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Conveyancing – The Process to Buying a Home.

Buying or selling a home is one of the biggest financial commitments you will ever make. There are several relatively complicated stages to negotiate and there are a number of things to look out for.  This process is often referred to as property conveyancing.

Steps to Buying a Home in NZ

In New Zealand there are several ways to sell and buy a home, including: auction, tender, advertised/ fixed price or by negotiation.

Regardless of the method used, you should always have a written sale and purchase agreement.

Preparing an offer

Before you submit an offer there are a number of key details that need to be determined:

  • The name(s) of the vendor(s) and purchaser(s).
  • The address of the property.
  • The type of title (freehold, leasehold etc).
  • The chattels that are to be sold with the property (e.g. whiteware, drapes, television aerial).
  • The price.
  • The rate of interest that the purchaser must pay on any overdue payments.
  • The deposit that the purchaser must pay.
  • The date on which the agreement will become unconditional if there are conditions. e.g. title approval, finance, LIM report, builder’s report, valuation, sale of existing home.
  • The settlement date (the date the buyer pays the remainder of the amount for the property, usually the day when the purchaser / buyer can move into the property). Any conditions the purchaser wants fulfilled before the contract is agreed.
  • Condition of property.

The Sale and Purchase Agreement

Have your lawyer review the sale and purchase agreement prior to executing (signing) same, as this will afford you the opportunity to make any suggested amendments.  It is extremely important to remember that once you have signed the agreement, a legally binding contract comes into force with the ensuing legal obligations.

As currently drafted, there are some key differences between the REINZ and ADLS sale and purchase forms of which you need to be aware. Your lawyer can explain the differences to you and may advise you to use one of these forms in preference to the other.

The Contract

Once your offer is submitted to the vendor, it will either be accepted, rejected or you will embark on negotiations with the vendor. It is usual for those negotiations to be handled by the real estate agent with any amendments to the contract being approved by your property lawyer. Every time the contract form (Agreement forSaleand Purchase) is amended and submitted to the other party it is, in law, the rejection of the previous offer and the making of a counter-offer. When the document is accepted without amendment and signed then the contract is formed.

It is important to note that the real estate agent works for and is paid by the vendor. The agent must therefore carry out the vendor’s instructions (as set out in the agency agreement) and act in the interests of the vendor. Agents also have clear responsibilities to purchasers even though they are representing the seller.

Once the contract has been signed and dated, the Real Estate Agent sends signed copies to the solicitors for the vendor and purchaser. The purchaser’s solicitor will immediately obtain a search of the title and any relevant documents recorded against the title. Copies will then be provided to the purchaser. The general conditions of the standard contract contain provisions allowing a purchaser to object if there are problems with the title.

Can I cancel the agreement if I change my mind?

Once a contract has been formed, you cannot cancel a sale and purchase agreement just because you have had second thoughts about buying or selling the property concerned.

In general, once you have signed a sale and purchase agreement and the conditions set out in it have been met, you will have to go ahead with the sale/purchase of the property.

Satisfying Conditions as set out in the Sale and Purchase Agreement

At the same time as the title is searched, the purchaser is normally required to take steps to fulfill any other conditions of the contract. For example, if the contract is subject to finance or a valuation report, then steps should be taken to satisfy these conditions. The purchaser should also at this time check with the Council to ensure that all Council requirements have been satisfied and in particular that any additions or alterations have obtained the requisite consents. Many purchasers obtain a LIM (Land Information Memorandum) report from the Council. The LIM sets out information the Council has on the property. Councils make a charge for providing LIMs.

A condition of the contact may be a pre-purchase inspection report. This report should identify any items in the property that require attention. It is unlikely that a home will come though a property inspection with a clean report as maintenance on an existing home is always required.  However, a property report allows you to make an informed decision prior to proceeding with the purchase of the property

We recommend you use a certified inspector for your potential pre purchase inspection report.

Confirmation

Once the purchaser is satisfied that the conditions can be fulfilled, then the purchaser’s solicitor confirms to the vendor’s solicitor that the contract is unconditional.  Alternatively, should a condition not be satisfied then the purchaser’s solicitor should notify the vendor’s solicitor that the contract is at an end.

Post Confirmation and preparation for Property Transfer

Once the contract has been confirmed we commence updating the Land Information New Zealand website (Landonline) for managing the transfer ofNew Zealandland titles with the details of your transaction. Relevant documents are completed on behalf of parties through the completion of signed Authority and Instruction forms (A&Is) which enables both the vendor’s and the purchaser’s solicitors to make the necessary changes to the title of the property being purchased. The vendor’s lawyer prepares a settlement statement (showing debits and credits) which adjusts the rates and any other outgoings and incomings on the property as at the proposed settlement/possession date.

In addition,

  • attend to the execution of the A&I’s  - which transfers ownership to you
  • check that the rates and other costs are paid and up to date
  • check that you have arranged insurance for your new home from settlement date
  • carry out a ‘guaranteed search of title’ from the Land Information Office. This protects you from anyone else having a claim over your property.
  • make arrangements with you and the bank for advancing of your loan and payment of the remaining share of the purchase price (excluding your deposit).

Loan and Mortgage Documentation

The mortgage is a legal document that gives your lender security for the money that you owe them.

If the purchaser is borrowing money from a financial institution, then following confirmation and before settlement all loan and mortgage documents need to be completed by the purchaser. Mortgage instructions are sent by the lending institution to the purchaser’s solicitor for preparation of the security documents and execution. The details of the mortgage are added to Landonline by the solicitor. Once the documentation has been completed, the purchaser’s solicitor completes a certificate requesting the financial institution to draw down the loan on the settlement/possession date.

Insurance Cover

The purchaser needs to arrange insurance cover for the property from the possession / settlement date.

Pre Settlement Property Inspection

During the normal course of events prospective property purchasers visit a house they intend to purchase and if the property is to their liking, enter into an Agreement forSaleand Purchase.  This agreement should preferably be reviewed by their solicitor prior to being signed. Once the specified conditions of purchase have been met, the contract becomes an unconditional agreement (a binding contract).   At an agreed date in the future, settlement / possession shall occur.

It is important to understand that a purchaser / buyer is entitled to carry out a pre-settlement inspection in order to avoid any unpleasant surprises. Examples could be a window broken, light fittings missing, a burn mark on the carpet, etc.  Obviously this damage must have occurred after the date on which the agreement was signed.

The pre-settlement inspection is normally arranged by the real estate agent, and must be carried out no later than the day before settlement is scheduled to occur.  During this inspection the property purchaser should ensure that the property is in the same condition as it was on the day that the contract was signed.  If any damage has occurred since the signing of the Agreement forSaleand Purchase, the purchaser can request that the problem be remedied or alternatively could ask for compensation.

Depending on the situation the purchaser’s solicitor could negotiate with the vendor’s solicitor to retain an amount in their trust account pending the satisfactory correction of the identified damage.

Possession / Settlement

The possession date, usually the same as the settlement date, is the day that you will take possession of the house. It is also known as the settlement date because it is the day you pay for the house and this process of transferring money is known as settlement.

On the possession/settlement date, the purchaser’s solicitor receives the loan advance from your lender and any cash contribution from the purchaser and pays over the full settlement figure by way of a bank cheque. This must be completed before 4pm on the day of settlement. The purchaser is entitled to vacant possession (and handing over of the keys) of the property as soon as moneys have been paid over but not before.

In exchange for the settlement moneys, title passes to the purchaser by means of the release of the Landonline documents from the vendor’s solicitor to the purchaser’s solicitor. The title is updated immediately with the discharge of the existing mortgage, the transfer of title to the purchaser and the new mortgage registered. A copy of the updated title is provided to the purchaser as part of the purchaser’s solicitor’s settlement report. Following settlement, the vendor’s solicitor notifies the relevant Council and Quotable Value which record the names of the new owners of the property.

General

Whilst there is a process to follow when it comes to property conveyancing transactions, there is skill and experience required to avoid potential problems.  You need to have confidence in those parties representing you to ensure an excellent result.

This article has been written as a guideline in order to highlight the process involved with purchasing a home. Should you need any assistance in relation to your property purchase or NZ Property Law, please contact Auckland Property Lawyer, Ian Mellett at Quay Law Barrister and Solicitor.

Contact Details

Phone: +64 9 5232408

Web: http://www.conveyancingauckland.co.nz/

Web: http://www.propertylawnz.co.nz/

Web: www.twitter.com/quaylaw

UNAUTHORISED USE. The contents of this article may be subject to copyright, legally privileged and confidential. Any unauthorised use, distribution or copying of the contents is expressly prohibited.

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by Auckland Law Firm, Quay Law on 27/04/2011  •  Permalink
Posted in Quay Law Articles
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Posted by Auckland Law Firm, Quay Law on 27/04/2011

http://aucklandlawfirm.co.nz/2011/04/27/property-law-nz-%e2%80%93-the-process-to-buying-a-home/

Valuing a Leaky Home – Excellent Article by Glenda Whitehead of QV

Source of Article: QV Website

To some people, leaky homes have no value. They wouldn’t even consider buying one.  To others, the value is intrinsic because it is already their home. And yet to others, a leaky home may represent an opportunity to make a profit.

How do we assess the market value of a home with un-resolved or un-quantified weather-tightness issues?   Does such a property have a different value to an owner who is going to repair it themselves, versus a purchaser?

Let us start by considering what ‘market value’ actually is. The market value is, by definition, the amount a property would exchange for between a willing, well-informed buyer and a willing, well-informed vendor. The principal of market value also states that the situation is free of duress, such as financial stress or matrimonial circumstances. It does not however take into account any emotional stress the vendor may be under in a ‘leaky home’ scenario.

Often an existing owner will conduct remedial work themselves and will not expect to make a profit from the situation. In such cases the owner only sees the intrinsic value of their home and doesn’t consider what the open market would pay for such a property. For many, the stigma attached to a leaky home means it won’t even be considered for purchase.

Leaky homes do sell, and with various levels of unresolved issues.  The cost to rectify each home can be quite disparate.  Therefore, valuing leaky homes by lining them up against one-another is generally not a good approach.

However, I have valued a terrace house in a development where all the homes required similar levels of work (re-cladding).  The process was being managed through the body corporate and the actual cost was known to each of the owners.  There was also recent market evidence (sales) within the development reflecting the same circumstances as the property being valued. What we refer to as ‘direct sales comparison’ was possible and suitable on that occasion.

But how do we value a leaky home when there is no direct sales evidence?

This question cannot be answered until the likely cost of repair is known. That is, we must establish the building costs, associated Council costs, financing costs over the rebuild period, and all other costs associated with the rectification process. Building costs will often be provided to us by owners who have sought builder quotes after engineers have established the extent of the damage.

We must also allow for extra costs such as landscaping, which may be ruined during the rebuild process.  Having these facts at hand, we can then start the valuation process.

The valuer begins by assessing the value of the property as if the home has been fixed and has no leaky issues. We also take into account what the material the home will be re-clad with, and any incidental upgrading work, or other alterations that will occur during the process.  Examples include re-cladding with weatherboards, replacement of joinery, and re-aligned roof lines to ensure better water disbursement. Often during the upgrade process other components of the home will be upgraded or replaced out of necessity, these are also taken into consideration when assessing the market value ‘as if complete’.

From this, we then start the cost deduction process. We deduct for Council costs, building costs, other site development work, the cost of financing the project over the planning and rebuild period, and finally but significantly, a profit and risk margin.

Why do we deduct for finance costs? Because we put ourselves in the position of a willing buyer, who will see finance as one of the costs they will incur in the process.

A profit and risk (P&R) margin is taken off because; why would a purchaser take on such a project if there was nothing in it for them?  While the current  owner may not want to make a profit but just want a sound and dry home, a prospective purchaser would know there are always risks attached to such work being done. If actual costs exceed those provided, it is the profit and risk margin that will be reduced. Some uncertainty typically remains around costs, so we include a contingency fund.

Ultimately, if the project is undertaken by a new owner, the P&R amount is their reward, or for the current owner undertaking the project themselves, it represents their salvaged equity on completion.

The bottom line of our assessment is what a willing, well informed market buyer should pay for that property, in order to cover the costs to rectify it, and obtain a reward (the profit and risk component) for taking on the task.

Example:

Indicated Value ‘As if Complete’ basis:Land value $ 400,000
Value of improvements $ 290,000
Market value on Completion (excluding chattels) $ 690,000
Added value of chattels $ 10,000
Market value (including chattels) ‘As if Complete’ $ 700,000
Less costs to rectify
Estimated building costs, including labour, materials, architectural fees, Council fees $ 170,000
Estimated finance cost over rebuild/re-sale period, allow:  (say 6-9 months at applicable interest rates eg 7%) $ 21,000
Profit & risk allowance (typically a percentage of ‘as if complete’ value, 15-25%) $ 105,000
Indicated value ‘As Is’ $ 404,000
As the indicated value after deducting all likely costs is close to the assessed land value, we are of the opinion that the land value should be adopted as the present value.“As is”   Market Value                           adopt                       $400,000

The above example, in which the Market Value is equivalent to the land value, is from our experience, not uncommon in the Auckland market.   The owner then needs to ask themselves whether they should rectify the existing dwelling, or demolish and start again. The latter would incur further costs associated with demolition. Such a decision would depend on the size of the existing home and how well it makes use of the space the site offers. For an existing owner, rectifying the existing building may be the only viable option.

In our assessment, we have not considered that the owner may recoup costs from parties deemed to be responsible for the home having weather tightness issues.  If some recovery is known and certain, it could be factored into the equation.

There is a definite stigma attached to properties that have monolithic, or plaster cladding, regardless of whether they have been proved to leak or not. We see this in sales evidence where values are discounted in comparison to, for example, a similar weatherboard home. We also know that saleability is reduced as some buyers won’t even consider purchasing them.  We have noted that these homes can take extensive time periods to sell. This can also be said for properties which have had leaky issues in the past, even if they have been re-clad. The stigma remains and is exacerbated in slow market conditions.

The value of any home can be significantly reduced if it is discovered to have weather-tightness issues.  If you are purchasing a property and have any doubts about its construction, get a suitably qualified and registered person to look at it, and provide you with a written report. It could end up being the only leg you have to stand on.

Glenda Whitehead is a Registered Valuer working with QV in Auckland.

To contact a registered valuer near you, call QV on 0800 16 44 44.

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by Auckland Law Firm, Quay Law on 21/01/2011  •  Permalink
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Posted by Auckland Law Firm, Quay Law on 21/01/2011

http://aucklandlawfirm.co.nz/2011/01/21/valueing-a-leaky-home-excellent-article-by-glenda-whitehead-of-qv/

Purchasing a Business

In this article, Auckland lawyer Ian Mellett of Quay Law Barrister and Solicitors discusses some of the legal matters that you should consider when deciding to purchase a business.

The decision to purchase a business is both exciting and daunting. On the one hand it signifies the start of a new venture, yet on the other it raises the uncertainty and risk inherent in any commercial undertaking. You may also be unsure as to whether to buy an existing business or to start your own from scratch. Generally speaking when you buy an existing business, there should be existing customers from day one which will ensure an instant cash flow. However if you start from scratch, then you will need to generate new customers. Both approaches have their own hurdles that you will need to overcome, and particularly so in light of the tough economic climate currently prevailing. It is important that you engage your professional advisors at an early stage in the process. Your lawyer and accountant, along with a business broker if there is one involved, are well placed to give you the necessary input and advice to enable you to make an informed decision. There are various aspects which require careful consideration. Some of these are set out below:

 

The Agreement

It is preferable to use the standard Legal Areement for Sale and Purchase of a Business which has been compiled, and amended over the years, by the forms committee of the Auckland District Law Society. The agreement, much like its counterpart for residential and commercial property transactions, is designed to cater for the needs of both the vendor and the purchaser. Always ask your lawyer to cast his eye over the agreement before you sign the document. There are a number of things that need to be considered, including the names of the vendor and purchaser; what is being sold; the price; terms of payment; warranties by the vendor; conditions such as the obtaining of suitable finance, solicitor’s approval (if appropriate) and due diligence; possible restraints of trade and all issues relating to existing employee contracts.

 

Purchasing Entity

It is recommended that the purchaser be reflected as (name)….. “and/or nominee.” This will give you the opportunity to discuss the most appropriate purchasing entity with your lawyer and accountant. Issues such as limited liability protection, tax, succession planning and the like, all need to be considered prior to settlement. There are various options, including but not limited to sole proprietorship; partnership; limited liability company and trading trusts. I will discuss the advantages and disadvantages of these entities in an article sometime in the new year.

 

Due Diligence

This is the most important aspect of any business purchase, as it provides you with an opportunity to perform an in-depth analysis across the entire spectrum of the business. Your accountant will be able to assist you in inspecting the financial statements for the past 3-5 years (this will vary from business to business) in order to judge the “financial health” of the business, and to raise any concerns or request further information if necessary. Your lawyer will be able to assist you with all the legal aspects of the due diligence process. These include, but are not limited to, reviewing all lease and/or licensing agreements; patents and copyright (if any); stock valuations, and evidence of ownership of equipment and assets (and whether these are unencumbered or not). He will also ascertain what is being sold namely the business and its assets, or the shares. The last issue is extremely important, as it will determine how certain aspects of the purchase need to be dealt with from a taxation perspective. Generally, due diligence only needs to be done once you have signed the Agreement. However, in practice, much of this work is often done in finding out about the business and in determining what amount to offer. Now you will need to decide! Due to space constraints, I have only briefly touched on some of the more significant aspects which you need to consider when purchasing a business. My recommendation is that you consult your lawyer (and accountant) early in the process to ensure that the proposed transaction proceeds smoothly. There is a cost associated with obtaining professional advice, but it is my experience that this will be far cheaper than the cost of getting it wrong.

Please feel free to contact Ian Mellett (BComm LLB H Dip Tax) at Quay Law.  (Phone 09 5232408)

 

Our Legal Website:  http://www.quaylaw.co.nz

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by Auckland Law Firm, Quay Law on 19/01/2011  •  Permalink
Posted in Auckland law firm LEGAL TIP of the Week, Quay Law Articles
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Posted by Auckland Law Firm, Quay Law on 19/01/2011

http://aucklandlawfirm.co.nz/2011/01/19/purchasing-a-business-and-things-to-consider/

Buying a Business or Franchise

Your agreement is crucial.  Do not sign any agreement until you have spoken to your lawyer and taken legal advice.

This could save you and / or your business a lot of time and money in the long term.

Aspects that should be considered amongst others, are:

  1. Franchising
  2. Company structure
  3. Business premises
  4. Regulations governing your proposed business sector
  5. Contract terms and Service Level Agreements (SLA)
  6. Intellectual property
  7. Finance

For more legal support when purchasing a business or franchise, contact Auckland Lawyer,  Ian Mellett of Quay Law.

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by Auckland Law Firm, Quay Law on 13/07/2009  •  Permalink
Posted in Auckland law firm LEGAL TIP of the Week
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Posted by Auckland Law Firm, Quay Law on 13/07/2009

http://aucklandlawfirm.co.nz/2009/07/13/buying-a-business-or-franchise/

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