In our recent discussion with Dave Creswell, property lawyer at Lane Neave, we covered where most buyers feel a mix of excitement and uncertainty - the moment you go unconditional. The contract is signed. The property is yours. But what actually happens next? Below, we cover the key legal steps, timelines, and risks to be aware of between going unconditional and settlement.
The first thing to do is you need to pay your deposit. And that’s normally payable to the vendor or the real estate agent. The deposit is non-refundable, so you need to make sure that you’re only going to pay it if you’re absolutely committed to the purchase.
Agents have a legal obligation to hold the deposit for ten working days. But sometimes they’ll ask for it to be released early if the vendor wants to use the money, often to pay their own deposit on their next house. Sometimes the agents just want their commission paid.
You should only ever agree to an early release after you’ve spoken to your lawyer, and they are absolutely confident that the contract is unconditional and there are no other issues they want to raise with the vendor, including any issues relating to the record of title for the property.
If you’ve bought a property off the plans or a new build, you should make sure that the deposit is paid to the vendor’s lawyer’s trust account and they hold it as a “stakeholder” until all of the conditions have been satisfied and settlement has been triggered.
Sometimes with new builds, you’ll pay the deposit and there’ll still be vendor conditions to be satisfied. It’s important that the deposit is held in a secure location until settlement is triggered.
You want to make sure before you sign the Agreement that the contract specifically states the deposit will be held in a stakeholder account until settlement is secured. A good lawyer should be all over it.
If the agreement is unconditional, the short answer is no. The vendor has no obligation to return your deposit and cancel the Agreement if you change your mind.
That’s why you should only ever go unconditional if you’re absolutely certain you want to proceed.
So you need to submit your KiwiSaver application. Most providers can turn around an application within about a week, but some can take up to 15 working days. So you want to make sure that the application is submitted at least three weeks before the settlement date.
Your application includes a statutory declaration whereby you’re confirming you’re going to use your KiwiSaver funds towards your purchase of the home.
Your statutory declaration needs to be signed in front of a lawyer or a JP, so you need to make sure that you arrange time to meet with your lawyer and sign the document.
You’re confirming that you’re going to use the home as your main home, and that you haven’t previously purchased property in New Zealand.
The money goes straight to your lawyer’s trust account and they will hold it until settlement takes place, or in some cases, to pay the deposit. They can’t pay it to you separately.
If the agreement is cancelled for any reason, they have a legal requirement to pay it back to your KiwiSaver provider.
Once you have pre-approval from your bank and once settlement has been triggered, the bank will send us the loan documents.
What we do is we review them and make sure that they are in accordance with what you’ve agreed, and then we get you in to sign the documents at least three days before settlement. We need to return those documents along with our solicitor’s certificate, whereby we confirm the documents have been properly executed.
The banks will have a number of conditions required to be satisfied before they release the funds.
They will always require that their interest is noted in the property, so you need to contact your insurer and get this in place. Also, if the property’s a new build, the bank can require you to obtain a valuation. Often the valuation can only be obtained once the property is fully built so it is important to get this underway as soon as settlement is triggered
The most important thing you should do is conduct a pre-inspection of the property.
The vendor has a legal obligation to make sure that the property (including the chattels and fixtures forming part of the sale) in the same condition as they were in when you signed the agreement.
With a new build, we always recommend you take with you a qualified builder or obtain a building inspection report to make sure that the property is being constructed in accordance with the plans and specifications included in the Agreement.
Any issues should be raised with the vendor immediately, and in any event at least two days before settlement occurs.
There are three practical options available to you.
The first is where the vendor acknowledges there’s a defect but doesn’t want to fix it before settlement – your best option is to negotiate with the vendor a reduction to the purchase price.
The second is if the vendor agrees there’s an issue and they are willing to fix it, but they might not fix it before settlement. In this situation, you can agree to retain funds – so you retain a portion of the purchase price and only pay it out to the vendor once the issue/defect has been fixed.
The third situation is if the vendor refuses to fix the defect. Then you can make a claim for compensation under the Agreement. This is where a portion of the funds is withheld and then following settlement, an expert appointed by the parties determines if that money should be paid back to you.
You get the keys when settlement is completed.
That means we’ve paid the money over to the vendor’s lawyer and provided them with an undertaking that it’s cleared funds and will not be reversed. Once the funds have been received, the vendor’s lawyer will release the dealing on the land registry and instruct the agent to release the keys.
We always recommend to our clients not to get the movers in at 9am, because settlement can sometimes be delayed.
If either the purchaser or the vendor doesn’t settle on settlement day, then the other party can issue a Settlement Notice.
This requires the other party to settle within 12 working days. Penalty interest is chargeable during this time, so it’s always in your best interest to settle as soon as possible.
Going unconditional is a major milestone but it’s not the finish line.
From deposits and KiwiSaver withdrawals through to inspections and settlement risks, there are still a number of moving parts to manage. Having the right legal and financial guidance during this stage can make the difference between a smooth settlement and a stressful one.
If you’re navigating a property purchase and want support across lending, structuring, and strategy, our team can help guide you through each step.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
