Below are some most common questions or issues that crop up on real estate transactions.
The dwelling is new, do I need a LIM report?
The LIM report deals with both building and land matters. It could be useful to know if there are matters to do with the land that might affect your purchase decision, or might affect the ability to insure the property or get bank funding.
The dwelling is new, do I need a building report condition?
Even though the dwelling might just have been built, and has a code compliance certificate (CCC), that does not mean the quality is assured. The CCC simply confirms the building work complies with the building code and the building consent issued; it does not provide any form of workmanship guarantee. So, either get a workmanship guarantee if you can, or even better, include a building report condition as part of your agreement.
The agent provided me with a LIM report, why do I need to get my own one?
Because the council that provided and prepared the LIM report is legally responsible for the accuracy of it, but only to the party that ordered it, and not third parties. There is a law change in the pipeline making council legally liable to purchasers, even if they did not order the LIM report, but until then I do recommend buyers order their own one.
I am using my Kiwisaver to pay the deposit.
It is important distinguish between the deposit payable under the agreement, and the contribution you are providing as a buyer. For example, a property is purchased for $750,000.00 with a 10% deposit of $75,000.00 payable on unconditional date. Once that date arrives, the deposit under the agreement is due. That is the legal deposit. On that date, your Kiwisaver might not have been released by your provider. Even if it has been released to your lawyer, it might be insufficient to pay the deposit under the agreement. However, once it is released, and with your lawyer, it is then used to make the final payment on the settlement date – your contribution to the purchase.
There’s a lot of interest in this property – can I just sign an agreement and pull out under my conditions if I change my mind?
The short answer is NO. There is a term in the agreement that requires you to use all reasonable endeavours to satisfy the condition/s. The court cases are quite clear on this. It is a breach of the agreement terms if you do not use all reasonable endeavours and attempt to terminate the agreement because you just have “cold feet”.
I have sold my house, but I have paid off my mortgage, so why is it still on the title?
Because the bank does not remove the mortgage security from the title unless asked to. Sometimes it is useful to leave the mortgage registered on the title just in case you do want to go into overdraft without asking the bank for permission (which it seems these days is harder and harder to get).
And finally, my favourite question ever – it’s just conveyancing, why can’t lawyers charge a fixed fee or give free advice on a contract and only charge if it goes ahead?
I like to answer the second half of that question by asking if readers of this newsletter go to work without expecting to be paid?
While some lawyers do charge fixed fees, the vast majority of lawyers charge an hourly rate for their time, in the same way that a builder will charge for their labour time in building your deck (i.e. $75.00 p/h labour). Naturally, if the legal work takes more time due to complications, it costs more. Most “conveyancing” work is relatively standard and rudimentary – I’d go as far to say that applies in about 98-99% of all transactions. However, that 1-2% that go wrong, need serious brainpower and expertise to unravel them. You could consider yourselves unlucky if you were part of that 1-2%, but nevertheless if you are, then yes, it will cost more. It is also important to remember that lawyers are legally obliged to protect their clients’ interests. If you are trying to save a few hundred dollars (or a little more) by not seeking your lawyer’s help then you could end up paying a whole lot more in the future trying to unwind or unravel a mess.
Nick Kearney | Director | Jim Thompson Law
Phone: (09) 486 0745 / Level 1, 121-123 Kitchener Road, Milford, Auckland / P O Box 33197, Takapuna, Auckland.
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