buying or selling a property

8/6/2019 Buying or Selling a Property

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BUYING OR

SELLING APROPERTY

Do the right thing see your lawyer frst


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Contents

1. Get the most from your property experience

2. Do the right thing see your lawyer frst

3. Stay in control

4. What is the process?

5. Your lawyers role

6. Checks what needs to be done and who will doit 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 your lawyer do for you?


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1. Get the most from yourproperty experience

New Zealanders like to own their own homes and, or mosto us, itll be our biggest investment.

Whether you are buying or selling or the rst time or not,you will want the experience to be positive and rewarding.

You can avoid a lot o potential stress, cost and rustration by

ollowing the basic steps in this brochure.

2. Do the right thing see your lawyer frst

Choose a property lawyer get recommendations romriends, amily, work colleagues or your local branch o

the New Zealand Law Society (see list on page 18). You can

also visit www.propertylawyers.org.nz

See your lawyer and make sure that whatever you sign isright or you be ore you sign it. Remember:

You usually cant change an agreement after you havesigned it.

Your agreement might be with your agent (an authorityto sell) or with the property buyer or seller.

You can save money and anxiety by seeing your lawyerrst.

Your lawyer can help you prevent small problems turnin

into big ones.


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3. Stay in control

Whether you are buying or selling a property, you are theone who must be satis ed with the outcome not the agent,not your amily or riends. Stay in control o the process andlet your lawyer help you to:

understand what your lawyer can do for you; understand the buying and selling process;

avoid the pitfalls; work out your nancial limitations how much you can

borrow, how much you can a ord to repay; nd out the other costs of buying or selling a property; complete any other legal work you might need such as

making a will, preparing enduring powers o attorney,setting up a trust, taxation or property relationshipmatters;

understand the agents role, who they work for, how theyare paid and how you can get best value rom them.

4. What is the process?The beginning

Select a real estate agent andcon rm the sale method

(multiple listing/sole agency,auction/tender) and pricerange.

You nd that dream home!Remember, do not sign the agreement before your lawyerhas had a chance to discuss it with you.

alk to your property lawyerabout your options andthe outcomes you want,including choice o agent,selling methods and pricerange.

Seller Buyer

alk to your property lawyer.Consider the price range

or the type o property you want and how much you cana ord to borrow.

Decide what you shoulddo to make the house moresaleable and get on withthose jobs.

Complete the checklist onpage 8 to identi y the thingsyou are looking or in aproperty.

Identi y key real estateagents; check out their

listings in publications and websites.


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Te contract is declaredunconditional.

Te contract is declaredunconditional.

The middle

Seller Buyer

Your lawyer can helpyou negotiate the price,settlement date andconditions to achieve thebest outcome or you.

Your lawyer will help younegotiate the price andconditions you want. Yourlawyer will advise you o any research you should do onthe property.

You sign a nal agreed o er a ter talking with yourlawyer, as this becomesthe binding agreement.Dont sign more thanone agreement unless it isabsolutely clear that thesubsequent agreement is aback-up that will take e ectonly i the rst one allsthrough.

You sign a nal agreed o er a ter talking with yourlawyer, as this will becomethe binding agreement.

Make sure the deposit youreceive is sufcient to coverany commission to the realestate agent that will all due

when the contract becomesunconditional (even i thepurchaser ails to completethe purchase).

Consider your loan options your lawyer can help youapply or a loan.

Get the title checked.

Get a Land In ormationMemorandum (LIM), avaluation and, i required, a

builders or engineers report.

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

ry to resolve any title orLIM problems with thevendor.

Check that all conditionshave been met.

Check that all conditionshave been met.


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A property transaction is like an iceberg. You, as the

client, will see only a small part o the work that needsto be done to complete the deal. Behind the scenes, yourproperty lawyer will make sure that it goes through with theminimum o uss. Your lawyer will look a ter your interestsevery step o the way.

Move out on settlement/possession date, or otheragreed date.

Move in on settlement/possession date, or otheragreed date.

The end

Seller Buyer

Arrange insurance. You sign the authority thatenables the lawyer to trans ertitle to the buyer.

You sign the authority that enables the lawyer toregister the trans er romthe seller and the mortgagecharge. You also sign loanagreements or the mortgage.

Your lawyer will organiserepayment o any mortgage.

Your lawyer will con rmthe amount required onsettlement and assist you toarrange payment.

Organise the keys orhanding over.

Organise your move andchange o address. Advisephone, power and otherutility companies o yourmoving out date and havemeters read.

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

Allow the buyer to re-inspect the property be oresettlement.

Be ore settlement, carry outthe nal inspection o theproperty you are buying.


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6. Checks what needs to bedone and who will do it for

you?

Tere are many checks you can make to be sure that whatyou are buying is really what you want. Your lawyer willknow what checks to make and who can make them or you.

For example, youll want to know: Are there any problems with the title? Get a title search.

Are there any problems with the buildings? Get abuilders (and /or engineers) report.

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5. Your lawyers role

Your lawyer should protect your interests and ensure thesmoothest, simplest, most efcient transaction or you,

whether you are buying or selling.

Unlike others involved at various stages of aproperty transaction, your property lawyer: gives you independent advice;

acts to protect your interests;

understands the process well;

has experience in negotiating for buyers and sellers;

knows potential pitfalls and traps;

knows you and your personal circumstances (or isprepared to nd out);

knows the law; and

understands that buying and selling can be an emotionaland stress ul time and tries to steer around that!

Remember, get your lawyers advice be ore signing anything.Documents can be emailed or axed to your lawyer whenthere is any urgency.

When you go to see your lawyer, take a list o the questionsyou want to ask. Te nal decision in all matters will beyours. Make sure you have enough in ormation to make theright decision.


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7. Loans so many choices!

Tere are a lot o choices or loans to buy property. Many

lawyers provide a ree mortgage-broking service. Your lawyercan provide unbiased advice about the best source o nanceor you and about related matters, including:

how long the term of your loan should be;

the interest rate whether oating or xed; if xed, 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 ull replacementor indemnity, and with whom (the cheapest is not alwaysthe best).

Some o these decisions a ect how long it will take to pay o your loan and how much interest you will pay overall.

Have all council requirements been met? Get a LIMreport.

Is the price good value for this property? Get a reportrom Quotable Value New Zealand or a registered valuer.

Your lawyer can assist with any research required about theproperty, including advising you on any reports you obtain.Tis work is insurance against disappointment and perhapssubstantial additional costs i you have to x something later.

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8. Buying a property ownership and other issues

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

Should you own the property in your own name, a trust ora company? ere are taxation and other issues here. ereare also taxation and other implications i you are buyingproperty as an investment.

You might buy the property as a single person, as a married,civil union or de acto (including same sex) couple, with a

riend or in a business partnership.

Ask your lawyer:

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 commonmean?

Do you need a property ownership agreement?

Does a will make any di erence to the form ofownership?

How do wills and trusts work together?

How does the Property (Relationships) Act a ect you oranyone you buy a property with?

Take another scenario where your family isprepared to help you fnancially:

Should your family lend or give you the money?

If it is a gift, will your family have to pay gift duty?

If it is a loan, how will it be protected and how willpay it back?

What are the implications of a guarantee?

Te decisions you make now might have importantconsequences later on when you sell the property or i yourrelationship ends.

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9. Your property checklist

Here are some of the questions you should consider whendeciding what property to buy, what area to buy in and how much you should pay. You might also have questions aboutmore personal issues. Add your own points to the checklistand rank them in order o 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 atrust or company?

Property insurance should it be ull replacement valueor just indemnity value?

Property issues Location (consider your objectives and possible capital

gains)

Outlook, view

Standard and condition of nearby houses, neighbourhoodgenerally

Closeness to schools, shops, church, parks, medicalacilities, other services

Transport

Sun and shade, general weather patterns

Access steps, paths, driveway

Trees, hedges, gardens, lawns, secure fencing

Suitability for children, pets

Pool is it fenced properly?

Accommodation issues Number of bedrooms

Number of bathrooms/toilets (showers or baths)

Laundry/laundrette


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Kitchen size and amenities

Separate living areas (dining, lounge, family room, study

Storage Carport, garage (door opener), o -street parking

Outdoor living amenities

Facilities Mains power, water, gas

Mains sewer/stormwater

Rubbish collection, mail/paper delivery

Features Telephones, TV/Sky aerial/digital dish

Chattels curtains, carpets, stove, light ttings Storage, shelving

Insulation, heating

Alarm system

Dcor, maintenance, weathertightness.

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10. How much can you affordto pay for a home?

When you are planning to buy a home, you think rst o what you would like and then it comes down to what youcan actually a ord.

What do you earn?

What have you saved? What other debts and commitments do you have (such a

hire purchase)?

What can you a ord to pay back on a loan?

What other costs are involved in buying and owningyour home (eg, rates, body corporate ees, insurance,maintenance)?


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11. Other sale and purchasecosts

Seller

Agents commission $_________

Water rates (estimated) $__________

General rates instalments due $__________

Mortgage discharge registration ees $__________

Legal ees $__________

Moving costs $__________

O AL $__________

Buyer

Loan application ee $__________

Mortgage repayment insurancepremium $__________

itle search ees $__________

Valuation ee $__________

Builders report ee $__________

LIM ee to local council $__________

rans er and mortgage registrationees $__________

Legal ees $__________

Moving costs $__________

Share o rates $__________

Property insurance $__________

O AL $__________


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12. Frequently asked questions

Do I need a Land Information Memorandum (LIM)?

It is recommended that you get a LIM i you are buying aproperty. e standard Agreement for Sale and Purchaseincludes a LIM condition, provided you select it on the

ront page. A LIM provides in ormation the council holdsabout the property. It will show whether existing workshave received council consent and whether the councilrequires any remedial work. It might, or example, show a re burner has been installed without the appropriatecerti cation. Tis could invalidate insurance on the property (eg, i the burner causes re damage). A LIM report willalso give you in ormation about any site characteristics (suchas contamination, propensity to ooding, etc) and zoning

details. You can ask the seller to x any de ects disclosed inthe LIM and cancel the contract i the seller re uses to do so.But remember, the LIM provides in ormation only aboutthose things reported to the council not those that haventbeen reported.

Who searches the title to the property?Both sellers and buyers should ask their lawyers to searchthe title. Sellers should, among other things, make suretheir property details are correct. Buyers should identi y everything registered against the title that might a ect theiruse and enjoyment o the property eg, easements includingrights o way, drainage and sewerage, electricity, telephone,gas, etc. Your lawyer will also check what needs to beremoved rom the title be ore you settle, such as the sellersmortgage.

Should I get the survey plan for the land beingpurchased?

Your lawyer should, in particular, get plans showing thesite o buildings on the property when you are buying across-lease title or unit title. You should check, among

other things, that the plans accurately show the outlines o the buildings on the land. For example, people sometimesadd an extra room to a house on a cross-lease title without

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changing the plan to include the extra room. Te cross-leasetitle is then de ective. You might also need to get survey plans or other reasons, such as identi ying the location o

boundaries or easements.

Should I get a builders (or engineers) report on theproperty?It is now quite common or a buyer to ask or a buildersand/or engineers report on a property. Buyers wantinga report should include an appropriate condition in theagreement. Te condition usually allows the buyer to cancelif the report is not satisfactory. e Weathertight HomesResolution Service run by the Department o Building andHousing will, if asked, check if the property is subject to aclaim.

What about when a property is sold by auction?

Buying

Auction agreements are usually signi cantly di erent

from standard sale and purchase agreements. Forexample, you cant make an o er subject to nance orconditional on checking title matters and council recordsa ter the auction, so you need to make these inquiriesbe ore bidding.

Always discuss the auction terms of sale with your lawyer

well be ore the auction so these things can be checkedrst. You will have to pay the costs involved withoutany guarantee that you will be the success ul bidder.However, you cannot a ord not to make these checks.

Also check that you can meet the nancial terms ofsale, including the deposit required at auction and the

settlement date.Selling

Ask your lawyer to check the auction terms of sale beforethey are made available to the public.

Make sure your reserve price re ects the propertys real

value but is realistic. Competitive bidding for a sought-after property may

bring you more than you expect or would get throughanother selling method.

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What are council rates?Te local council (sometimes called the local or territorialauthority) and local regional council charge annual rates on

each property or the services they provide. Rates are setannually and collected throughout the year in instalments.Each council xes its own number o instalments usually between two and ve each year. Your lawyer will make surerates are adjusted on settlement. You will pay rates up to thesettlement date i you sell and rom the settlement date i you buy.

What if I buy a property with my de facto partner?Tere are now major implications or de acto (includingsame sex) couples buying or owning property and even orthose who live in the property that just one o them owns.See your lawyer! Part 8 of this pamphlet sets out a lot othe issues you will need to consider i you buy a property inthese circumstances. Make sure you discuss these issues withyour lawyer be ore you sign the agreement to purchase.

13. Commonly used terms

Agreement (also called the Agreement for Sale andPurchase)

A written contract or the sale and purchase o the property between the seller (vendor) and the buyer (purchaser). Neversign one without rst discussing it with your lawyer.

Body corporate

Te name or all the owners o unit titles on one underlyingreehold title. Te Unit itles Act includes rules or owners

to elect a body corporate committee and other rules that, orexample, govern the use o common areas. Some, but notall, o these rules can be altered by the required percentageo votes o unit owners. Each owner gets a number o votes

based on the value o their unit. Make sure your lawyerchecks the body corporate rules and explains them to you i you buy a property with a unit title.

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ChattelsItems included in the sale that are not legally part o abuilding. Tey usually include any stove, television aerial,

carpets, blinds, curtains, drapes and light ttings on theproperty. Tey may also include rangehoods, dishwashers,re rigerators, heaters and so on. Make sure the agreementcorrectly includes the chattels you intend to buy or sell.Chattels not speci cally listed in the agreement are notincluded in the sale.

Conditional agreement A legally-binding agreement that can be cancelled i certainconditions are not satis ed. An agreement can, or example,be conditional on: the buyer arranging suitable nance to complete the

purchase; the buyer getting a satisfactory builders report or valuers

report; the seller nding another property.

e agreement becomes unconditional when all the

conditions are satis ed. Ask your lawyer to make sure all theconditions you need are included in the agreement.

Cross-lease (title)More than one dwelling (or commercial premises) isincluded on one reehold title. All owners jointly own

the reehold title. Leases by all the owners (as lessors)to individual owners (as lessees) give the individuals theexclusive right to occupy their own property. A cross-leasetitle is a combination o the owners share in the reeholdplus the owners lease as lessee.

DepositPart of the purchase price (usually 10%) paid by the buyer

when the agreement is signed or becomes unconditional.

Electronic transaction

A way o trans erring title electronically instead o by papertrans er. Your lawyer needs to have a licence rom LandIn ormation New Zealand (LINZ) to do this.

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Equity

What you own rather than owe! Te market value o yourproperty less what you owe on your mortgage. Your equity

will increase as the value o your property increases and theamount o your mortgage decreases.

Fee simple (title) You own the property even i you have a mortgage. Alsoknown as a reehold title, although some people do not

regard their title as reehold until the mortgage has been paido . It is the most common orm o title in New Zealand.

InterestInterest is the cost o borrowing money, usually expressed asan annual percentage o the amount borrowed. Interest is

usually paid monthly or housing loans, but can be paid atdi erent intervals.

Leasehold (title) You do not own the property, but a lease gives you theright to occupy the property. Tenancy agreements are

leases. It is possible to lease a property and own the buildingon the property. Your lease might also include an optionto purchase. Ask your lawyer to explain the terms o thelease to you be ore you sign anything and, in particular, toidenti y costs in addition to rent (i any) the lease requiresyou to pay.

MortgageTe security you give your lender and which is usually registered against the title to the property you buy. Teproperty cannot be sold, except in rare cases, without theloan being repaid and the mortgage removed rom the title(discharged). Te lender can sell your property i you ailto do what your mortgage requires you to do. However,the lender must rst meet certain legal requirements, whichinclude giving you an opportunity to remedy any de aults.Make sure your lawyer explains the consequences o signingyour mortgage.

Possession date Te date when the buyer takes physical possession o the property.

Principal (sum)Te amount you borrow.

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PurchaserTe person who buys the property.

Settlement date When the purchase price o the property is paid in ull.Usually the same date as the possession date.

Term (of your loan)Te period o time over which your loan (mortgage) is to be

repaid. Te longer the term, the more interest you pay.

TitleTe Certi cate o itle is an electronic document thatdescribes the property and shows the legal owner o theproperty. In New Zealand, it can be a reehold, leasehold,

cross-lease or unit title.

Unconditional agreement An agreement not subject to any conditions: as buyer youmust buy; as seller you must sell. Dont sign one unless youhave discussed it with your lawyer rst.

Unit titleUsed or apartments and units. Each owner has reeholdtitle to an apartment or unit and any garage/parking space orsimilar area attached to it. A unit plan shows their locality.Owners o units and apartments share common areas (eg,

driveways and li ts) and the cost o looking a ter them.

Valuation Your local council uses a valuation or rating purposes(previously the Government Valuation). Te valuation isonly a guide to the market value o the property. A private

valuation, carried out by a pro essional valuer or QuotableValue New Zealand, should give a more accurate value.

VendorTe person who sells the property. Te vendor pays thecommission to the real estate agent who arranges the sale o

the property.


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14. What else can your lawyerdo for you?

Lawyers deal with many personal, amily, business andproperty matters and transactions. No one else has thetraining and experience to advise you on matters relatingto the law. I your lawyer cant help you with a particularmatter, he or she will re er you to another specialist. Seeinga lawyer be ore a problem gets too big can save you anxiety

and money.Lawyers must ollow certain standards o pro essionalbehaviour as set out in their rules o conduct and client care.

When you instruct a lawyer, he or she must provide you withcertain in ormation, as outlined in our brochureSeeing alawyer what can you expect?

Tis includes in orming you up ront about the basis on which ees will be charged, and how and when they are to bepaid. Te ee, which must be air and reasonable, will takeinto account the time taken and the lawyers skill, specialisedknowledge and experience. It may also depend on the

importance, urgency and complexity o the matter. Terecould also be other costs to pay, such as court ees.

You should discuss with your lawyer how you will pay orthe work and advise i you dont want to spend more than acertain sum without the lawyer checking with you. A lawyer

is required to tell you i you might be entitled to legal aid.Te brochure Seeing lawyer what can you expect? alsooutlines how you can help control your legal costs and getbest value rom your lawyer.

Choose your own lawyer or independent advice. You do

not have to use the same lawyer as your partner or anyoneelse involved in the same legal matter. In act, sometimesyou must each get independent legal advice.

Lawyers must have a practising certi cate issued by theNew Zealand Law Society. You can call the Law Society on (04) 472 7837 (or at one of the o ces listed below)email [email protected] to see i the person youplan to consult holds a current practising certi cate. Youcan also check this on the register accessible through the

website www.lawsociety.org.nz

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I you have a concern about a lawyer, you can talk to theLawyers Complaints Service, tel 0800 261 801.

I you dont have a lawyer:

ask friends or relatives to recommend one;

look in the Yellow Pages under lawyers orbarristers and solicitors;

inquire at a Citizens Advice Bureau or Community

Law Centre;check these websites:- www.lawsociety.org.nz/home/for_the_public/

nd_a_lawyer- www.familylaw.org.nz- www.propertylawyers.org.nz

contact your local New Zealand Law Society branch:

Auckland (including Northland, (09) 304 1000South Auckland, Coromandel)

Waikato Bay of Plenty (including Taupo) (07) 838 0264

Gisborne (06) 867 1562

Hawkes Bay (06) 835 1254

Taranaki (06) 758 3238

Wanganui (06) 345 7092

Manawatu (06) 356 2214 Wellington (including Wairarapa) (04) 472 8978

Nelson (03) 545 2613

Marlborough (03) 578 7269

Canterbury-Westland (03) 366 9184Otago (03) 477 0596

Southland (03) 218 8778


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Law Awareness ProgrammeTe New Zealand Law Society publishes this pamphlet aspart o itsLaw Awareness Programme to in orm you o your

legal rights, the law and how lawyers can help you. Te ulllist o titles in this series is:

Buying or selling a property

Over the ence ... are your neighbours

Domestic violence

What happens to your children when you part?

Dividing up relationship property

What happens when your relationship breaks up?

Living together

Te amily trust

Making a will and estate administration

Powers of attorney

Motor vehicles, accidents and alcohol

You and the policeGiving evidence

Going into business

Client care brochures

Te Law Society also publishes the ollowing brochuresoutlining the standard o service that clients can expect

rom their lawyers and about the Lawyers ComplaintsService:

Seeing a lawyer what can you expect?

How to complain about a lawyer

Copies o the Law Awareness pamphlets and the clientcare brochures may be obtained rom the New ZealandLaw Society, PO Box 5041, Lambton Quay, Wellington6145, tel (04) 472 7837, fax (04) 463 2985, [email protected] or from Citizens AdviceBureaux or Community Law Centres. Tey are supplied

ree to individuals and non-pro t community serviceorganisations, and at a small charge to others. Tey are alsoavailable on the Law Society website www.lawsociety.org.nz/home/for_the_public/how_can_we_help_you


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Notes


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Notes


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Property Law Section of the New Zealand Law SocietyPO Box 5041, Lambton Quay, Wellington 6145

Tel: 0800 745 754email: [email protected]

To the best of the New Zealand Law Societys knowledge,the information in this pamphlet is true and accurate as at the date below. However, the Law Society assumes no liability for any losses suffered by any person relying directly or indirectly on information in this pamphlet. It is recommended that readers consult a lawyer before acting on this information.

Reprinted July 2009