Conveyancing.co.nz Buyers Guide

So you're looking at purchasing a property in New Zealand? Congratulations - below is our guide pointing out a few tips from a legal and conveyancing viewpoint. We trust that you'll find the content below informative. If you require any further explanation we invite you to call us 0508 4 LAWYERS (0508 452 993) or email us with any further queries you may have.

The contents of this guide refer to the Real Estate Institute of New Zealand and Auckland District Law Society Agreement for Sale and Purchase (Eighth Edition 2006 (3)) which is called "the standard agreement" in this guide.  The guide highlights a number of important areas of the standard agreement and some other areas which may be of interest to you.  It is not intended to be exhaustive.  The guide is intended for general information purposes only and should not be acted upon without specific advice related to your own circumstances.

1. Aspects of Title and Boundaries  
   1. The legal boundaries of the property are usually shown on a plan deposited at Land Information New Zealand ("LINZ") and also, on a much reduced scale on the certificate of title to the property.  If the boundaries on the title or plan look different from those in real life, let us know immediately.
       
   2. The title also shows any restrictions or interests which have been registered against the land.
       
   3. The title will also refer to any rights of way or easements giving access to, or running across, the land.  These will usually be shown in more detail on the deposited plan at LINZ. 
       
2. Local Authority Requirement  
   1. It is important to ensure that the regional and district plans published by the local authority do not prevent you from using the property as you want.
       
   2. You should check with the local authority what the zoning of the property is, and whether there are any restrictions or requisitions affecting the property.  The district plan will contain much information about what you can, and cannot do.  For example, it will specify any building or subdivisional restrictions which affect the property.
       
   3. You should also check the council's records to see:
       
      1. whether permits were obtained to any previous extensions or alterations to the property and whether a code compliance certificate was issued for those works;
          
      2. if the council's records show the property as susceptible to slip, erosion, flooding, etc;
          
      3. whether there are any road widening or other works proposed in the area which may affect the property.
          
   4. There are two ways of obtaining this information.  You can go directly to the council, or you can order a Land Information Memorandum ("LIM") form the council.
       
   5. A LIM should provide you with all the information the council has on the property and identify any special features of characteristics of the land including potential erosion, subsidence, slippage or the likely presence of hazardous contaminants etc. which are not apparent from the district scheme or district plan but of which the council is aware.  It may also assist to identify any unauthorised alterations made to or improvements on the land by giving details of building and other consent previously applied for.
       
   6. The council makes a charge for a LIM.  We strongly recommend you obtain a LIM whether or not the agreement you signed allows for this. 
       
3. Cross Lease Titles 
   1. If you are purchasing a property on a cross lease title, it is important to understand the ownership concepts involved.
       
   2. Cross leases are often used where more than one house is built on the same piece of land.  In a cross lease situation, the freehold interest in the underlying land is owned in shares by the owners of each of the dwelling units (or flats) situated on, or intended to be situated on the land.  For example, if there are three flats on the land, the owner of each flat will typically own an undivided one third share in the fee simple (or underlying freehold title).
       
   3. The cross lease then defines the areas of the underlying land which are subject to exclusive occupation rights, and those areas subject to shared occupation.   These areas are then shown on a "flat plan", which gives a diagrammatic perspective of the exclusive and shared use areas.
       
   4. The exclusive use areas usually include the "flat" and an area surrounding and immediately adjacent to the flat.  Typically shared areas are common drive ways giving access to some or all of the flats.  Without the cross lease and associated flat plan, it would be impossible to tell who is entitled to occupy which piece of land.
       
   5. Cross leases are usually for terms of 999 years at a peppercorn rental.  The owners of the land are the landlords under the lease, and each flat owner is the tenant in respect of his or her flat.  The lease, in addition to identifying those areas to which you are entitled to exclusive possession, sets out the terms and conditions under which you must occupy the flat.
       
   6. The standard form of cross lease places several restrictions on the owners of each flat.  These may include, for example:
       
      1. restrictions on alterations to the flat or the erection of other buildings on the exclusive use area associated with it, without the consent of the other owners;
           
      2. restrictions on leasing the flat;
          
      3. restrictions as to the colours which may be used in repainting the flat;
          
      4. restrictions on keeping pets.
          
   7. In addition the standard form cross lease contains provisions setting out:
       
      1. how the property is to be insured.  In some cases each owner is required to take out insurance of his or her flat; in other cases all the owners (in their capacity as lessors) are required to insure all the flats in the development under a single policy with each person meeting a proportionate share of the premium;
          
      2. the obligations of the owners to maintain the common areas or those parts of the land and buildings which are not the responsibility of any particular owner;
          
      3. the maintenance obligations on each owner in respect of his or her flat;
          
      4. the procedure to be followed when there is a dispute amongst owners.
           
   8. All costs and expenses which are not the responsibility of any particular owner (for example, maintenance costs relating to a common drive way), are usually shared on a "land share" basis irrespective of the comparative value of the flats.  Therefore, if you own an undivided one half share in the land, you will have to pay 50 percent of those expenses.
       
   9. Rates are normally assessed separately by the local authority against each owner in respect of his or her interest in the land and the flat.
       
   10. If you are purchasing a cross lease property, you must ensure that the external appearance of the flat matches that shown on the flat plan.  Problems can occur if there have been alterations to the flat which are not shown on the flat plan, particularly if the appropriate consents have not been obtained.  In some cases, if the plan has not been amended to reflect the on ground position, there may be a title defect.
        
   11. Alterations to a cross lease flat, or the erection of additional buildings on the exclusive use area which goes with the flat, usually require the written consent of all the other owners.  If you propose making any alterations to the property after you have purchased it, you should check with your legal advisor before proceeding.  Depending on the alteration contemplated, you may need to obtain:
        
       1. the consent of all the other owners;
           
       2. the deposit of a new flat plan redefining the flat.  This would involve a resurvey and a variation of the cross lease;
           
       3. a Resource Consent under the Resource Management Act 1991;
           
       4. a Building Consent under the Building Act 2004.
           
   12. Where alterations or additions have been made to the flat or new structures erected on the property since it was first cross leased then you may have the right to requisition the title if the correct procedures were not followed.  This right of requisition applies in respect of alterations or additions which are both enclosed and attached to the flat itself where you can requisition the title to be rectified to correctly depict the dimensions of the structures now sited on the property.  It also applies to stand alone or open structures erected on the "exclusive use" areas discussed above, where you have the lesser right to requisition to sight the prior written approval of the other flat owners to the erection of such a structure.  Time limits apply to your right to requisition the title and will be set out in the sale agreement.  
        
4. Unit Titles 
   1. If the property you want to buy is a part of a unit title development, it is again important to understand the ownership concept involved.
       
   2. As with cross leases, unit titles are often used where there is more than one dwelling on the same piece of land.  However, unlike a cross lease, you will usually acquire a stratum title in freehold to your unit and any accessory units that go with it.
       
   3. Accessory units typically comprise carport and garages allocated to a particular unit.  They may also comprise exclusive use areas used in conjunction with a unit, and in some cases, things such as letter boxes.
       
   4. Units and accessory units are shown on a plan lodged at the LINZ and known as the "unit plan".  The unit plan will specify the exact dimensions of each principal unit and accessory unit on both a horizontal and a vertical plane.  Because of this, the air space above your unit will usually be common property, or in some cases another unit.  Any change to the physical shape of a unit therefore requires the consent of the body corporate and the preparation and registration of redevelopment plans.  This can be an expensive exercise.
       
   5. Those parts of the development which are not shown on the unit plan as principal or accessory units will comprise "common property" and, subject to any agreements entered into by the body corporate, will be available for the use of all unit owners.  Carports and garages are often shown as accessory units.
       
   6. The owners of all the units on the unit plan comprise what is known as the "body corporate".  On purchasing a unit you automatically become a member of the body corporate.  The body corporate is a bit like a company, but is known by a number (usually the same number as the unit plan).  Under the Unit Titles Act 1972 it is charged with certain statutory responsibilities, including:
       
      1. the maintenance of any common property; and
          
      2. arranging replacement body corporate insurance in respect of all units.
          
   7. The body corporate is required to hold meetings and is empowered to levy each unit holder a share of any outgoings incurred or payable by it.  Levies will be made on account of insurance premiums, common property maintenance and secretarial fees.  If the unit is situated in a building which is subject to a compliance schedule under the Building Act 2004, and which is required to have a building warrant of fitness, as a member of the body corporate you will be required to meet your share of the compliance costs.
       
   8. Body corporate levies are allocated according to the unit entitlement of each unit and accessory unit as those entitlements are shown on the unit plan.  Therefore if there are a total of ten thousand units and your principal unit and accessory units comprise a total of two thousand units, you will be liable for one fifth of the costs incurred or payable by the body corporate.  Body corporate levies will usually be apportioned between the Vendor and you on settlement.
       
   9. Some body corporates include in the levy, an allowance for cover future maintenance of common property.  This spreads maintenance payments over a period of time and guards against unit holders being called on for large, one off payments.  This can be particularly important where there are a large number of connected units in the development or where the common property includes lifts or other machinery requiring maintenance.  The failure to maintain a maintenance fund could see a situation arising where a major maintenance item requires attention and one or all of the unit owners are unable to meet their share of it.
       
   10. The body corporate is required to insure all units in the development on a replacement basis.  The individual unit owners cannot contract out this liability.  You need to satisfy yourself that the cover is adequate.  You must take out separate cover for your chattels and personal effects.
        
   11. Where you need a mortgage, your mortgagee may require you to take out mortgage redemption insurance.  This is an additional cover enabling the mortgagee to clear its mortgage in the even of damage or destruction.  Mortgagee insurance is necessary, because, except in some limited circumstances specified in the Unit Titles Act, the body corporate is bound at law to apply any funds received by it under its insurance policy toward replacing the units.  Mortgage redemption insurance can normally be arranged at a nominal premium with the body corporate insurer.
        
   12. Certain rules govern the operation of the body corporate and you occupation of your Unit.  The rules deal with such matters as your voting rights in respect of body corporate matters and the procedures for body corporate meetings.  They also place some restrictions on the use of your unit; for example, lay down requirements if you want to lease your unit.  You must familiarise yourself with the rules.  You must ensure any tenants of yours also comply with the rules.
         
5. Goods & Services Tax ("GST")  
   1. Usually Goods & Services Tax (GST) is not payable on the purchase of a house for private occupation, but this is not always the case (for example if you buy a new house directly from the builder).  The Agreement will say on the front page whether the price includes GST or whether it is payable in addition to the purchase price.  If neither of the options are crossed out the purchase price stated in the Agreement will be "inclusive of GST".  If GST is payable, you should check the GST date as sometimes it can occur before settlement.
             
6. Insurance  
   1. We recommend that the insurance be on full "replacement" terms.  If the contract you have signed indicates that the property is at your risk from the date of the agreement you will need to arrange insurance cover form the date of the agreement as, if the property is destroyed before the settlement date, you will still have to complete the purchase. 
       
   2. Make sure your insurance company agrees to cover you for the difference between what the Earthquake Commission will pay you if your house is destroyed by a natural disaster, and the cost of replacing your house.
       
   3. You should also arrange insurance on your personal possessions.
       
   4. In the case of Cross Leases and Unit Titles, specific insurance covenants may apply (see above). 
        
7. Rates  
   1. Rates are payable to the council each year, usually by instalment and the rating year runs from 1 July to 30 June.  Rates are apportioned between buyer and seller as at the settlement date.  The seller is required to see that all general and water rates are paid up to that date and, if not, to give you a credit on settlement.  Similarly, if the rates have been paid to a date after the settlement date, you will have to pay your share to the seller on settlement.  The adjustments will be shown on the settlement statement.  In some cases regional council rates are levied separately from the local authority's rates and these will also be apportioned. 
       
   2. Where your property is on a water meter a special reading of the meter will be obtained as at the settlement date and the full amount due for all consumption to the date of that reading will then be paid by the vendor's solicitors.
       
   3. Your solicitor will take the necessary steps to advise the authorities of your interest in the property and generally no action is required by you unless you wish to put in place direct debit or automatic payment arrangements. 
       
8. Settlement, Possession and Keys 
   1. The possession date shown in the agreement is the date when legal settlement takes place.  This is the date on which you are required to pay the balance of the purchase price and any apportionments shown on the vendor's settlement statement.
       
   2. The property should be left vacant for your occupation and keys will be made available to us, or from the agent, unless you advise us you have made other arrangements with the seller.  You should be very careful about taking possession prior to settlement as in some circumstances this could involve the insurance risk passing to you.
       
   3. Under the standard form agreement for sale and purchase you are entitled to inspect the property before settlement.  This can be arranged with the Agent.
       
9. Purchase of New Houses from Builder and Subdivision 
   1. Where you are purchasing a new house directly from the builder or a property in a subdivision which has not been completed, additional consideration may apply (including in respect of GST).
       
   2. If you are buying a new house or a property in a subdivision, you should tell your legal advisor, preferably before you sign the Agreement as your solicitor can suggest clauses to provide you with additional protection in these circumstances.
       

Online Conveyancing Limited thank Kensington Swan for assistance with our Buyers Guide. Kensington Swan, with offices in Auckland and Wellington, are one of New Zealand's leading Property and Commercial Law Firms. They carry out conveyancing for companies and individuals from Multi National Property Developments through to Affordable Residential Conveyancing for single house sales & purchases. Kensington Swan won the Lexis Nexis NZ Large Firm of the Year Award in 2007.