How to guide: A guide for residential property buyers

Are You Eligible to Buy?

Restrictions were introduced in 2019 to prevent overseas residents from purchasing property in New Zealand. To purchase a property, you must now be a New Zealand, Australian or Singaporean Citizen, or hold a Residence Class Visa and have lived in NZ for 12 months prior to signing the agreement. You must also have been present in NZ for at least 183 days in the past 12 months and be a tax resident (i.e. have an NZ IRD number). In all other cases, the consent of the Overseas Investment Office must be obtained for the purchase to go ahead. If you are in any doubt as to your status and eligibility to buy a property, please contact and we can advise you.

Check Before You Sign

We recommend that all clients have their agreements checked before they sign them. As there have been many recent developments in property law, even experienced property buyers may benefit from advice. We can review a draft agreement very quickly at short notice. We can supply you with clauses to protect your interests and to cater for your specific circumstances.

It is important to note your desire to obtain a LIM, Building and/or any other report and this must be included within the agreement as a condition of the purchase. This also applies where finance approval is required. If you are intending to purchase a property at an auction, these reports and all due diligence of the property, as well as obtaining finance approval must be completed before you bid at the auction.
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For more of our best tips on buying residential property in New Zealand, read on...

Property Titles

Every property in New Zealand has an electronic title which is registered with Land Information New Zealand (LINZ). The Record of Title is an extract of the information held and identifies any encumbrances, covenants, easements or any other memorials that may be prejudicial and/or of a concern to you or a Lender. If you are supplied with a copy of the title from the Real Estate Agent, please let us have a copy and we will review this. Alternatively, we can obtain a copy from LINZ ourselves.

Land Information Memorandum (LIM) Report

We recommend to our clients that they obtain an up to date LIM in almost every case. A LIM report covers all matters relating to the property which are held on Council records. This will include matters such as zoning, building consents, requisitions and matters which may concern you. It also confirms whether the seller has complied with the warranties and undertakings given by them in the agreement on matters such as whether the property and all buildings comply with council requirements. Be aware that the Council can take up to 10 working days to supply a copy of the LIM. You may also wish to consider obtaining the ‘property bag’ from the Council which contains additional information including documentation lodged in support of planning applications.

Building Report

Unless your property is a new build, a buyer should always engage a builder to carry out an inspection of the property and report on any matters which may be of concern to a buyer. If a building report uncovers issues with the property, the seller can be asked to rectify those issues or alternatively agree a price reduction to enable the work to be completed at the buyer’s expense. In some cases, the issues might be so substantial that a buyer might decide not to proceed with the purchase.

Toxicology Report

You may also wish to consider obtaining a toxicology report to detect whether the property has been contaminated by the preparation, manufacture or use of drugs. If you do choose to obtain a toxicology report, you will be required to share the result of the report with the seller.

Leaky Homes

There can be major issues if a property is what is technically classed as a ‘leaky home’. The property may not have an active leak but may become ‘leaky’ as a consequence of the kind of materials it is made of. In many cases, leaky homes require major rebuilding which can drastically affect the value of the property. Please ask for a copy of our guide ‘What is a leaky home’, or see our website if you would like some more information.

Unit Titles and Leasehold Property

You are entitled to receive a disclosure document before signing an agreement for the purchase of a Unit Title property. For these, and leasehold properties, there are various issues to consider including your ongoing liability for Body Corporate levies and other expenses associated with the property. Payment for your share of Body Corporate levies, and if the property is leasehold or has tenants, the rent and other payments, are normally calculated and apportioned closer to settlement.

Investment Properties

There have been several laws introduced over recent years for owners of properties that are let to tenants. There are regulations which impose obligations on landlords to meet healthy home standards including minimum requirements for heating, ventilation, insulation, moisture ingress and drainage. If landlords fail to meet these standards, they face a financial penalty. It is important that your building inspection identifies any areas of non-compliance before your agreement is unconditional so that the cost of bringing a property up to a rental standard can be assessed.

Inland Revenue Department

All owners of land must supply their IRD number to LINZ on or before the date of settlement. We will ask you to provide your number to us prior to settlement. If you do not have an NZ IRD Number, you will be required to get one before you can settle, and this can take a number of days to complete. It is also important to note that, under the ‘brightline test’, if the property is not your ‘main home’ and you intend to sell the property within the next 10 years, you will be liable to pay tax on any financial capital gain. We suggest that you obtain advice from your accountant in this respect, but we will be able to assist with general legal advice.

Property Ownership

As part of the settlement, we will register the new ownership. Before we do so, it is important to consider whether your property will be owned by you personally or by a company or a trust. If the property is to be owned jointly (i.e. with you and someone else), you will need to consider whether you own the property as ‘joint tenants’ or as ‘tenants in common’ (in shares). We can explain the distinction to you and it’ll depend on your circumstances which will be preferable.
You may also benefit from getting a property sharing agreement and/or contracting out agreement (i.e. a ‘pre-nup’), depending on your circumstances, and you should consider making a new will.

Loan Finance / Mortgage

If you are arranging mortgage finance, you will need to make this a condition of the agreement. If you are unable to satisfy the finance condition, you may need to provide evidence to support this. Lenders usually require the loan documentation to be signed at least two business days before settlement, so that the funds can be drawn down on the due date. They may require guarantees to be signed or set other conditions which you will need to satisfy before the loan can be drawn down. If you have a Trust, all trustees will be required to sign the documentation, including the sale and purchase agreement.

KiwiSaver

If you are intending to withdraw your KiwiSaver to contribute towards the purchase price, it is important to do this as soon as possible as the Provider always requires at least two weeks prior to settlement or payment of the deposit, to process the KiwiSaver withdrawal application. Once the application form is completed, it will need to be signed in the presence of a Solicitor, Justice of the Peace or a person authorised to take statutory declarations in New Zealand. We will then send the application form and supporting documentation directly to your KiwiSaver Provider. Where the KiwiSaver funds are required to fund the payment of the deposit, the agreement should be modified to allow sufficient time for the funds to be withdrawn from the provider, before the deposit becomes due.

Insurance

It is the buyer’s responsibility to arrange property insurance and if you are raising a mortgage, insurance cover must be on the terms required by the Lender (i.e. the bank). The policy must be in the names of all owners of the property and the Lender’s interest must be noted on the policy. Lenders also require a copy of the certificate of currency for the policy before their loan monies are advanced. We can help you to do this and to identify the Lender’s requirements.

Inspection

It is normally your right to carry out one inspection of the property prior to settlement. When you inspect the property and the chattels which are included in the sale, you are advised to check that everything that was included in the agreement is present at the property, and in the state of repair you expect. We suggest that this inspection takes place two days prior to settlement as any defects must be raised with the seller’s lawyer before the settlement date. The inspection arrangements are usually made through the Real Estate Agent. In terms of the latest REINZ/ADLS agreement buyers may only note a dispute once and may only have ‘one bite at the cherry’ in respect of noting defects or issues before settlement. It is important to be thorough in your inspection and to deal with all issues at the same time.

Rates and Utilities

The seller’s lawyer will arrange for the water meter to be read on the settlement date and the account will be paid by the seller. Water rates from after that date will be your responsibility as the new owner. General rates will be apportioned in the settlement statement so that you will only pay your share from settlement onwards. The seller’s lawyer will organise with the Council for future instalment notices to be sent to you directly. Arrangements for power, telecommunications and other providers are the buyer’s responsibility and you should make arrangements for connection directly with your preferred supplier.

Moving In

Removal vehicles should be arranged for the afternoon of the settlement day or, if practical, the following day as you may not gain access to the new property until late afternoon. Please bear this in mind when making your commitments to vacate the property. Settlement is dependent on a number of factors, including waiting for the lender to provide the loan funds and the seller’s lawyer providing confirmation that they are in a position to settle. If the purchase is part of a chain of other transactions, this can also impact the timing.

Post Settlement

Once settlement takes place, the seller will advise the Real Estate Agent to release the keys to you. As part of the settlement, we will register the change of ownership of the property. We will send you a copy of the updated Record of Title. If there is a mortgage, a copy will also be sent to the Lender. If there are any excess proceeds from the loan advance, we will deposit these into your nominated bank account.

AML

Under Anti-Money Laundering legislation, we are required to verify your identity and take copies of your identification documents and proof of address. We are also required to hold documentary proof of the bank account into which we deposit any payment. If we do not already hold these documents, we will ask you to bring in these documents when you meet with us.

We have prepared this Guide to outline some key issues for property buyers and answer some frequently asked questions. The Guide is general in nature and every transaction is different, but we hope that you will find that the information is handy, helpful and it may answer some questions for you. It may also help you avoid a few problem areas. It is not a substitute for proper legal advice. Do let us know if you would like to find out more on these or any other matters where we may be able to assist.

​Contact us today.