What to expect when you’re expecting … to buy a property
21 Oct 2018
By Amanda Brady, Aspiring Law, Registered Legal Executive
The property market’s never far away from the headlines these days – but whatever the state of the market, properties will still be traded, and the same old legal considerations are just as important to ensuring your interests are covered.
Who knows what the market will bring during the next year, 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 have put together a simple overview for buyers and some key considerations to get you started, you can check out our guide for sellers here.
Please remember, as always, these are general comments that cover only a small part of what you need to think about, and we recommend you seek personalised legal advice from the outset, and certainly do not sign anything until you’ve consulted a lawyer.
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 simply “change your mind”.
We recommend you give some thought to adding conditions into any offer that cover anything you still have to fully investigate and sign off on. 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 relevant condition was not satisfactory – but you need to be sure your condition clauses are appropriately and carefully worded to ensure you’re covered.
We definitely recommend you get a 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?
- 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?
There are many things in the agreement you need to know about, but a few of the key factors you need to have in your mind about conditions are:
- 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 the agreement 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.
Once conditions are confirmed a deposit is usually payable.That deposit is usually paid to the real estate 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 should be held by the vendor’s solicitor until title has issued.Make sure the agreement does not say otherwise.
Some of the things we need to know
To help us to provide the best possible service to you, please let us know:
- 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 inquiries 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.
These are only a few of the things that have to be considered, but we hope it gives you a little snapshot of some of the key factors you’ll need to think about.