Legal Guide to Buying a Home in New Zealand

You find your dream home - it is within your price range, the perfect location and just the type of house you want...do you need a lawyer? This article was written for Broadbase International by solicitor Annabel Sheppard.

Consult your Solicitor

You should not sign an Agreement for Sale and Purchase till you have discussed it with your solicitor. You can not usually change an agreement or its conditions, once it has been signed.

Your solicitor can assist you with any potential pitfalls or traps. Your solicitor knows the law and always acts in your best interests. They can help you negotiate the price and the conditions you want in your agreement. They can also assist with arranging inspections and other checks of the property.

Points to Consider

Your ownership structure will depend on the purpose for which you are buying the property. If you are buying the property as a family home the main options to consider will be whether you own the property as Joint tenants or Tenants in Common.

• Joint tenants jointly and equally own the property. If one of the joint tenants die, the other automatically inherits the deceased's person's interest in the property.

• Tenants in Common can involve owning the property in equal or unequal shares. Each party can mortgage their share of the property or leave it to someone in their will. 

A trust can also own the property. Trusts can operate in exactly the same way an individual person does and hold all types of assets and investments as long as they operate according to the powers set out in the trust deed.

If you are buying the property as an investment or you intend to develop and sell the property, it is important that you communicate this to your solicitor so your solicitor and accountant can discuss the tax implications and the most appropriate ownership structure with you.

Price and deposit

Once you have agreed on a price for the property, the deposit is typically 10% of the purchase price. The deposit is usually payable when the contract becomes unconditional (when all the conditions are confirmed).

Possession/Settlement date

Possession (when you actually physically own the property) and Settlement (when the monies are paid for the purchase) usually occur on the same day, unless otherwise agreed between the parties.

Conditions (Good things)!

There are a number of conditions which you and your solicitor need to consider including in your Agreement for Sale and Purchase. Conditions to consider include:

• Title - your agreement should be subject to your solicitor's approval of the Certificate of Title for the property.
• LIM (Land Information Memorandum) - your agreement should be subject to your solicitor's approval of a LIM. A LIM provides information the City Council holds about the property. It will show whether existing works have received Council consent and whether the Council requires any remedial work. It will also give you information about any site characteristics.
• Finance - if you need time to approach a bank or lending institution for a loan to purchase the property, then your agreement needs to be subject to you obtaining approval for finance.
• Valuation - you may want to check whether the price you have negotiated for the property is good value, in which case you need to make the agreement subject to valuation. Sometimes your bank as a condition of approving finance will require you to obtain a valuation.
• Builder's or Engineer's Report - You may want to have a builder and/or an engineer check the property, in which case your agreement should be subject to their report.

A Signed Agreement

Once the agreement is signed a copy is sent to the Purchaser's solicitor and the Vendor's solicitor.

Solicitor Checks Conditions are met

Your solicitor will then go through the process of ensuring each condition of the agreement is met. They will check the title, obtain and check the LIM, liase with your bank, the Council and the Vendor's Solicitor if necessary. Throughout this process they will be in contact with you to advise on progress.

The research work by your solicitor at this stage is your insurance against disappointment or additional costs at a later stage.

Once all the conditions are met and you are happy to proceed your solicitor will confirm the agreement. Once the agreement is unconditional, you will need to pay the deposit either to the Vendor's solicitor (if a private sale) or to the Real Estate Agent (who will deduct their commission).

Preparation for Settlement

If you are borrowing money to purchase the property your bank will usually send your solicitor instructions to prepare loan and mortgage documentation. Your Solicitor will then meet with you to sign the documentation and explain your obligations to the bank. On settlement day your solicitor will draw down the monies to settle.

If you are contributing your own cash to the purchase of the property, your solicitor will confirm with you the amount required for settlement.

You will need to arrange insurance for the property.

You are entitled to a final inspection of the property before settlement. You should make sure that the property is in the same condition as when you signed the Agreement to Purchase.

Settlement

Your solicitor attends to Settlement with the Vendor's solicitor.

Selling a Property

Again, the most important thing is to consult your solicitor before you sign an Agreement. If you are selling your property through a Real Estate Agent, you need to ensure that the deposit amount in the agreement is enough to cover the commission payable to the Real Estate Agent.

Once the agreement is unconditional, if the property is subject to a mortgage, your solicitor will liase with your bank to arrange for a discharge of mortgage and repayment on settlement day.

Buying and Selling a Commercial Property and/or a Farm

There are different matters to consider when purchasing or selling a commercial or farm property.  Before entering into any contract it is vital to consult your solicitor.  This article does not provide advice on these transactions. 

A Note

If you are working with a soliciter to arrange a property purchase, it is a good opportunity to also make sure that your wills are current, and to consider setting up enduring powers of attorney. Please see the Legal Guide to Life in NZ on our UK website for more information on these and other legal aspects of life in New Zealand of particular interest to Brits.

This information is of general commentary and should not be relied on specifically without appropriate legal advice. If you would like further advise please contact Annabel Sheppard, a partner at Wynn Williams & Co, P O Box 4341, Christchurch, New Zealand.

At Broadbase International we specialise in helping British migrants make a confident start to their new lives. Please contact us if you have any questions about the financial side of life in New Zealand, and don't forget to order your free copy of our comprehensive New Zealand Guide.