By Ben King, Solicitor, Aspiring Law
Your home, your castle
I’ve had an active interest in property transactions for many years from different vantage points, both as a lawyer and as a bank lender.
So I’ve seen property transactions go both good and bad, and everything in between, from a number of perspectives. I’ve also bought property myself and, regardless of my professional insight and experience, I know just how nerve-wracking it can be.
During my banking career, I came across this interesting scenario. With the scorching summers and freezing winters around here, most property hunters seem to keep an eye out for insulation and, before committing, this buyer booked a building report, which included a thermal imaging scan. Their thinking was this would cover off issues of concern, such as leaky home syndrome. The plans for the house, submitted and approved by Council, specified insulation in the walls and ceiling at this particular property. The building report came back and didn’t show any anomalies. Sorted?
Well, actually, it wasn’t that simple. Come winter, the apparently insulated house was, in fact, surprisingly cold. That happens when you live in an alpine area, and there’s absolutely no insulation in your home. Just because something’s on the house plans, doesn’t mean it actually exists.
A stitch in time …
It was a happy ending, eventually, with the issues settled between the parties. However, this is not the case for every home buyer. Sometimes, we see people that are left with no recourse when they discover, too late, they’ve bought a property with expensive problems. First goal – ask questions and talk to the experts so that you get enough information to avoid a bad buy or, at least, mitigate the risk. Second goal, make sure your agreement provides you with enough protection, so you have some recourse if things go bad.
When it comes to property transactions and you are the buyer, make sure you don’t get so caught up in the hype that your due diligence and best intentions disappear in the process.
There have been stories coming out of Auckland’s housing market where buyers are so caught up in the frenzy that they’re foregoing the vital pre-purchase checks. Crazy stuff. Don’t let the hype get the better of you.
Meeting the market
A quick phone call to your legal advisor before you sign an agreement is time well-spent. Sometimes, all it takes is a 15-minute conversation to allow them to get to grips with what you’re after and your position. Importantly, they can flag the common legal “pitfalls”, as well as any current considerations and local quirks that you mightn’t be aware of.
Putting the legalese aside, the requirements for property transactions are constantly changing. For example, buyers and sellers are now required to front up with more information than ever before, and, in certain circumstances, may have to account to the IRD for what has been described as “capital gains” tax. Administrative tasks, such as changing trustees in a family trust, may attract the application of those new laws, so you’d be wise to seek advice on the timing and structure of how such changes are best managed.
I know many would-be buyers don’t even think about getting legal advice before signing an agreement, and once they do, they’re somewhat committed. The problem with that is often the sale conditions mightn’t be appropriately worded, and you also mightn’t have left enough time to do what needs to be done. Case in point, getting Kiwisaver funds typically has a defined timeline which needs to be factored in. We have also seen people run out of time where building inspectors haven’t been able to inspect within the timeframe provided in the agreement.
Always remain aware, even if you’ve traded a lot of property in the past, the law changes, the market changes, lending criteria changes; so, you may end up in a completely different environment than you’re used to. Be sure you’re up to speed before you commit to anything.
Last updated 18 November 2016
