Property Transactions
Frequently Asked Questions about Buying Residential Property - Page 1
When we have spent some time pouring over the Property Guides in Web Sites and Papers and Real Estate Magazines and going to numerous open homes and have found the property for us
- What Should we Do?
We recommend that before you sign any document which creates legal obligations between you and the vendor you Talk to Us First.
Remember: the Real Estate Agent wanting you to sign the agreement, often in pressured circumstances, does not act for you.
The agent is the agent of the vendor.
When the agent says: " this clause in the conditions will protect you", make sure that you get the agent to send us the proposed contract before you sign it so that we can advise as to the provisions you are contemplating putting in it, and any conditions the vendor requires. Be aware that clauses which say "subject to my lawyer's approval within X days" have been held by the Courts not to be effective in various circumstances, and vendors have obtained orders against purchasers requiring the purchase to be settled when the purchasers thought they had "an out".
The legal costs you are likely to incur relating to a residential property purchase will be in the range of $2,000.00 to $3,000.00 plus disbursements and GST. Transactions involving unit titles and related body corporate matters often require additional legal attendances on your behalf; as do transactions involving apartments owned through company share structures. Building Contracts can require considerable attendances relating to the finalising the agreement and to ensure it conforms to the plans and specifications. If you retain us to act for you we will give you an estimate of the likely costs and disbursements for the transactions at the time we send you our engagement letter. The recent requirements imposed by the AML/CFT Act have created added costs for property purchasers.
We recommend you instruct us to advise you before you sign an agreement to purchase.
Matters you need to consider are:
1. The title to the property: is it freehold, leasehold, a cross lease title, Maori Land, Maori Freehold, or company shares and a licence to occupy; or part of a unit title development. Is it a Retirement Village occupation right?
2. What do the survey plans show; are there any easements which impact on the owner's use? Is the property correctly identified on the survey plan?
3. Who is to take title to the property, and in what shares? Will it need to be some other entity?
4. How will you pay for the property? Is a loan required, and on what terms? Who has negotiated the loan for you; have you got the best terms possible? Have you budgeted for the repayments? What if……..?
5. Do you have to sell another property?
6. Is this your first home purchase? Are you relying on Kiwisaver for part of your contribution to your equity? What is your total equity?
7. What conditions should be included in the purchase agreement?
8. Will you be able to obtain appropriate insurance, at a reasonable premium? What happens between contract and settlement if a natural disaster intervenes?
9. What due diligence do you need to carry out prior to making your offer; or as a condition of your offer? This includes a Land Information Memorandum, a search of the title and any encumbrances registered against it. You need to understand the effect of any relevant interests, restrictions or encumbrances on the title. These steps should be taken before any agreement is signed.
10. If it is a Cross Lease Title some difficult issues may arise as to whether all the buildings on the property are on the flats plan and configured as per the plan; or if exclusive use areas on the plan correspond with the physical layout and usage. Defects may require to be remedied.
11. Body Corporate Rules bind all owners of Unit Titles. Appropriate due diligence is essential if you are buying a Unit Title. You need to obtain certain disclosures from the Vendor, including pre-contract. You need to understand how a Body Corporate works. You need to know what has gone on in the Body Corporate before you purchase.
12. Maori Land and Maori Freehold Land have special provisions relating to them. Again, careful due diligence is required at the pre-contract stage if you are buying.
13. What chattels are being sold?
14. Is the property tenanted? Special provisions apply if it is. Is the property sold subject to tenancy?
15. What about GST? Is the vendor registered for GST and on what basis? Are you? What is the impact of GST on the transaction? GST is a difficult arena. Do not be caught out. Is the purchase price ‘plus GST’ or ‘GST inclusive’? Are there any other tax issues for you? For example, can borrowing be structured so that interest paid by you is tax deductible?
16. Is it sensible to obtain a valuer's report?
17. What about reports from a builder, or engineer? Has the house been built in accordance with the required Local Authority consents? Has all building work, including work carried out after the house was built been properly consented and code compliance issued.
18. Do the dates by which any condition is to be satisfied give you reasonable time to satisfy the relevant condition?
19. What values (if any) should be placed on chattels, shares, dwelling, section, forestry, lease goodwill, livestock, stock in trade.
20. Then you need to resolve the particular items to be included in the form of the agreement, including:
20.1 The purchase price;
20.2 The deposit, and when it is payable, and who should hold it;
20/3 The position regarding GST including, in particular, the GST date;
20.4 The possession date and settlement date;
20.5 The finance, LIM and OIA clauses;
20.6 The chattels included in the sale;
20.7 Any warranties given in relation to the property and the chattels;
20.8 The implication of the risk and insurance provisions in the agreement and the implications of not being able to arrange insurance from the possession date (especially if finance is required);
20.9 The implications of any clauses included as further terms of sale;
20.10 The implications of the general terms of sale particularly if they are of special relevance to the purchaser’s circumstances;
20.11 The implications of the particular form of title and what is required to undertake due diligence.
20.12 Carports, garages, garden sheds, decks, conservatories and woodburning installed fires can often cause problems.
21. Then when you get a contract subsequent negotiations may be required about matters neither the vendor or you have covered in the contract.
22. Both prior to and after settlement of your purchase legal issues can arise which require the best possible outcome to be achieved for you. That is what we do.
23. We are usually instructed by your lender to act on its behalf to prepare the documents to secure its loan to you.
23. Then there are all the other conveyancing aspects of the transaction, including electronic settlement and registration of the title into your name. With your lender also registered as mortgagee.
24. When everything is completed you receive a final report and accounting. And so begins or continues your life as a property owner.
What should I do if the contract goes wrong?
Contact JDLO immediately you receive any notification that any part of the agreement which you have signed is not being honoured by the other party to the contract.
Click here to Read the NZLS Pamphlet on Buying and Selling Property
- What Should we Do?
We recommend that before you sign any document which creates legal obligations between you and the vendor you Talk to Us First.
Remember: the Real Estate Agent wanting you to sign the agreement, often in pressured circumstances, does not act for you.
The agent is the agent of the vendor.
When the agent says: " this clause in the conditions will protect you", make sure that you get the agent to send us the proposed contract before you sign it so that we can advise as to the provisions you are contemplating putting in it, and any conditions the vendor requires. Be aware that clauses which say "subject to my lawyer's approval within X days" have been held by the Courts not to be effective in various circumstances, and vendors have obtained orders against purchasers requiring the purchase to be settled when the purchasers thought they had "an out".
The legal costs you are likely to incur relating to a residential property purchase will be in the range of $2,000.00 to $3,000.00 plus disbursements and GST. Transactions involving unit titles and related body corporate matters often require additional legal attendances on your behalf; as do transactions involving apartments owned through company share structures. Building Contracts can require considerable attendances relating to the finalising the agreement and to ensure it conforms to the plans and specifications. If you retain us to act for you we will give you an estimate of the likely costs and disbursements for the transactions at the time we send you our engagement letter. The recent requirements imposed by the AML/CFT Act have created added costs for property purchasers.
We recommend you instruct us to advise you before you sign an agreement to purchase.
Matters you need to consider are:
1. The title to the property: is it freehold, leasehold, a cross lease title, Maori Land, Maori Freehold, or company shares and a licence to occupy; or part of a unit title development. Is it a Retirement Village occupation right?
2. What do the survey plans show; are there any easements which impact on the owner's use? Is the property correctly identified on the survey plan?
3. Who is to take title to the property, and in what shares? Will it need to be some other entity?
4. How will you pay for the property? Is a loan required, and on what terms? Who has negotiated the loan for you; have you got the best terms possible? Have you budgeted for the repayments? What if……..?
5. Do you have to sell another property?
6. Is this your first home purchase? Are you relying on Kiwisaver for part of your contribution to your equity? What is your total equity?
7. What conditions should be included in the purchase agreement?
8. Will you be able to obtain appropriate insurance, at a reasonable premium? What happens between contract and settlement if a natural disaster intervenes?
9. What due diligence do you need to carry out prior to making your offer; or as a condition of your offer? This includes a Land Information Memorandum, a search of the title and any encumbrances registered against it. You need to understand the effect of any relevant interests, restrictions or encumbrances on the title. These steps should be taken before any agreement is signed.
10. If it is a Cross Lease Title some difficult issues may arise as to whether all the buildings on the property are on the flats plan and configured as per the plan; or if exclusive use areas on the plan correspond with the physical layout and usage. Defects may require to be remedied.
11. Body Corporate Rules bind all owners of Unit Titles. Appropriate due diligence is essential if you are buying a Unit Title. You need to obtain certain disclosures from the Vendor, including pre-contract. You need to understand how a Body Corporate works. You need to know what has gone on in the Body Corporate before you purchase.
12. Maori Land and Maori Freehold Land have special provisions relating to them. Again, careful due diligence is required at the pre-contract stage if you are buying.
13. What chattels are being sold?
14. Is the property tenanted? Special provisions apply if it is. Is the property sold subject to tenancy?
15. What about GST? Is the vendor registered for GST and on what basis? Are you? What is the impact of GST on the transaction? GST is a difficult arena. Do not be caught out. Is the purchase price ‘plus GST’ or ‘GST inclusive’? Are there any other tax issues for you? For example, can borrowing be structured so that interest paid by you is tax deductible?
16. Is it sensible to obtain a valuer's report?
17. What about reports from a builder, or engineer? Has the house been built in accordance with the required Local Authority consents? Has all building work, including work carried out after the house was built been properly consented and code compliance issued.
18. Do the dates by which any condition is to be satisfied give you reasonable time to satisfy the relevant condition?
19. What values (if any) should be placed on chattels, shares, dwelling, section, forestry, lease goodwill, livestock, stock in trade.
20. Then you need to resolve the particular items to be included in the form of the agreement, including:
20.1 The purchase price;
20.2 The deposit, and when it is payable, and who should hold it;
20/3 The position regarding GST including, in particular, the GST date;
20.4 The possession date and settlement date;
20.5 The finance, LIM and OIA clauses;
20.6 The chattels included in the sale;
20.7 Any warranties given in relation to the property and the chattels;
20.8 The implication of the risk and insurance provisions in the agreement and the implications of not being able to arrange insurance from the possession date (especially if finance is required);
20.9 The implications of any clauses included as further terms of sale;
20.10 The implications of the general terms of sale particularly if they are of special relevance to the purchaser’s circumstances;
20.11 The implications of the particular form of title and what is required to undertake due diligence.
20.12 Carports, garages, garden sheds, decks, conservatories and woodburning installed fires can often cause problems.
21. Then when you get a contract subsequent negotiations may be required about matters neither the vendor or you have covered in the contract.
22. Both prior to and after settlement of your purchase legal issues can arise which require the best possible outcome to be achieved for you. That is what we do.
23. We are usually instructed by your lender to act on its behalf to prepare the documents to secure its loan to you.
23. Then there are all the other conveyancing aspects of the transaction, including electronic settlement and registration of the title into your name. With your lender also registered as mortgagee.
24. When everything is completed you receive a final report and accounting. And so begins or continues your life as a property owner.
What should I do if the contract goes wrong?
Contact JDLO immediately you receive any notification that any part of the agreement which you have signed is not being honoured by the other party to the contract.
Click here to Read the NZLS Pamphlet on Buying and Selling Property
Remember this: the Real Estate Agent does not act for you. The Real Estate Agent acts for the vendors.
Current as at November 2024
Current as at November 2024