Buying a home, whether it is your first or subsequent home, is probably the biggest, most important financial decision you will make in your life.
It is tempting to think that conveyancing is a process dealing with the mechanics of transferring property ownership. In reality, it is much more than this. Apart from needing indepth knowledge of contract law there is an ever increasing list of statutes which affect property transactions, your rights and obligations (such as the Property Relationships Act, the Resource Management Act, the Building Act and the Fencing of Swimming Pools Act).
The steps outlined in this section aim to guide you through the stages of buying your home. This will help you to "stay in control" of the legal process which should make buying your home an enjoyable and rewarding experience.
It's a lot of work and takes some experience and expertise to get it right.
For absolute piece of mind we recommend that you show us the contract which you are being asked to sign before you sign it. It costs you no more to show us the agreement prior to signing it and in some cases this simple step has saved thousands of dollars.
What You Are Signing - The Agreement
The Auckland District Law Society Standard Form has been developed over a number of years. It is designed to cover most situations that are likely to arise during the life of a real estate contract. Despite its dexterity there are circumstances where particular care needs to be taken in using the form.
This is an important legal contract - you should have it checked to make sure that it is fair and sensible and that any conditions you or the other party may add are appropriate. For absolute piece of mind seek advice to make sure you understand the 'fine print' before signing.
Some key points are:
- ARRANGING FINANCE
The biggest single priority in determining the type of new home you will be purchasing will be the total amount of money you are able to pay for your new home. It is important at this early stage to establish how much you can borrow, the repayments you can expect, and the mortgage or lending fee you will be expected to pay.
We can assist you with arranging finance via the National Bank (subject to normal lending criteria). In fact if we arrange the finance for you, we are usually able to discount our conveyancing fees.
You should also remember to allow for some other costs that are essential to every home purchase. These are solicitors' fees, disbursements, (payments made on your behalf by us - e.g. LIM report or registration fees); a registered valuers' fee; home and contents insurance' bank fees; and any moving costs you may have.
Contact us immediately if you would like to take advantage of this service.
- LOCATION OF THE HOUSE AND PROPERTY
There may be occasions, especially in older subdivisions, when buildings are not erected on their own sections, but encroach over boundaries. We suggest if there is any doubt at all that you should check with the building inspector of the local council to ensure that any buildings forming part of the property you intend to buy are properly located on the section which was described to you.
Where the property you are purchasing is a section you are entitled to have the property pegged prior to possession at the vendor's expense.
- TOWN PLANNING
It is important that you satisfy yourself that any improvements you may wish to make to the buildings or any non-residential activities intended for the site can be lawfully carried out. It may be that you intend making alterations to the house or building a new garage. Many of these activities are subject to planning laws and again we suggest you check with the Planning Officer of the local council to ensure that council requirements are met. This is particularly important if you propose any further subdivision of the property.
- DO I NEED A LIM?
What is a LIM?
LIM is short for Land Information Memorandum and is a report obtained from your local Council that provides information about:
- Zoning restrictions Rates and water rates details
- Details and the status of any building consent applications and permits
- Any special land features including drainage problems, subsidence, flooding or possible erosion
- Details of stormwater and sewerage drains affecting or serving the property
- Information relating to the Resource Management Act
- Requisitions on the property
Why do I need a LIM?
It is not essential but is advisable. In short, this information may affect your decision to buy.
Council's spend a considerable amount of time building up files on properties and it is often a good idea to view the file of the property you are buying so as to ensure that all Council requirements have been complied with in regard to the property you are purchasing. The LIM will also disclose any plans which the Council may have for the area in which the property is located to ensure that there are no surprises.
If council requirements haven't been met, they will require the owner of the property to correct the problem. So if you buy the property that obligation falls on you!
Whilst a LIM report details the file collated by Council, it doesn't mean the Council has inspected the property to ensure the physical attributes of the property match the LIM report. For this reason it is important for you to make the comparison as unauthorised works are unlikely to be shown on the Council file unless they have been brought to the Council's attention.
You need to allow sufficient time to obtain a LIM. Council must supply one within 10 working days and the standard sale and purchase agreement only allows you 15 working days from the date of the agreement to raise any issues you find in a LIM Report.
We can arrange this for you but you should let us know early if you want one.
- BUILDERS AND ENGINEERS REPORTS
If you are interested in purchasing an older house, it can be advisable to get somebody to inspect either before you purchase it, or to have a clause put into your Agreement by your Real Estate Agent or your lawyer, to allow someone to inspect the house.
For a fee, a member of the Master Builders Association will do a full inspection of the condition of the house and provide a written report. This could well save you unnecessary expense at a later date.
If the property is in a hilly area or there are concerns about the stability of the land, it may well be worth getting an engineer's report. Costs can vary substantially for an engineer's report and it pays to ask before you get the report done.
Before going unconditional
1. TITLE SEARCH
Certificates of Title are records of property ownership, which show mortgages on the property and any other restrictions that may apply. Land Information New Zealand (LINZ) is the government agency which holds all titles in New Zealand.
· Searching the property title. Even if you have a recent copy of the title we will always obtain a title search for a Purchaser to check the validity and accuracy of the Vendor's title. We need to check that the title to the land is clear and that there are no complications with the title.
Cross Lease Or Unit Title Properties
If you are buying a Cross lease or Unit title property it is important that you check the flats plan attached to the title so as to ensure that the outline of the buildings that you are buying are shown accurately on the title.
We need you to firstly confirm the details of the property share agreement or advise any changes you wish made.
2. SATISFYING YOUR PRIOR CONDITIONS
We will check that conditions - such as finance arrangements or a builder's report - are met before sale.
3. YOUR FINANCE
If you are buying and are raising money from a bank or other financial institution you will need to ensure that you can obtain the finance before you sign an agreement that is fully binding upon you.
We can assist you if you need to raise a mortgage. Once again we urge you to call us before you sign the agreement.
Most lenders will require a valuation to check that the property is adequate security for the money they will be lending you. You should ensure that you leave sufficient time for the valuer to complete their report.
- OWNERSHIP OF YOUR PROPERTY
There may be a better way to own your property than in your own name. We can discuss the best way for your property to be owned. Once again it is important that you talk to us before you enter into an agreement. See us first.
You need to decide how you want to own the property. There are several options available to you. You can own it as:
A Joint Tenancy - here you own the land together and neither owner has exclusive rights to possession or any particular parts of the land. On the death of the first joint tenant, his or her share automatically transfers to the other joint owner regardless of any instructions in their will.
Tenants in common - This means that you each own a percentage of the property individually (presumably 50% each although it can be uneven). Each Co-owner can deal with their share of the property without the consent of the other owners. Should you die, the property does not automatically transfer to the other owners (as it would under joint tenancy) but is instead dealt with in accordance with the instructions in your will. This is the most common type of ownership for unmarried owners.
Via a family trust - You may feel that it is a prudent course of action to settle your new purchase into a Family Trust. There are real advantages ofr you in placing your property in a trust. Ask for our Family Trust leaflet or visit www.citylaw.co.nz.
- PROPERTY RELATIONSHIP AGREEMENTS
The new Property (Relationships) Act came into force on 1 February 2002 and sets out how property should be divided when a couple splits up. The new law applies to all couples, including defacto and same sex couples. If you've been together three years, any relationship property (assets you've built up together) is usually divided equally between you if you separate or transfers automatically to the surviving partner if you die.What property is covered by the new law?The majority of property is now considered after three years to be relationship property, eg. the family home, home contents, motor vehicles etc, and any property acquired by you after the relationship began. The exceptions include inherited property, superannuation policies acquired before the relationship commenced, and property owned before the relationship began. Even then, if you and your partner or spouse were to live in an inherited home the new law would apply. The only way you can be sure to protect pre-relationship and inherited property is with an agreement.
When buying a property you should consider how the new act may affect you now or in the future.
Property Sharing Agreements
As a bare minimum, if you are not married we recommend you enter into a property sharing agreement (in addition to owning the property as tenants in common) which will cover the major asset you are about to buy.
Ownership via tenants in common is not sufficient protection because you need to create agreements on what to do if you want to sell your half share. It is very difficult to sell or borrow money using your half share only.
The agreement details:
the initial contributions that you each put in;
what contributions you will each make towards expenses during ownership
how ownership of the house is to occur;
creates rights for each of you in case you want to sell
how the sale proceeds are to be applied upon a sale
A property sharing agreement affects only the house you are buying and not any other property you may own together or individually.
Our recommendation is that some careful consideration is given to what entity the property is purchased in at the outset. Advice should be sought from us regarding this aspect of your purchase.
Steps before settlement
Confirm ownership - we will need to confirm how you want to own the property and so that we can draft and send a transfer and notices of sale for the property to the vendor's solicitor. Any property agreements relating to ownership will also need to be drafted.
Rates, Water Rates, Body Corporate levies - The Rates and the body corporate levy for the property will be apportioned as at the date you take possession. This may mean the vendor will expect payment on settlement day for any unused portion that they have overpaid. You need to take this into your calculations when budgeting. We will also ensure that a final water meter reading will also be ordered and paid by the vendor on settlement day.
Telephone, power connections and rubbish day - You will need to contact the local telephone, power and gas companies to ensure that you are connected to take effect from settlement day.
Mortgage documentation - We will prepare all mortgage documents and meet all bank requirements to uplift funds. If you are borrowing money from a financial institution, then we will prepare the necessary security documents, ensure you complete them and arrange settlement. Upon receipt of the mortgage security documents from the Bank we will complete them and call you re signing them. We can come to you if that is more convenient for you. (and you live in Auckland)
Balance required to settle - Once we receive a settlement statement (and supporting documents) from the vendor's solicitor, we will draft our final statement which will show the balance we require from you to settle the purchase. We will require this sum by bank cheque no later than the morning you are settling.
Insurance - If the property you are buying is a body corporate, the buildings will already be insured as part of your levy. We will obtain the details from the Body Corporate secretary.
You should have arranged home and contents insurance which protects you in case of fire, floods or other accidental damage to your house and property. You may also wish to take out a redundancy insurance which covers your mortgage payments in case of redundancy, and mortgage protection insurance.
If you are getting a mortgage, it is important that before settlement you send us certificate of currency that shows your bank as an "interested party". You should ensure that the Insurance cover starts inclusive of the day that you take possession.
On settlement day
We will manage the mortgage advance drawdown from the bank and the exchange of money to the vendor's solicitor in accordance with the agreement.
Other important points to note:
Right of Inspection - You have a right to inspect the property prior to settlement. All chattels being sold with the property you are purchasing must be in the same condition on settlement day as they were when you signed your agreement and therefore it is a good idea to check their status prior to settlement.
If you are intending to view the property you should contact the Real Estate Agent so they can arrange a suitable time as close to settlement day as possible. You should also notify us that you will be inspecting and phone us once you have done so to confirm you are happy with the state of the property.
- Moving In - Settlement day can be a very stressful time and it is difficult to say when your property will settle. We realise that you will want to organise a suitable time for the rental truck etc but there are often many factors which will dictate the time of your settlement.
- Keys - On settlement day you are entitled to vacant possession of the property (unless you have agreed for the tenant to stay and pay rental to you) as soon as we have paid the funds to the other solicitor. The most common practice and simplest solution is to either make private arrangements with the other side or to ensure that the keys will be left locked up in the property except one set which can be held by the real estate agent. Upon settlement we will ensure the other solicitor authorises the real estate agent to release the keys to you.
After settlement day
- Prepare and send out legal documents such as the transfer of ownership. We will register the transfer and advise the necessary authorities, such as the Council, on behalf of you and the bank and will send you a copy of the title once it is finalised. This process can take a few weeks.
- Final report - we will report to you and pay you the balance of funds owing.
Other points to note
We recommend that you take this opportunity to consider some prudent asset and trust management. You may wish to create a trust or as a bare minimum create a current will and powers of attorney in the event of your incapacity or death.
- Enduring power of attorney - You may like to consider putting in place an enduring power of attorney in conjunction with your purchase. An enduring power of attorney gives you the ability to appoint a spouse, relative or friend to look after your affairs in the event that you become incapable through accident or illness of doing so yourself. It is a simple piece of mind insurance against the cost of obtaining a similar court order if the need arises allowing your attorney to quickly deal with the management of your affairs. There is a small additional charge should you elect this option.
- Wills - As part of this transaction we are happy to do free simple wills for you.
The matters mentioned above have been summarised and generalised so as to be informative and ensure that they are drawn to your attention. The detail above is not intended to be exhaustive and we invite you to call us should you have any queries or issues you wish to discuss regarding your purchase.
|Conveyancing Prices as at 1st June 2006||Total (GST and usual disbursements included)|
|Refinance with mortgage (Fee $695)||$950|
|Sale No Mortgage (Fee $695)||$810.00|
|Sale One Mortgage (Fee $795)||$1010.00|
|Purchase No Mortgage (Fee $795)||$1,050.00|
|Purchase One Mortgage (Fee $995)||$1,370.00|
|Set up Trust (Fee $1,750)|
|Set up trust in conj. with purchase (Fee $1,250)|
|1. All prices include a free simple will.|
|2. The prices are for residential properties where there are no undue delays or complications.We reserve the right to charge for extra time at $200 per hour where delays or undue complications occur.|
|3. Ask us about our special prices where purchasing/refinancing is being done in conjunction with setting up a Family Trust.|