In our recent discussion with Dave Creswell, a qualified property lawyer with over ten years of experience, we unpack what buyers should be thinking about before signing an agreement and the legal checks that could save you from costly mistakes. Whether you're buying your first home, upgrading, or investing, here’s what you need to know.
So before we sign a sale and purchase agreement, you want to make sure that you’ve done sufficient due diligence on the property. You also want to make sure that the agreement has the appropriate conditions.
We always recommend including a broad due diligence condition so that you and your lawyer can look at all relevant information in respect to that property.
You can also include a finance condition so that you can make sure you have sufficient finance to complete the purchase.
Sometimes if there are multiple offers on the property, you want to make sure that you get in first and submit an offer with no conditions as this can often be more attractive to sellers. You should only submit an unconditional offer if you’ve done your due diligence beforehand, however.
As a minimum, we always recommend that you get your lawyer to review the Agreement itself, review the LIM, and the Record of Title.
So LIM stands for Land Information Memorandum. It’s provided by the local council, and it includes information the local council considers relevant for that property. This includes a summary of any resource consents and building consents that have been issued for the property, as well as a summary of all natural hazards that could affect the property, such as any flooding or soil issues.
We always recommend that you review them, but sometimes they’ll be less relevant than others.
If the Agreement is for a new build, then a lot of information in the LIM won’t necessarily be relevant, such as historic building consents. Secondly, most new build developments would have required the developer to prove to the council as part of their consenting process that they’ve adequately dealt with any natural hazards, like flooding or soil contamination. So instead of ordering a LIM, you can ask the developer for copies of their consent documents.
We always recommend that you check out their previous developments to make sure they’ve got a strong track record for delivering what they advertise.
Every new build Agreement will contain a lot of further terms, and you want to make sure that your lawyer has reviewed them properly to make sure you’re really well protected.
So this is the date that settlement under the Agreement must have occurred by. It’s really important for purchasers because it creates an end date that holds the developer accountable.
If the development has been delayed for whatever reason and settlement hasn’t been triggered by that date, the purchaser can cancel the Agreement and get their deposit returned without any penalty.
So you want to review any instruments on the title that could restrict or prohibit, in any way, your use of that property.
For example, we’ll often see land covenants which may restrict what you can build on the property and how you can operate from it.
It’s like what they say – jack of all trades, master of none.
You want a specialist property lawyer because there’ll be issues that can come up that require specialist knowledge.
Residents associations are commonly seen in new developments. Basically, they require all owners of the property to form a society.
The society can set rules for the development and maintain any common property. We’re generally in favour of residents associations, but there will otten be an annual levy.
Going unconditional is one of the biggest steps in the buying process and understanding what happens next can make all the difference.
We cover that in the next part of the series.
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.
