The purpose of this video is to provide a bit of insight into the process of buying property in New Zealand. Legal literacy not legal advice. Hopefully you can pick out a few nuggets and otherwise enjoy learning a little bit more about the legal landscape in New Zealand. Enjoy!

Well, welcome along, and to those online, welcome, and thank you for tuning in. Today, we're going to be talking about purchasing property and obviously particularly in Tauranga, because that's where we are, but just generally in New Zealand.

So my name is Simon Gyenge, I'm one of the directors at LOA Law. We're a local law firm, we've got about 20 staff and we do general practice generally happy clappy law. But today is about legal literacy and just you guys being able to learn a little bit about how to buy property. So for those of you online, you're going to be able to see what we're going through.

We're going to be having a chat in the room and then at the end there's going to be a Q and A here. But of course you guys can just post your questions in writing and then we'll look at answering them in the next week. So today we're going to go over the process of purchasing. We're going to look at the types of property, the types of ownership that you can have, specifically co-ownership structures.

We're going to look at some of the compliance requirements, how to investigate a property, the conditions you might look at putting in and a particular point is going to be buying when you're selling and how to make sure those agreements are talking to each other. And we're going to try and spend the majority of our time towards the end of those topics to get the most mileage.

It wouldn't be a legal seminar without a disclaimer. So it's important to note that nothing that we're talking about today is legal advice and that you should certainly talk to your trusted legal advisor before making any decisions. This is less about marketing and more about learning. So whoever your legal advisor is, if you already have one, you can see them.

Or of course you can come and see us and LOA Law. But specific legal advice about your circumstances is going to be the key. Okay, so the process of buying property I deal with this all the time. So for me, this is a relatively simple list of things, but this is, this is the big picture. So we've got finding a property, you then need to negotiate the terms upon which you're going to purchase.

You're going to sign the agreement, and either the agreement is going to be unconditional or it's going to have conditions. So if it's got conditions, you've got the opportunity to do further investigation before you're fully locked in. If it's unconditional, then you're locked in. So whatever's in that agreement you are now bound by and you have to complete the purchase of that property.

If there's conditions, you're going to work through them, and then you've got the opportunity to either terminate the agreement or to go unconditional after the agreement is locked in, we're then going to prepare for settlement. And there's a number of steps that we need to take at that point. So that includes making sure that your insurance is finalised, making sure that we've got the lending side of things and getting the money.

And so whether that's money that you've got in the bank or additional lending, and then once we're ready to go, we're going to complete settlement. And that last point, that's where us as the law firm, we are doing the heavy lifting and handling settlement day on behalf of our buyer before that, it's a team effort with not only my client but also with other professionals.

So we've got real estate agents, we've got mortgage brokers or banks, we've got insurance providers. There's a number of parties that are having to kind of collaborate in order to get to that end point of actually buying a property. Okay. So the types of property that we're looking at now split this up into a couple of different categories.

We've got property zoning and we've got put out there for different categories commercial, rural, lifestyle and residential. Now, if we're buying a home to live in, then we're looking at residential lifestyle and potentially rural and rural is just really covering outside of cities. And you're going to have a homestead area where there's the actual house and the surrounding area, which is treated differently than the rest of the property, farm, orchard, whatever it is, forestry is another example and so it will be treated differently, particularly in respect of its tax treatment.

And so it can be really important if you are getting into rural and commercial property that you've got an accountant on your team as well to make sure that everything is as you think it should be from a tax perspective for everyday people buying in the city, you're going to we're going to be looking at residential property. That's a key one.

The different types of title that you can own first is face simple. Now this is basically where you own the land. So you just own a plot of land and that's yours. Your name goes on it. Cross lease is where there's a plot of land, and it was a system of subdivision that was developed kind of in the seventies where basically subdivision was expensive and regulation was difficult.

So instead of breaking up that piece of land into two genuine face, simple, separate lots, the entire lot was informally, or I want to say casually, but that's not the right word. It was divided into with two parties leasing to each other. So Party A technically owns the whole lot, but they lease to party B this area and party B technically owns the whole lot, but they lease the other area to PATEA And then you have two separate titles for those two different properties.

It's a it's a style of land where you have extra relationship obligations with your neighbor then you otherwise would that. That's the main point to get across with cross lease stratum estate, which is commonly called unit titles. This was originally designed to cover land that is not land. So apartment buildings are really easy way to conceptualize this. If you buy on the third story of an apartment building, you are not buying land per se.

You're buying like a square of air, basically. So that's what the unit title on the stratum estate is describing is your ability to buy something that's not necessarily the physical land, although it is on a piece of physical land. And then we've got the Unit Titles Act, which most recently has come in and formalized a lot of terms.

So that now that style of ownership covers a number of different ways of, of conceptualizing property. An example would be a set of eight ground floor units that are all connected with one long driveway. They might all be unit titles. And so all the owners have obligations to each other. There's one overarching block of land and then each owner owns their little unit together with common access. So it's a style that's designed a bit more flexibility around particularly areas where there needs to be common access. The last one there is leasehold and leaseholders where you don't own the land outright, you own the right to be on the land for a period of time. A really good example of that would be in downtown Auckland. There's a lot of leasehold land that apartment buildings are built on with is a maori land trust or other trusts that actually owns the underlying land. And then that is a long term lease to developers who then develop it, create leasehold titles and then sell those. And so then the apartment owners in those apartments would own a leasehold interest in those properties. And we also have some here in Tauranga on total restraint where there's some, where there's some commercial leasehold and lots basically, for all intents and purposes, you own the land subject to a timeframe. That's, that's, that's really the crux of it. And depending on the time frame depends on the value of the property. So if you only have a five year leasehold, then that's nowhere near as valuable as a 100 year leasehold in terms of how you could sell it to someone else. These last two types of ownership are different than physically owning a piece of land. Physically having your name on a title Timeshares are not super fashionable these days. I don't think in the last nine years I've ever dealt with a new timeshare arrangement. It's a bit of a historical structure, but syndicates are still fairly common, but more in a informal closed syndicates, i.e. a small group of friends or a small group of business partners going and syndicating a property together rather than large scale. And if you're looking at large scale, then you're sending into big funds where they own large commercial premises that you can buy into in a more structured way, occupation rights as the last one, and that is really covering predominantly out retirement village ownership. So if you're buying in a retirement village, you're buying a right to occupy, you don't actually own the land and generally you're paying a premium at the at the back end for that type of ownership. And what I mean by that is that if you pay $1,000,000 to buy in to a retirement village, when you leave often in a box, then there's an exit payment fee, which if you've been in there for longer than three years, is almost certainly going to be around 30% And so then that's deducted and then you get the balance back out. So occupation rights are not a way to make capital gains off property. We don't get the value of capital gains there are a way of giving people the right to occupy at a cost of, okay, so that's the actual property that we're buying now. This is the way of owning or who can own more importantly. So first of all, we've got personal ownership, which is myself or a couple owning and then you can own it in two different ways when you're personally owning. So you can either own it as joint tenants or you can own it as tenants in common. Now joint tenants is where you own the property jointly. If something happens to one of you, then the survivor automatically gets that property. It does not go through your well. That's compared to tenants in common, which is where, let's say two people own property, they own it together, but they own it. And she is. So if something happens to one of them, then that half of the property is going to be distributed pursuant to their will and their will might direct it to their kids or to their siblings or to their parents, but it doesn't necessarily go to the other owner of the property. The second type of ownership is ownership under a trust, which is very common in New Zealand. And we will at a later date, I think in a few months will be doing a Trusts basics seminar so you can be on the lookout for that as well. But, but the crux of it is that the trust is holding it for the benefit of beneficiaries. The company ownership is the is the third on the left sphere and partnership ownership. These are generally reserved for investments rather than owning your main home. It would be rare, I think, to own your family home under a company structure and you would be more only doing that if you had some other purpose for needing a company to own that property. Maybe if there's a business operating on that on the land would be a reason to potentially do that. And we see that more in the agri and rural sector. So if it was a farm or an orchard, then it could be a what's commonly called a trading trust, which is effectively just a trusts that is operating a business. Or it could be under a partnership or a company that's actually running that that orchard the next on the list is constructive trust. Now everything else on here and I'm just going to skip that one for a second, come back to it because estates are when someone dies and then that ownership falls into the estate of that person to be distributed under their will. Okay. Now, so that so that and the rest of them are all formal ownership structures. So they're all structures that happen because of what you have put in place. And then in respect of estates that happens by operation of law, construct of trusts, they are imposed on land. So an example might be that I was working on a piece of land for ten years and I was always told that I'd work on this piece of land and that it was mine. 5050 with the owner. Even though their name is the only name on the title, I put in all the capital to develop the land. I put the Sleepout in whatever it is. It was always on the basis that I owned half of that property, even though my name wasn't on the title. Now, if my friend goes to sell that property and take all the money, then I would be trying to argue that he was holding half of that property on constructive trust for me. So it's a it's a ownership that I'm trying to impose on the property rather than the property actually demonstrating that it exists. If you look at the title of the property, you wouldn't see my name on it in that scenario. So it's more resulting from dispute or litigation. And when parties are trying to impose their rights on a piece of land now that leads quite nicely that little example into the different types of co-ownership structures. I've got three headings on the slide Who, what and how, now who and who am I going into this co-ownership structure with? It could be a friend, it could be a family member or it could be a business partner. Those those are the main three categories. I think that we would see co-ownership models and a really easy example which I'm going to carry through here is the bank of Mum and Dad. So Mum and Dad are going to contribute into the purchase of your first home or of your property, and then you're going to actually buy their property together. So maybe they're going to own half and you're going to own half. And so we come to the watch, which is effectively it's a what? But it's really a why. Why should you formalize the arrangement with your parents in that scenario? Or if you as a parent, why should you formalize the relationship with your child? Because what we hear commonly is they would never do X, they would never sell the property from under me. They would never demand that we upgrade all the plumbing. They would never stop us from adding a sleep out, whatever it is. And always that's what they would deliver. And in my limited but nine years of experience, when often that's true, but when it's not true, it's really not true. And so having these structures in place protects people from those awkward situations. So the things that we're going to be looking at and that agreement are who's using the property and how is it going to be used. So in the example of mum and dad and child, is the child going to be the sole tenant or are they going to is the parents going to also occupy? So is it going to be a sleep out that the parents move onto the property with the child in the main home or vice versa? So knowing exactly that relationship, that also kind of leads into who is responsible for what costs. So the utilities of actually living on the property, Internet, power, water, but then also rights insurance, things that are more traditionally associated with land ownership rather than just land occupation that includes improvements and maintenance. So those things are listed often initially around adding a sleep out or updating a plumbing. You know, who's responsible for those things, and then the bottom to where it's getting serious. So who and how can you dictate the sale of the property? Can one party demand that the property be sold? And if they can demand that, how much time do they have to give? So do they have to give six months notice? If they want their investment out of the property, do they have to give a year's notice or can they not give notice? So relatively common is if parents are putting 50,000 into a property and maybe they get an interest that there would be a provision in there that the parents aren't aren't actually able to demand that the property be sold in order to give some security to the kids that have moved in so that they know that they're not going to have to come out with that money unless they sell the property. But not everyone's in a position to be able to just park 50,000 and definitely 100,000, 300,000 and a property. So again, it's about making sure everyone's on the same page rather than it needing to be a specific way. And the last one is what happens if someone dies? So is the survivor able to continue to occupy the property? For example? So if it's rather than family members, if it's two friends, can the surviving friend continue to live in the property for six months or for a year or indefinitely? That's important because the friend that's passed away, their parents or siblings, they might be quite keen to get their money out of that property and they might have plans of buying utes or going on trips or just wanting to close out their loved one's estate and not have it lingering over them.  You know, it doesn't have to be a nefarious purpose. It can just be people wanting to move on. And that's probably the big takeaway for structuring co-ownership is actually it's not always people being naughty that gets you in trouble at the back end of these situations. It's actually often just people living their lives. You know, two friends go in, they buy a property because neither of them can afford one on their own. Three years later, one of them is in a relationship. They want to buy a home with their partner, but they can't because they've got this property with a friend. And so the bank won't lend them any more money or they need the equity out. They need the cash out to be able to buy the other property. So they're not being horrible. They're just living their life. So having a plan, knowing what the structure looks like, is going to help in those situations. In terms of the how for a company shareholders agreement is how we handle it for tenants in common, which is just individuals owning property to individuals. It's a property sharing agreement and for a partnership, it's a partnership agreement. That's how we handle those those terms, and we can just put in the terms however we want basically into those structures. Now, I've got to look at the bottom there, and I don't know if you can see it online, so I'm going to say it very clearly. There is a different approach that applies for couples and this does not cover relationship property. So if a if two people are in a relationship or maybe in a relationship and this is particularly important, if they have not told anyone, they're in a relationship. So maybe they they haven't told their family, particularly in circumstances where they're either gay or some other factor that is stopping them from wanting to be open about their relationship. It is so important to make sure that your lawyer is in the tent with you because we can't protect you and get the terms right on this. We know the whole picture. So that's critically important that these style of structures, they don't apply to relationship property. It has to be a relationship property agreement subject to that law, which I'm not going to go into further today. But certainly at some future point we will be going into so compliance obligations. Now this is really unsexy, so I don't want to linger too long on compliance, but basically we've got anti-money laundering and counter financing of terrorism legislation, which is our AML laws. So professionals have to collect information about who you are and where your money has come from. That's the guts of it. It's not voluntary. Sorry, It's not yes, not voluntary. It's compulsory. So so any professional that you're going to you're going to get asked these types of questions, don't fight it. Roll with it. And and then we've got the Brightline, Texas. Now, currently we have a regime of different rules apply depending on when you purchased a property and when you are and when you're selling a property.So but that law is changing is the expectation. Now, the current government has indicated that those changes will take effect from the 1st of July. We've had indications or we've had communication that it's going to be a two year brightline tax period, which means that from the 1st of July, if you bought your property longer than two years prior, then you will not be paying brightline tax when you sell that property that is subject to the law actually passing.So my suggestion and this is less relevant for buying property, but if anyone is listening in and is selling property is wait until that law to pass before making any moves, that's critical for you. If you're looking at buying, what you are factoring in is if you are looking at buying an investment property, do is it reasonable that I may want to sell within ten years?Is it critical that I sell within ten years? If it is critical and you don't want to potentially pay tax, then wait until the law to pass. If the purpose is just to get on with investing and and you're not worried about potentially paying tax if you sell in eight years and this law doesn't change, then crack on.But either way, just go in with your eyes wide open and be just be wary that that law is expected to change, but hasn't yet last one. There is overseas investment. So if you're buying property in New Zealand, all residential land is considered sensitive land under the Overseas Investment legislation. And that means that you have to be a well, there's a number of categories about that, but the main ones are a New Zealand citizen, an Australian citizen or a Singaporean citizen can buy a property in New Zealand.If you are a New Zealand permanent resident, an Australian permanent resident, you can buy a property in New Zealand. If you are a New Zealand resident and you are living in New Zealand, then you can buy a property in New Zealand, subject to some factors that that relate to you being here at least half of the year. And I think there might be. I feel like there's one other factor that I've forgotten and but is easily Google about. So the upshot is that if you're not a citizen of New Zealand, a quick search to make sure that you are able to purchase property in New Zealanders is a good idea. But generally if you are a resident and you are living in New Zealand, you're just living your life here, then you're going to be eligible to buy property in New Zealand.That's the crux of the of the situation. So this now, now we're turning to actually how we investigate property. And this is a kind of my golden standard or the factors that when I'm looking at an agreement, when it comes onto my desk, these are the these are the core things that I'm that I'm looking at. So first thing that I'm turning my mind to is the purchase price. And if I'm buying property, obviously that's particularly important. Is it the price that I want to pay? The deposit, which is usually going to be 10% checking that I've actually got that right in the agreement and that I'm physically going to have that cash in the bank account to be able to pay the deposit when I go unconditional. So that's important. You might want to reduce the deposit if you only have 40,000 cash sitting in your bank account, you might want to specifically put 40,000 is the deposit rather than 10% and vendors that are generally amenable to different people circumstances. As long as there is seriousness with the offer, GST status is potentially critical. What it relates to on the on the agreement you're going to have plus GST or inclusive of GST. And if you're buying from a builder or a developer or some other GST registered entity and the front page says plus GST, if you are not GST registered, then you're going to be adding tax onto whatever the dollar figure is that's written there. So if it's 500,000 plus GST, then it's going to be 500,000 plus whatever that GST is, 15%, 75,000. That sounds right. So to be 575,000 actual purchase price for you as a non GST purchaser. So it should be right. But checking its rights important settlement date have you got enough time? Is it right? Is it going to fit in with what your the timeframe of you wanting to settle chattels that are included. This is all the stuff that's not nailed down or screwed down in the property. The general warranty is that anything that's included in that list is going to be in reasonable working order, but it doesn't need to be perfect. So dinged up, etc. It will be in whatever condition it is at the date that you signed the agreement. So the most important thing is to check that everything that you're expecting to be on that list is actually on that list. So if you do a walk around the property and you're expecting the washing machine to be included in there in the purchase and the washing machine is not in that schedule of items, it will not be there on settlement day. So that needs to be added in some examples that I've had, a wall mirrors that that are not actually screwed on. They're just they're just kind of sitting on a screw and then they've disappeared for Settlement Day. The worst one I ever had was a bank of pots of plant pots, and the pots were not included in the channel list. And on settlement day, all the pots were removed and there was a dirt bank. So. So it can be important. It can be stuff that you would have thought is just included. So checking that it's right is a good thing to do. Conditions in the agreement. I'm going to put a bookmark in that because because we're going to talk about conditions a bit more fully in a second. But further terms of sale is a portion of the back end of an agreement where anything weird, wonderful, unique about that particular purchase is going to be located. So if there is any exclusion of any of the standard warranties, if the vendor is saying I haven't lived in the property for ten years, I've got no idea whether whether the power works to the property on excluding that warranty. I'm not saying that the electrical is all going to work. This is where it's going to be located. So it's a it's a really good place to look to make sure that there's nothing, as I say, weird or wonderful going on with the purchase that you're going after. And then unit title disclosure is specific to unit title purchases. So this is additional information that you get if you're buying a unit title and it's going to give you extensive information about that unit title development.So there's specific requirements and law now which has a laundry list of information minutes from the body court meetings, evidence of the long term fund relating to maintenance. There's a whole bunch of information in there to trawl through and make sure that there's nothing out of the ordinary. A big one for those and apartment buildings is water tightness because traditionally, say, if I have a house, I'll own my house. And if my neighbor has a leak and has roof, it doesn't affect me. If my neighbor has done something that caused that leak in the roof. So he's run something that causes a whole bunch of moisture in his living room and has rotted out, you know, things and cause issues. It doesn't affect me. It doesn't bother me because he's a totally separate building in an apartment building. If my neighbor has done something that has caused issues to the to the roof, well, that might affect me because it might now affect my roof. It might now affect my shared wall with them. And even though they might be liable, you've still got to go through that process of forcing them to pay, forcing them to deal with it. And that might not be a walk in the park. So it's not just looking out for your specific little apartment. It's also looking at the bigger picture of the development to make sure that there's not bigger issues with particularly water tightness and weather tightness. And so that stuff that's going to show up actually in the documents that's there, it's going to be there when you get the agreement, when you get the information from the from the registered agent. But the other general investigation, things that I'm going to be looking at are whether the vendor has done any work on the property. Now, the standard warranty in the agreement is that if the vendor has done work on the property, then they must have got the appropriate consents and sign off from counsel. So that's the standard warranty. So if we're looking for weird and wonderful and fair terms, we might see something like the vendor installed a bathroom and the purchaser acknowledges that no consent was obtained and they're purchasing as is, whereas that's something that comes up fairly regularly. That's an exclusion of the general warranty that the vendor would otherwise have to apply. Now if the vendor didn't do the work, but the last owner did the work and it doesn't have all the consents, the current owner is not responsible for that and you are just purchasing buyer beware. So looking at what work the vendor has done, looking at what work has been done, generally it's going to give you the picture to make sure that all of the alterations to the property have the appropriate consents and appropriate sign off. So now post 1993, we would call that code compliance, a code compliance certificate being issued for those works. If it's required by council. So that's what you're looking for. Next up is property insurance. Make sure that you can actually get insurance for the property. My suggestion is to do that before you're locked into a contract just in case there's something that would affect your insurance. And I would say that it's very rare that you can't physically get insurance for a property, but it's more common that some factor with the property will influence the extent of the cost and any exclusions or limitations that the insurance company puts on. So so that's something that's important, bearing in mind that it's a requirement of every bank to have insurance for the property before you are able to draw down your lending. So so it is important that it's done and it's just the way that you do it before you're locked into a contract or after you're locked in. Now, the healthy home requirements these are different to the building code generally, so properties can be constructed and not be compliant with the healthy homes requirements, but they cannot be tenanted. So if you are buying an existing property, you want to be looking at whether the home is currently compliant, what you would need to do to bring it up to compliance, particularly in terms of heating insulation and the ventilation. The first three on that, let's see. And that's things like ventilation out of out of bathrooms and whether it's going to be an issue, putting those then putting the ducting in, there's certain exemptions for concrete slab properties and for flat roof properties in terms of insulation. There's also like if you're if it's cinder block, then maybe you don't need to do wall insulation. So there is exemptions to the rules. But as a general principle, you want to make sure you understand the position so that you know that when you come to sell, if the property is not compliant with healthy homes, it might impact whether investors want to buy that property. So if you're buying a cookie cutter style property and it is not compliant with healthy homes, then you are limiting yourself to first time buyers. People that want to downsize, people that can't afford to have a have a unique or bespoke house. But you are taking anyone that wants to be a landlord out of your poll or they are in the poll, but they will see that they have a cost associated with buying that property and they will factor that in when offering you money. So it's important to bear that in mind because it might impact what you ultimately can sell the property for. And can they force you to sell up to that? Can they force you to get the hip? And so, no, they can't force you to do it, but it can be part of the negotiation around around purchasing and buying. So example, the way of doing that would be I'm happy with the property, but I'm going to reduce the purchase price by 5000 because I'm going to put the heat pump in or I'll pay you the full purchase price as long as you put a heat pump in before settlement. And so it just becomes part of the negotiation. Yeah. And again, I've reiterated because of the importance of checking those further terms in the agreement and making sure that there is nothing there. A little extra step is that in the agreement there's a page 18 or 19 that is the further terms page, but often it says see attached further terms. And then there's a page at the very back of the agreement that actually has the further terms. So if you're scrolling through an agreement and you get to that page and you're skimming and it's blank, just carry on reading just in case there's something at the back end of the agreement, because it doesn't have to be referred to in that schedule, it can just be attached to make sure you read the whole agreement as the upshot.It's kind of like reading the back of the exam paper. Now in terms of conditions, you can literally put any condition you want. And the agreement, I could put it in an agreement that my purchase of your property is subject to my dog reaching 15 kilos before Christmas if I wanted to. Right. So, so when people think of conditions, I think sometimes there's a bit of a narrow perception of what a condition is or isn't. A condition is simply this has to happen for for me to do X and those two things can be anything. The lights have to go out for me to leave this building. Right. That's a conditional statement. So our core conditions, the ones that we see most common on slide finance, due diligence, solicitor approval building report, limb report and drug test or methamphetamine testing. Now, the most important thing with conditions is that you can only terminate a contract based on the conditions that you have. So if you have a finance condition and you get a building report, you can't cancel the agreement because you don't like what's in the building report unless you can't get finance because of it. So the reason for exiting the contract has to relate to the condition that you've got as. Then you can only get out for what you said that you were waiting to confirm. The big place where I think there's some strong advocacy to be had. A solicitor approval of this due diligence. Now a solicitor approval condition is not the same as due diligence condition. If you're told being in a five working day solicitor or approval condition because it's basically due diligence and your lawyer can look over it, if they have any problems, then you can just cancel. That's a dangerous position to take in my opinion. I would be far more comfortable with a three or five working day due diligence condition. You can make it tight so that the vendor has confidence that you're serious and that you're going to and you're going to expedite your investigations and that they're not taking the property off the market for too long. So if there's someone else that wants to buy, they can crack on and give them an opportunity. But it's basically a get out of jail free card. It's a I'm going to look at everything while you don't sell to someone else. So that's effectively saying I'm going to incur cost. You have promised not to sell to someone else whilst I incur that cost to investigate and make sure I'm happy with the property that allows for the investigations.You need taken particularly a review to make sure that it's doing what you think it's doing and then you can satisfy that condition and push on a solicitor or approval condition can be a bit limiting. And it does sometimes worry me because we can only we can only bring what I would consider to be objective problems with the contract. So, for example, if you said, we're found somewhere else and we want to put an offer in there, we want you to cancel the contract because we want out, that's something that probably is not within the scope of a solicitor approval condition. It's probably putting you on shaky ground that you've actually validly canceled that agreement. And the reality is that may as your lawyer, I'm not the one that's carrying the potential risk and the potential liability you as the purchaser who is attempting to terminate you are carrying that risk. So so definitely, if you can sneak or if you can encourage a due diligence rather than solicitor approval, that's that's an advantage. And then in respect of very important conditions, the building report is to assess the current state of the building generally. Now some inspections will include the review of the council file as part of it as an extra. But generally you're looking the current condition of the building. How is it now? Does any work need to be done? Are there any issues? The report is looking at the council file and determining a number of things, but mainly have the consents been obtained and appropriate sign offs? So has the building. Was the building meant to be compliant with the law based on the plans and did it get constructed in accordance with those plans? So that's what you're going to find out in the LUM, whether there's a record of that with the council. And you're also going to find out whether there's any special land features. So for example, in total we're blessed with a beautiful beach and any property that's in Papamoa will have on its special land features a tsunami warning as part of its council file. Now when I tell that to clients at, no one goes, my God, I can't believe that it's in a tsunami zone, because obviously it's And so it's it's not a shock, but it's still helpful information. And there's other things in there like flooding information. And again, you would go, yeah, papamoa a low lying flooding. But depending on the way the roads have been created and depending on where the draining is, actually dictates where water has been designed to flow. So the property you're looking at might be right. An area where a one in 100 year event that it will flow over your front lawn by design. So that's helpful to know if you're going to build your garden shed and that and that lawn or if you're going to put a $20,000 bespoke golf green and your annual lawn that is designed to get flooded every time there's a major storm. So that's something that's relevant. The two are not the same as my point. So when you're doing your due diligence, you should see them as separate and and if you are doing a fold, you're doing Jake, then getting both is the best way to go. All right. Now, when you're buying, when you're selling, this is one of my biggest frustrations with particularly with people when they're selling and buying is not getting the agreements to talk to each other. It's so easy to do if you have the agreements reviewed and checked before you sign. So whether it is your lawyer, whether it's your accountant, whether it's your best friend, someone that is able to compare those two contracts and make sure that particularly the conditions and the settlement dates are lining up. So you don't want to be, for example, locked in to a purchase and your sale will fall over that. So because then you won't have the money to complete the purchase on the on the property. You don't want to have a settlement date on your purchase that is a week before your sale because you won't have the money yet to pay for your purchase and less and to finance, you're going to do what's called bridging finance, where you're going to go to your bank and you're going to say, Hey, look, we're purchasing and we're selling. We want to purchase on the first of the month and sell on the 14th of the month so that we've got a fortnight to move all our stuff into the new place and the bank. And then you're asking the bank to basically advance extra funds, a bridging loan to get you over that fortnight. And so they go, yeah, that's fine because we know you're going to sell, we know you're going to pay us back and therefore you'll pay for the pleasure with high interest rates and fees, but you'll get the benefit of being able to have that fortnight to be able to move your staff, whether it's not available to everyone. But it is there is something the banks might do and just depends on your particular circumstances. So that conversation with the bank comes out of making sure that you understand how the two agreements are talking to each other, that you've got those dates not necessarily on the same day, but they're working in harmony, they're lining up so that, you know, the plan and the worst case, the worst cases that we deal with A, when the dates are round the wrong way or not lining up and then penalty interest and depending how bad it is, it could be that you lose one of the contracts or both of the contracts. So it's relatively easy to mitigate if it's dealt with at the front end rather than dealing with it on the fly. The other important thing with buying and selling is the deposit. Now, what I get a lot of the time is people having in their mind that if they sell, say you sell for 900,000 with a $90,000 deposit, that when your sale goes unconditional, that that day you're going to get $90,000 into your bank account and you're going to be out of use that 90,000 to pay the deposit on your purchase. That's generally not how that plays out. And one of the key factors for that is that there is a timeframe that's allowable for when deposit has to be paid. So the deposit isn't necessarily paid. The day the agreement goes unconditional, it can be paid three days later, which means that you haven't received your funds to be had to pay your deposit. So there is a bit of wiggle room around when that money comes in. And secondly, generally the money goes into the reset agents third party trust account. And when the money is released to you, the commission is deducted. So your 90,000 actually comes out to you at 55,000 because the agency has taken the fee and then you have now got the balance. So the upshot of that is make sure that you understand the your cash position to pay your deposit because you might not have the deposit from your sale to pay it. And that's where when I talked about earlier in the chat about you've got 40,000 cash in your bank account, then that might be what you make available for the deposit when you go unconditional and that you're not actually able to use your sales deposit yet because those funds won't be available at the time when you need them. So again, thinking ahead, co-ordinating is going to be your friend because when you go unconditional, the agreements, what I would say crystallize, you're locked in and whatever dates, whatever provisions are there, that is what will happen unless everyone agrees. So if, if once you're locked in and people don't agree to a change of those dates, whatever the default are, that's what it's going to be. So as much as possible, making sure those are correct, that's going to put you in better suited to make sure that you have a smooth and safe settlement process. And that's kind of a snapshot, quick, hard focused summary of buying property in New Zealand. So thank you for tuning in online. It's been great to have you who have been there. And we're going to have a quick Q&A. so the initial thing that happens is that if you can't do what? Like if you all say unconditional and you can't settle because you don't have the money at the right time, then penalty, interest and costs. So penalty interest at a fixed rate, it's normally 12, ten, 12, 14%, somewhere in that ballpark. And that's calculated daily and then costs. So legal costs, if a party is having to carry their mortgage while you're in default, then you might be liable for the mortgage costs as well. It can quickly rack up. But it also, if you're out by a day or two, the right to cancel, which is the next remedy that is 12 working days from the date of default. And notice. So you go into default, the other party says, hey, you're in default, you need to settle in 12 working days or we can cancel. And then you've got two and a half weeks to figure it out and get the money to be able to settle. And if you don't, then the other party can cancel or they can go to the courts and start getting more aggressive with their position. So you've kind of got this two and a half week window where you're going to pay for the place. Are you going to incur the costs of penalties but the other party can't get cancel. So on like a on a seven $800,000 purchase with an interest rate of about 12, let's say 12% your daily rate, you're going to be looking at about 200 bucks, 250 bucks per day and penalty interest.So if you're out by two days, then you're south of $1,000 and costs, but then still being able to sell info. So it's not the end of the world. It's just it's just costing money and stress and and and unnecessary basically. So yeah, understanding whether the property is vacant or not, I think that's a that's a good one and that's less of a legal thing and more of a practical thing because if it's a mortgagee sale and there's still someone living in the property, then they may be skeptic, they may not have a normal vendor's attitude to the sale, which means that although you might have the legal ability to get a reduction in purchase price, if they do something silly, you would still have to deal with that silly thing that they've done. And when you take over the property. So I would say that's my number. That's probably number one would be like understanding whether there's a problem person still involved, but generally a mortgagee sale. They're going to have in the fear, the terms, they're going to have limitations that is as is, whereas and that all the normal vendor warranties don't apply. So doing the investigation is as more important to make sure that you know that you know yourself where the property is standing because the vendor won't have any obligations is clearly to make sure it's to a certain standard. and I didn't clarify myself as well as I should have. That's really if it's only for reviewing the contract, reviewing the title as a direct replacement for a solicitor or approval. Yeah. Finance then building for 15 working days. Yeah, yeah, yeah. And yes, certainly because if you're getting finance approval I don't think, I don't even think ten working days is enough these days. It's just that the cogs most slow, the requirements are extensive. And so yeah, so three weeks is reasonable. And then Lum reports the time to get it and report as is for most councils around ten working days. So then you need time to get it and then time to review it basically. No, no. But it depends. Depends on when in the month you're talking to the bank. It depends on what they've had for breakfast. It depends on what color the sky is. Yeah. Every bank has a different policy to risky or to all their lending, right? They have different policies and then they have different things that they want to focus on. And when it comes to new builds and build contracts, each bank will change over time. Their specific requirements. The best people to nail that for you are mortgage brokers. In my opinion, mortgage brokers are free. They are financial advisers caught under the financial regulations that govern financial advisors of their category, which means that they have obligations to a higher regulatory board, which you can enforce against, which is which is ideal. And same with lawyers like practicing lawyers. You know, we've got we're bound and we're governed so you can complain about us, which is a great mechanism as a self-regulation. But mortgage brokers, they're the that knowledgeable about finance. They're connected in with the banks, the good ones. So they understand the policies as they're changing. They understand better than, say, may what the banks are doing and when they're not all created equal, find a good one and and use them like you would use any resource. Use them like you don't pull your own teeth. You go to a dentist, right? You get a specialist to do the job. That's how that's how I would suggest using mortgage brokers, because if you go direct to the bank, you're getting one product from one person, which is the equivalent of going to rip Repco to buy a wetsuit rather than going to mount surf shop and looking at all the different brands of wetsuits and picking the one that's right for you. So rather than that kind of looking at all the different options, you're just getting one given to you and they are going to tell you that what they've got is the best, you know, and we've all had that in retail, so we know what that feels like when you're told that this is the best option for you and then you go online or you go to a different store and you're like, that's crazy that they were telling me I should have done that. This is clearly a better product. So yeah, that would be my big suggestion On the finance front. Certainly. Well yes we do have different options available for first time buyers and just end generally just for buyers that don't have a 10% deposit. So and banks are governed by legislation which restricts how much lending they can do in that more risky space of low equity, like low cash lending, which is your, say, 5% deposit, 95% lending, 10% deposit 90% lending. These are high risk areas for the bank. So in terms of being able to get around needing a 10% deposit, we've got being out of pull out your KiwiSaver withdrawal to go towards your deposit.

We've got the first home ground, which is that if you are under certain income thresholds and you're buying a property under certain thresholds, depending on what city you're living in, then you can get free cash money up to $10,000 per person for a new build. So if you're a couple, you can get up to 20,000 towards your deposit, But and those will then go into as cash as part of in your deposit for the purposes of getting your bank loan.

So generally speaking, if you're buying property, you're going to be aiming for a 10% deposit anyway. But there are kind of those extra things to be able to assist with buying. And next month, we're actually going to be doing first time buyers and we're going to be doing and so that's going to be the topic for next month and we're going to deep dive into that exact those exact things are the things that are unique to people that are that are buying their first time. So the point when you actually pull the trigger and get insurance is once you're unconditional, the point when you should investigate insurance is before your unconditional and that's just to make sure like so while there's there's there's a couple of options there actually because it's going to be a requirement of your finance that you that you get insurance. You could just do it, that you have a finance condition, and then you and then you look at insurance while you're organizing your finance. Now, one of the limitations on that and in the current market where there is not buyers out the door and prices aren't going crazy, is that if you physically can get insurance that would be satisfactory to your bank.

There's an argument that you cannot cancel on the basis of insurance that you're just not quite happy with and therefore your finance could be approved and therefore you should satisfy your finance condition. So any time you are using a condition in a subjective way, there is risk that the other party will say, No, you can get finance because you physically can't get insurance. That's just not exactly what you would want. Or it's an extra $50 a month or the boundary fence down the bottom of the hill is as excluded or whatever it is. And you're kind of you're kind of bouncing up and down. So that's the best way to protect yourself is to check before you're locked in and or have a specific insurance condition that the agreement is conditional on you confirming that you can get insurance. Yeah, but but generally, you will hopefully have an indication of whether you might have trouble with getting insurance from the real estate agent and or from the vendor or just from your walking through the property. And it's one of the questions to ask the reservation. Has the vendor had any issues with getting insurance? Does the vendor currently have insurance? Who is the vendor was insurance with? Now, some of those questions might be subject to privacy. Some of them might mean that the agency is no sorry, can't answer that. But your job as a purchaser is to ask as many questions as you can to ask everything that you can about the property, about the history, about the neighbors. Have they had any problems up the road? When was the last time it flooded? Have they repainted? When did they repaint? Was there any mold? When they repainted? Has there been any moisture under the carpet? When was the joinery redone? Were there any issues? When the joinery was redone, all these questions just I mean, it's just a case of trying to learn as much about the property because that's your friend.

Because then with that knowledge, when you go in and you get the builder and the builder does the building are not the builder, sorry, the building inspector goes in and says, there's a high moisture rating in the third bedroom. And you go, Yeah, the agent mentioned that two years ago they had a burst water main and, and they had redone the pipes on this wall and you know so high moisture rating is suddenly a major, potentially a major problem because it's an indicator that whatever they did didn't work. So it might it might not be that it's just a cold winter's day and that therefore you got a rogue high moisture rating. It could be an indicator of a major problem in the wall. So that piece of data, together with your kind of investigations and your questions, is going to give you a better picture.

and perhaps a mine, I don't know if I'll get into trouble with agents with with what I say.

My dad was an agent, so I feel like I've got this kind of joker card that I can just say whatever I want. But basically, agents, if you look at it, that the window is the client and the purchaser is the customer. That's the way I that's the way I like to visualize it in my mind. So the vendor is trying to sell the property for, as are the agents trying to sell the property for the window.

That's the client that they're trying to make money for, right. And they're trying to sell the property to the purchasers. And the way that we've structured our law in New Zealand is that they owe a duty to the purchasers because purchases are deemed to be vulnerable in that relationship. So it's not acceptable, for example, it's not acceptable that an agent would know that there is no code of compliance for the conservatory that's been dealt and that they wouldn't disclose that to a purchaser.

Right. So as soon as an agent is aware of a problem as a general principle, they are required to disclose that to to purchasers because as a as a rule, we've decided that we don't like it, that agents would be able to withhold information from purchasers. So that's so there's so there's a nice boundary there. Bigger problem actually comes with the vendor and the purchaser that the agent has really strict legislative obligations on them based on what they know.

But the window doesn't have the same obligations on them, the vendor and the purchaser. It's more of a buyer beware relationship. And that's where the questions come in because the vendor cannot lie point blank, but they can not say things. So if you just haven't asked the question, then a vendor might be able to get away with defects on a property that if you had asked them and they had lied to you, then they would have been liable for.

So questions about about water and grace, those are big ones that you put to the agent. But if you can, to the vendor as well. Have you painted recently as a good one? Because often painting and stopping as a way of covering up water damage. And so it might be that a property in the winter had some water damage and then it's, it out in the spring and then by the summer it gets stopped and then painted and then the moisture ratings show up as normal and then it's put on the market and solved and that's a really naughty thing to have done.

And I'm not saying that everyone does that, but it does happen. So it's it's just certain they need to make sure that you're asking about stuff. But to come back to your question, the agents are generally obligated to disclose what they know and then they put that on their property owners to tell them everything they know. So the listing or agreement with the agent and the vendor is going to have a whole bunch of disclosure that the vendor has to give the agent and then hopefully they're going to be passing an information on to the purchaser.

It's a good question to ask. Else question should be disclosed to me. Yeah. Yeah, correct. Is there anything wrong with the property I need to know about? Are you aware of any issues? Have you read the report? Did you see any issues in the report? Have you read the building inspector's report that's in the bundle of the auction pack?

Was there anything in there that caught your eye? These are all questions that the agent could turn around and say, hey, that's a question for your lawyer. That's a question that need to investigate. And really, the worst case scenario is that that's exactly what they say that they say. I'm not obligated to answer that question or I don't know underneath the expertise and you have an obligation to seek that answer from your own advisor.

And that's kind of I think when you're getting if you ask the agent five questions in a row, this is not this is not a calculation. But if you ask the agent five questions in a row and they say that to every single of the questions you have, you have got to the outer limits of the information that the agent is prepared to give you without you getting it yourself.

And that's a good indicator that you can move on to the rest of your investigation.the short answer is no. That they they don't necessarily they don't necessarily say that the offer hasn't been accepted. Yeah. Yeah. And say you need to tell you a little bit, right. Yeah. Yeah, yeah. And because yeah, they'll be like if I get busy and I've maybe had a spate of reviews of, of properties and then given those reviews to clients and said here's the review, good luck with, with your offer or good luck with what you're doing.

And I don't hear anything for two or three weeks. Then the presumption is that it didn't go anywhere, you know, But it's not until confirmation. So wait. Yeah, we won't get actual confirmation directly. Yeah. Often I get people saying that they went ahead with putting in an offer or doing whatever they're doing because they couldn't wait for their lawyer to or they didn't know how much was going to cost or the last time they got a bill from their lawyer, it was $1,000 or $2,000 to just look at a property for them, or it took him four days to come back to me and someone else got the property. So. So time and money, right? They tend to be the two reasons that I get regularly that people don't do the full due diligence that they maybe should. So the thing is to ask your trusted legal advisor, ah, how long does it take you to turn around a review of a property? If I email you the contract and the details? And what is it going to cost for a standard review of a property? And will you give me a fixed fee to do that portion of the job? Those are two really good questions to make sure that you've got clarity on, because if you know from your advisor that they will guarantee a turnaround of 48 hours on a property review and that the costs will be $400 plus just and any searches of titles, then that information equips you that then you're negotiating, you confront that with the agent or the vendor and you can say, Look, I need to run this past my lawyer, but give me 48 hours because I know that I can beready to go in 48 hours. So whatever answer you get back from your advisor is going to equip you to then decide, Do I do that due diligence and incur that cost or do I just risk it and go ahead? And that's really valuable information for you to have and not just be going in blind. So that's what I'll end on. Thank you for watching, and I hope that you've managed to pick out a few key pieces of information that are going to help you on your property purchasing journey here in New Zealand today. Simon says if you've enjoyed this video, give it a like. Subscribe to our channel so you can stay up to date on future videos on other areas of law.

And if the conversation has sparked a thought that's worth sharing, leave it as a comment. I look forward to bringing you future chats and remember at LA law. We have good lawyers for good people.

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