What to expect when buying and selling

24 Nov 2016

By Amanda Brady, Registered Legal Executive, Aspiring Law

The property market’s never far away from the headlines these days – skyrocketing prices, predictions on when the boom will bust, and the latest on the Government’s initiatives to cool the buying frenzy.

Still, houses are being traded, and the same old legal considerations are just as important to ensuring your interests are covered. Who knows how the property selling season will end, but one thing’s for sure: the need for sound due diligence and a good understanding of the process hasn’t changed a bit.

Some of you might never have traded property before, while, for others, it might have been a while since you’ve held a sales and purchase agreement. So, we’ve put together a simple overview and some key considerations to get you started, whether you’re buying or selling.

Please remember, as always, these are general guides, and we recommend you seek personalised legal advice from the outset, and certainly do not sign anything until you’ve consulted a lawyer.

WHAT TO EXPECT ... WHEN YOU'RE BUYING

Before you sign

Talk to us before you sign an agreement to purchase a property. Buying property is likely to be one of the biggest investments in your life, so doing it right the first time could save you a lot of heartache and money.

Once an agreement is signed correctly and dated it’s binding and not easy to get out of if you “change your mind”.

We recommend you make any agreement conditional on due diligence. This gives you an opportunity to take off the rose-tinted glasses and look at the property objectively to make sure it’s right for you in all respects. If it transpires the property is not “the one” the agreement may be cancelled on the basis that the result of your due diligence investigation was not satisfactory – but you need to be sure your condition clauses are appropriately and carefully worded to ensure you’re covered.

We also recommend you get your own Land Information Memorandum (LIM) and building report (if applicable) to make sure there are no hidden surprises about the land and/or building(s).

Other key considerations include:

Do you have sufficient funds to purchase the property? Will you be:
- Taking a mortgage over the property?
- Withdrawing your KiwiSaver funds?
- Applying for a Housing New Zealand grant or Queenstown Lakes Community Housing Trust loan?

Note: Any ‘unconditional’ or ‘pre-approved’ offer for finance from a bank does not mean you are guaranteed finance – if it transpires there are encumbrances/charges registered on the title for the property you’re purchasing that the bank does not agree with, you could be declined finance at the 11^th hour.

Is there enough time to make the required applications to access funds before committing to buy the property?
Is the property tenanted, and what does this mean for you?
What, if any, tax implications could there be when you come to sell the property?
Do you have enough time to obtain an IRD number (if necessary)?

The agreement

Some key factors you need to know if you have conditions to meet in the agreement:

You’re not obliged to confirm a condition or otherwise until the due date of the condition.
If you don’t confirm a condition by the due date and time, the vendor may cancel the agreement.
The agreement remains live until either party cancels it when they are legally entitled to do so (for example, non-fulfilment of a condition by the due date).Important: Talk to us before entering into another agreement to make sure the prior agreement is not still active.
The LIM condition is covered under the General Terms of the Agreement. Unless otherwise specified, the condition is due 15 working days (excludes weekends and public holidays) from the date of the agreement.
The building report condition is also covered under the General Terms of the Agreement. Unless otherwise specified, the condition is due 10 working days (excludes weekends and public holidays) from the date of the agreement.

The deposit

The deposit (if any) is usually paid to the agent who holds it as stakeholder for the statutory period of 10 working days following receipt. The deposit may be released earlier if both parties agree to its early release. If the property is part of a subdivision where title has yet to issue, the deposit will be held by the vendor’s solicitor until issue of title.

Things we need to know

To help us to provide the best possible service to you, please let us know:

How you will be funding the purchase and, if by bank loan, which bank. Do you have a mortgage broker? As we act for you, and the bank (if applicable), we have certain obligations to the bank, including the requirement to advise the bank (via your mortgage broker, if necessary) if there are any encumbrances/charges registered on the title that may affect the bank’s ability to provide lending.
If you hear that a back-up offer has been made on the property.
If you have queries about the property. These need to be communicated to us as soon as possible so appropriate enquiries can be made in good time before a condition is due to be met.
What, if anything, you would like us to look into in particular to help with your due diligence investigation.
Your IRD number(s) and tax residency status.

WHAT TO EXPECT ... WHEN YOU'RE SELLING

Before you sign

Talk to us before you sign an agreement to sell your property. You have obligations to the purchaser under the agreement that you need to be aware of.

First up, will you be receiving sufficient funds from the sale to cover the likes of:

Any loans you may have to discharge the mortgage (if any)?
Your tax obligations (if any)?
Commission to the agent?
Any outstanding rates or other outgoings (e.g. water and/or body corporate levies, disclosure statement costs)?
Legal costs?

Secondly, does the selling entity (trust, company, individual(s)) have an IRD number? If not, is there enough time to obtain one before the settlement date?

The agreement

Some key factors you need to be aware of if the purchaser has conditions to meet in the agreement:

The purchaser (via their solicitor) has up until the date and time of the condition date to confirm the condition or otherwise. The purchaser is not obliged to confirm a condition before expiry of the condition date.
If the purchaser does not confirm a condition by the due date and time, you may cancel the agreement.
The agreement remains live until either party cancels it, when they are legally entitled to do so (for example, non-fulfilment of a condition by the due date). Important: Talk to us before entering into another agreement to make sure the prior agreement is not still active.
The LIM condition is covered under the General Terms of the Agreement. Unless otherwise specified, the condition is due 15 working days (excludes weekends and public holidays) from the date of the agreement.
The building report condition is also covered under the General Terms of the agreement. Unless otherwise specified, the condition is due 10 working days (excludes weekends and public holidays) from the date of the agreement.
If required, can you give vacant possession of the property on settlement date? Refer below to “Existing tenancies”.

The deposit

The deposit (if any) is usually paid to the agent who holds it as stakeholder for the statutory period of 10 working days. The deposit may be released earlier if both parties agree to its early release. If the property is part of a subdivision where title has yet to issue, the deposit will be held in trust until issue of title.

Unit title

If the property is a “unit title” – for example, part of an apartment complex – there are further special considerations, including:

You are obliged to obtain and provide to the purchaser a Pre-Contract Disclosure Statement at your cost. This is to be provided to the purchaser before they sign the agreement.
The purchaser may request an Additional Disclosure Statement at their cost. The statement must be provided within five working days of the request. You may be required to pay this cost up front to ensure the statement is released by the Body Corporate and provided to the purchaser within the statutory period.
You are also obliged to obtain and provide a Pre-Settlement Disclosure Statement to the purchaser at your cost. Unless you advise otherwise, we’ll obtain this statement on your behalf to ensure the document is provided to the purchaser within the required timeframe before settlement date. You may be required to pay this cost up front to ensure the statement is released and provided to the purchaser in time.

Existing tenancies

If the property you are selling has existing tenants, you need to consider whether the tenancy is a fixed term or periodic tenancy and give relevant statutory notice of the sale to the tenants.

If the property is a fixed term you cannot cancel the tenancy before the expiry of the fixed term, therefore you cannot give vacant possession to the purchaser, and the property must be sold with the tenancy in place. You are still required to give the tenants notice of the sale of the property and advise other details.
If the tenancy is periodic you must, in the first instance, give notice to the tenants of the intention to sell the property, and, when you receive an acceptable offer for sale of the property, give the tenants the minimum required notice period for vacating the property before settlement date.

Things we need to know

To help us to provide the best possible service to you, please let us know:

If you receive a back-up offer for the property.
If the property is tenanted.
Your IRD number(s) and tax residency status.

Last updated 24 November 2016

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