After you have decided that you wish to purchase a property, the next step is to make an offer to the Vendor. This offer can be recorded in an Agreement for Sale and Purchase of Real Estate (“Agreement”), this is a legally binding contract detailing the agreed conditions of the purchaser and vendor of a property. A commonly used form of Agreement is a form jointly prepared between Real Estate Institute of New Zealand and Auckland District Law Society.
The Agreement usually includes:
It is recommended to complete the following:
A LIM is a summary of information held by the Relevant Local Authority on a property and it may include the following property information:
A Building Inspection Report is a report prepared by qualified, experienced building inspectors. A building inspector will inspect parts of the house which are reasonably accessible.
A professional building inspection report will highlight any matters that may need your attention. An inspection will normally cover:
A Code of Compliance Certificate (CCC) is a formal statement issued under section 95 of the Building Act that the building work carried out under a building consent complies with that building consent.
The property owner must apply for a CCC after all work set out in the building consent approval has been completed.
Sole ownership means one person owns and controls the property.
Co-ownership means more than one person owns the property, property can usually be owned in two different ways:
Tenancy in common allows for owners to hold a distinct share of the property. This can be equal shares or differing shares. If a tenant in common dies, their share can be passed to whoever they choose.
Joint tenancy is where each owner has an equal share own an equal share of the property. If a joint tenant dies, the share is passed to the other tenant (they will become the sole owner).
If you plan to take out a mortgage or bank loan to purchase a property, this mortgage will be registered on to the property’s certificate of title which protects the bank’s interest in the property.
It is wise to obtain a pre-approval from your bank before signing an Agreement. After finding the right property, you may wish to confirm the amount that the bank is willing to lend to you to purchase that particular property.
This is particularly important if the sale is completed by way of an auction, where the Agreement becomes unconditional once a sale results from the auction where you will become legally bound to purchase the property from the vendor.
After the Agreement is unconditional, you will need to sign some documents in your lawyer’s office before the settlement.
You must sign the said documents personally in your lawyer’s presence.
If you have properly executed a Power of Attorney, then your attorney may sign the relevant documents on your behalf in your lawyer’s presence. Please note that some banks may have specific policies which you have to follow before accepting signatures by way of Power of Attorney.
If you are not residing in New Zealand before the settlement or do not live in New Zealand usually, you may sign the documents in your country of residence in the presence of a Notary Public and post the original signed documents to your lawyer (subject to your lawyer’s acceptance of this arrangement).
It is important to consider and plan what the best ownership structure is for your circumstances. This will differ depending on if you are buying a rental investment property or a family home to live in.
You should obtain professional advice from your lawyer as to the preferred entity in whose name the property is to be bought. It is also wise to seek your accountant’s advice with respect to any taxation implication of these ownership structures.
Personal Names
This is the simplest method of property ownership, whereby the property is either owned in your personal name as Sole Tenant or in the names of two or more people as either Joint Tenants or Tenants in Common (see discussion on property ownership above).
Trust
A trust is a legally binding arrangement whereby the settlor transfers legal ownership of certain assets to the trustee held on trust for the benefit of the beneficiary.
Main advantages of setting up a trust (e.g. Family Trust):
1. Asset protection – protecting your assets from third party claims and in some instances protection against relationship property
2. Succession Planning – providing assets to your family members and future generations
Company
A company is a separate legal entity to their shareholders. This provides shareholders with limited liability from any of the business debts beyond the value of their shares in the company.
A Company needs to be registered with the Companies office, which manages the public registry of companies in New Zealand. It is wise to consult with professional advisers regarding the registration of your company in New Zealand.
An Auction Agreement usually is an unconditional agreement to purchase the property when a sale results from the auction.
This means that prospective purchaser must complete all relevant enquiries and checks, such as arranging finance, obtaining LIM reports, builder’s reports and title checks prior to the auction.
A Body Corporate comprises of all unit owners of the unit title property acting as a group. It is a unique feature of unit title properties, common in apartments or multi-unit developments.
Main functions of the body corporate are to organise and maintain the insurance for all buildings and other improvements and to keep the common property in good state of repair.
A Body Corporate has rules which govern the unit owner’s obligations and duties, prospective purchasers should be aware and familiar with the body corporate rules.
