YOUR PROPERTY CHECKLIST

Here are some of the questions you should consider when deciding what property to buy, what area to buy in and how much you should pay. You might also have questions about more personal issues. Add your own points to the checklist and rank them in order of importance to you.

Ownership Issues

  • Joint tenancy or tenancy in common?

  • For your own occupation or as an investment?

  • Finance – what source?

  • Should you own it in your own name(s) or through a trust or a company?

  • Property insurance – should it be full replacement value or just indemnity value?

Property Issues

  • Location (consider your options and possible capital gains).

  • Outlook, view.

  • Standard and condition of nearby houses, neighbourhood generally.

  • Closeness to schools, shops, church, parks, medical facilities and other services.

  • Transport.

  • Sun and shade, general weather patterns.

  • Access – steps, paths, driveway.

  • Trees, hedges, gardens, lawns, secure fencing.

  • Suitability for children and pets.

  • Pool – is it fenced properly.

Accommodation Issues

  • Number of bedrooms.

  • Number of bathrooms/toilets (showers or baths).

  • Laundry/laundrette.

  • Kitchen size and amenities.

  • Separate living areas (dining, lounge, family room, study).

  • Storage.

  • Carport, garage (door opener), off-street parking.

  • Outdoor living amenities.

Facilities

  • Mains power, water, gas.

  • Mains sewer/stromwater.

  • Rubbish collection, mail/paper delivery.

Features

  • Telephones, TV/Sky aerial/digital dish.

  • Chattels – curtains, carpet, stove, light fittings etc.

  • Storage, shelving.

  • Insulation, heating.

  • Alarm system.

  • Décor, maintenance, watertightness.

10. HOW MUCH CAN YOU AFFORD TO PAY FOR A HOME

When you are planning to buy a home, you think first of what you would like and then it comes down to what you can actually afford.

  • What do you earn?

  • What have you saved?

  • What other debts and commitments do you have (such as hire purchase)?

  • What can you afford to pay back on a loan?

  • What other costs are involved in buying and owning your home (e.g. rates, Body Corporate fees, insurance, maintenance)?

11. OTHER SALE AND PURCHASE COSTS

Seller

Agent’s commission                                                                $

Water rates (estimated)                                                         $

General rates instalments due                                               $

Mortgage discharge registration fees                                    $

Legal fees                                                                              $

Moving costs                                                                          $ __________

Total                                                                                      $_________

Buyer

Loan application fee                                                              $

Mortgage repayment insurance premium                              $

Title search fees                                                                    $

Valuation fee                                                                         $

Builder’s report fee                                                               $

LIM fee to local Council                                                         $

Transfer and mortgage registration fees                              $

Legal fees                                                                             $

Moving costs                                                                         $

Share of rates                                                                      $

Property insurance                                                               $___________

Total                                                                                     $_________

12. FREQUENTLY ASKED QUESTIONS

Do I need a Land Information Memorandum (“LIM”)?

It is recommended that you get a LIM if you are buying a property. The standard Agreement for Sale and Purchase includes a LIM condition, provided you select it, on the front page. A LIM provides information the Council holds about the property. It will show whether existing works have received Council consent and whether the Council requires any remedial work. It might, for example, show a wood burner has been installed without the appropriate certification. This could invalidate insurance on the property (e.g. if the burner causes fire damage). A LIM report will also give you information about any site characteristics (such as contamination, propensity to flooding etc) and zoning details. You can ask the seller to fix any defects disclosed in the LIM and cancel the contract if the seller refuses to do so. But remember, the LIM provides information only about those things reported to the Council – not those that haven’t been reported.

Who searches the title to the Property?

Both sellers and buyers should ask us to search the title. Sellers should, among other things, make sure their property details are correct. Buyers should identify everything registered against the title that might affect their use and enjoyment of the property – e.g. easements including rights of way, drainage and sewerage, electricity, telecommunications, gas etc. We will also check what needs to be removed from the title before you settle, such as the seller’s mortgage.

Should I get the survey plan for the land being purchased?

We will, in particular, get plans showing the site of buildings on the property when you are buying a cross-lease or unit title. You should check, among other things, that the plans accurately show the outlines of the buildings on the land. For example, people sometimes add an extra room to a house on a cross-lease title without changing the plan to show the extra room. The cross-lease title is then defective. You might also need to get survey plans for other reasons such as identifying the location of boundaries or easements.

Should I get a builder’s (or engineer’s) report on the property?

It is now quite common for a buyer to ask for a builder’s and/or engineer’s report on a property. The standard Agreement for Sale and Purchase now includes a building report condition, provided you select it, on the front page. The condition allows the buyer to cancel if the report is not satisfactory. The Weathertight Homes Resolution Service will, if asked, check if a property is subject to a claim.

What about when a property is sold by auction?

Buying
  • Auction Agreements are usually significantly different from the standard Sale and Purchase Agreements. For example, you can’t make an offer subject to finance or conditional on checking title matters and Council records after the auction, so you need to make these inquiries before bidding.

  • Always discuss the auction Terms of Sale with us well before the auction so these things can be checked first. You will have to pay the costs involved without any guarantee that you will be the successful bidder. However you cannot afford not to make these checks.

  • Also check that you can meet the financial Terms of Sale, including the deposit required at auction and settlement date.
Seller
  • Ask us to check the auction Terms of Sale before they are made available to the public.

  • Make sure your “reserve price” reflects the property’s real value but is realistic.

  • Competitive bidding for a sought after property may bring you more than you expect or would get through another selling method.

What are Council rates?

The local Council (sometimes called the local authority) and local Regional Council charge annual rates on each property for the services they provide. Rates are set annually and collected throughout the year in instalments – usually between two and five each year. We will make sure rates are adjusted on settlement. You will pay rates up to the settlement date if you sell and from the settlement date if you buy.

What if I buy a property with my de facto partner?

There are now major implications for de facto (including same sex) couples buying or owning property – and even for those who live in the property that just one of them owns. See us! Part 8 sets out a lot of the issues that you will need to consider if you buy a property in these circumstances. Make sure you discuss these issues with us before you sign the Agreement to purchase.

13. COMMONLY USED TERMS

Agreement (also called the Agreement for Sale and Purchase)

A written contract for the sale and purchase of the property between the seller (vendor) and the buyer (purchaser). Never sign one without first discussing it with us.

Body Corporate

The name for all the owners of unit titles on one underlying freehold title. The Unit Titles Act includes rules for owners to elect a Body Corporate committee and other rules that, for example, govern the use of common areas. The rules can be altered by the required percentage of votes of unit owners. Each owner gets one vote per principal unit. We will check the Body Corporate Rules and explain them to you if you buy a property with a unit title.

Chattels

Items included in the sale that are not legally part of a building. They usually include any stove, TV aerial, carpets, blinds, curtains, drapes and light fittings on the property. They may also include rangehoods, dishwashers, refrigerators, heaters and so on. Make sure the Agreement correctly includes the chattels you intend to buy or sell. Chattels not specifically listed in the Agreement are not included in the sale.

Conditional Agreement

A legally binding Agreement can be cancelled if certain conditions are not satisfied. An Agreement can, for example, be conditional on:

  • The buyer arranging suitable finance to complete the purchase.

  • The buyer getting a satisfactory builder’s and/or valuer’s report.

  • The seller finding another property.

The Agreement becomes “unconditional” when all the conditions are satisfied. Ask us to make sure all the conditions you need are in the Agreement.

Cross-Lease Title

More that one dwelling (or commercial premises) is included on one freehold title. All owners jointly own the freehold title. Leases by all the owners (as lessors) to individual owners (as lessees) give the individuals the exclusive right to occupy their own property. A cross-lease title is a combination of the owner’s share in the freehold plus the owner’s lease as lessee.

Deposit

Part of the purchase price (usually 10%) paid by the buyer when the Agreement is signed or becomes unconditional.

Electronic Transaction

A way of transferring title electronically instead of by paper transfer. We have a licence from Land Information New Zealand (“LINZ”) to do this.

Equity

What you own – rather than owe! The market value of your property less what you owe on your mortgage. Your equity will increase as the value of your property increases and the amount of your mortgage decreases.

Fee Simple Title

You own the property even if you have a mortgage. Also known as a freehold title, although some people do not regard their title as freehold until the mortgage has been paid off. It is the most common form of title in New Zealand.

Interest

Interest is the cost of borrowing money, usually expressed as an annual percentage of the amount borrowed. Interest is usually paid monthly for housing loans, but can be paid at different intervals.

Leasehold Title

You do not own the property, but a “lease” gives you the right to occupy the property. “Tenancy Agreements” are leases. It is possible to lease a property and own the building on the property. Your lease might also include an option to purchase. Ask us to explain the terms of the lease to you before you sign anything, and in particular, to identify costs in addition to rent (if any) the lease requires you to pay.

Mortgage

The security you give your lender and which is usually registered against the title to the property that you buy. The property cannot be sold, except in rare cases, without the loan being repaid and the mortgage removed from the title (discharged). The lender can sell your property if you fail to do what your mortgage requires you to do. However, the lender must first meet certain legal requirements, which include giving you an opportunity to remedy any defaults. We will explain the consequences of signing your mortgage.

Possession Date

The date when the purchaser takes physical possession of the property.

Principal (Sum)

The amount you borrow.

Purchaser

The person who buys the property.

Settlement Date

When the purchase price of the property is paid in full. Usually the same date as the possession date.

Term (of your loan)

The period of time over which your loan (mortgage) is to be repaid. The longer the term, the more you pay.

Title

The Certificate of Title is an electronic document that describes the property and shows the legal owner of the property. In New Zealand it can be a freehold, leasehold, cross-lease or unit title.

Unconditional Agreement

An Agreement not subject to any conditions; as buyer you must buy; as seller you must sell. Don’t sign one unless you have discussed it with us first.

Unit Title

Used for apartments and units. Each owner has freehold title to an apartment or unit and any garage/parking space or similar area attached to it. A unit plan shows their locality. Owners of units and apartments share common areas (e.g. driveways and lifts) and the cost of looking after them.

Valuation

Your local Council uses a valuation for rating purposes (previously Government Valuation). The valuation is only a guide to the market value of the property. A private valuation, carried out by a professional valuer or Quotable Value New Zealand, should give a more accurate value.

Vendor

The person who sells the property. The vendor pays the commission to the real estate agent who arranges the sale of the property.

14. WHAT ELSE CAN WE DO FOR YOU?

We deal with many personal, family, business and property matters and transactions. Only a lawyer has the training and experience to advise you on matters relating to the law. If we can’t help you with a particular matter then we will refer you to another specialist. Seeing us before a problem gets too big can save you anxiety and money.

Like other professional people, we charge for time, experience and skill in looking after your affairs. Ask at the beginning about the likely cost or tell us that you don’t want to spend more than a certain sum without our checking with you.

Choose your own lawyer for independent advice. You do not have to use the same lawyer as your partner or anyone else involved in the same legal matter. In fact, sometimes you must each get independent legal advice. We will always act for you.

We will:
  • Treat your business as completely confidential;

  • Give you independent advice;

  • Use our skills for your benefit; and

  • Give value for what you have to pay.

 

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