Doing something new can be scary. Something new that's going to cost you hundreds of thousands of dollars. Now, that merits taking a second to check your options. What you know and more importantly, what you don't know. I'm Simon Gyenge and welcome to Simon Says. Now, the purpose of this video is to look at the process of buying property in New Zealand through the lens of a first home buyer. We are looking at particular elements of the purchase process in greater detail, as well as things that only impact first home buyers. It's all about legal literacy, not legal advice. Knowing your legal position is half the battle, so hopefully you're able to take away a couple of pointers out of this video that you can use in your property purchasing journey.

Cool. All right, well, welcome along, everyone. Great to see you here tonight. And welcome to everyone that's tuning in online. My name is Simon Gyenge one of the directors at LOA Law and tonight we're going to be talking about buying property, but specifically for first time buyers buying your first home.So we're going to be going through a couple of key terms, that sometimes maybe asking is going to be embarrassing. Then we're going to look at KiwiSaver withdrawals and first home grants. We're going to look at the due diligence process and going unconditional, saving for the deposit, co-ownership structures and then we're going to finish out with a bit of a summary of the settlement process, so that you can get a gauge of what settlement day will actually look like when you get to that point. So just a reminder that this is general advice. That's not specific advice to your circumstances. So if you want specific advice, talk to your trusted legal advisor or alternatively you can touch base with us. But otherwise this is about legal literacy, not legal advice. So hopefully you learn something and it helps you on your journey. Alrighty, first up is some key terms. So this segment is just about some of the basic words that you're going to hear when you're buying property and maybe you'll feel too embarrassed to actually ask what they mean. So conveyancing. ‘Conveyancing’ is simply the term we use to describe the process of buying and selling property. Nothing more, nothing less. ‘Solicitor’. It's just a fancy word for lawyer. ‘Vendor’ that is the person that owns the property. So that is the person that is selling the property to you and then the ‘purchaser’ is obviously the person buying the property. so, so that's, that's your basic kind of parties. And then our ‘due diligence’ that we're going to go through, is the process of investigating the property. Now, due diligence will mean different things in different contexts. So there might be a due diligence condition included in a contract and that means specifically you investigating everything about the property. But in a broader sense, the word just means that you're going to look at what you need to for the property to find out all the information in the background. Now, conditional versus unconditional. When a property is ‘conditional’, it means that you could still get out of it if you're not satisfied with specific elements. So for example, if there's a finance condition, then you can still get out of the contract if your finance is not approved. ‘Unconditional’ means that there are no longer any conditions in the agreement for you to be able to get out. And you're 100% committed to completing the purchase, so there's nothing you can do to get away from it. Now deposit versus equity. Again, ‘deposit’ is a word that in different contexts is going to mean different things. Now when you're talking to your broker, ‘deposit’ is going to normally be referred to as any cash that you are putting into the purchase. So not just the initial 10% deposit, but also your KiwiSaver, any money from family, your savings, the whole lot, any ‘equity’, which is what we would normally call it as the lawyers, we would normally call that the equity that you that you're going to have in the property. And that just means the bit that you own versus the bank loan, which is the bit that the bank have put in. So when you're talking to your lawyer about deposit, what we're referring to is the 10% deposit that you have to pay when you go unconditional. So that's just a slight distinction that's going to come up probably early on in the process for you. And then ‘settlement day’ is the day that the balance of the sale purchase price or the purchase price has to be paid. So that's the day that you pay the balance of the money and you get access to the property when you’re the purchaser. Okay. So that's some basic terms that hopefully, you no longer have to worry about understanding. So KiwiSaver. Now this is the big one that's different for first time buyers versus let's say, ordinary buyers or buyers out in the wild. So your KiwiSaver withdrawal is going to be from the funds that you've saved in KiwiSaver. The eligibility is that you have to have been a contributing member for at least three years. You can have had a break in between, but the total period that you've contributed has to be three years. So if you stopped contributing for two years, then that would add up to, you know, five years. The second thing that's important is that the funds have to be used towards the purchase of a first home. And then the last point that is really noticeable is that it has to be in relation to land. So the funds can't be used towards a build. Now that distinction is important because if you already own a piece of land and then you want to enter into a build contract in order to build on that land, then you can’t use your KiwiSaver funds at that point. You can only use your KiwiSaver funds when you're purchasing the land. So if you are looking at a land and build package, then your KiwiSaver funds are going to come out for the land portion at the start. If you get the idea that ‘Oh, if I leave my KiwiSaver in and only pull it out when I'm finishing the build, and then I'm going to get more money out of my KiwiSaver’, then you're not going to able to get the money out. So you have to do it at the outset, it has to be connected to land. There is some exception for Maori land that is being built on but if you're dealing with that situation, then you really need to talk to your trusted legal advisor rather than just going in blind. In terms of the actual application process for KiwiSaver, you do your pre-approval online with most main providers, and then that pre-approval gives you confidence that you can go ahead and look for properties, knowing that you're going to be able to get your KiwiSaver funds out. So that's the critical first step. The formal application is then something that is prepared generally by your lawyer, but you can do the initial stages with a Justice of the Peace as well, If you want to. In my experience, getting your lawyer to submit the KiwiSaver application is much cleaner because the funds are going to be coming in to us anyway, so it's better that we've been involved at that point, we know exactly what the application includes, we can make sure that it's got everything that needs to be in there, and then we know that we're expecting the funds so that we can chase the provider to make sure the funds are arriving when we when we need them. And that's where the supporting evidence comes into play. So making sure that copy of the agreement that all the identification requirements are taken care of so that that application is going to be processed first time, every time. Now, the timeframes for KiwiSaver applications are really important when you're going through the process of entering into a contract or deciding what conditions you need, because for a standard KiwiSaver withdrawal, the banks require at least ten working days to process it. That's ten working days from the date the application is submitted to the bank, so it's not ten working days from the date the agreement is signed. Which means that if you need your KiwiSaver funds in order to pay the deposit to go unconditional, then you need a window of at least ten working days to be conditional on finance so that you can go to your lawyer, complete the application, get it lodged, and then have time for the funds to arrive into the lawyer’s trust account. So if you are using KiwiSaver and you need it for your deposit, my general suggestion is to bang in a 15 working day finance condition, because that's going to give you sufficient time to be able to get into the lawyer's office, get it done and then get the money out. So that's a bit of a precaution. Now, if you have lived overseas for any period of time whilst you've been contributing to KiwiSaver, then the banks estimate at least 15 working days to process the application out.So in that scenario, you're going to want to push out to maybe a 20 working day finance condition. In reality, a 20 working day finance condition is going to be super rare. I very seldom see a finance condition of a month. So if you can get it to 15 working days, that's probably going to be the best that you're going to be able to negotiate.And if you have lived overseas for any period of time, then it's just critical that you get that application in ASAP to hopefully have the bank process it on time. And in any case, the best thing to do at that point is to talk to your trusted legal adviser to make sure that you understand what you're getting into before you've signed the contract, so that if those time frames are going to be a problem, then you can deal with them upfront.So not going out traveling if you've actually lived and stopped contributing to KiwiSaver and been earning an income overseas is a good kind of rule of thumb. Basically, if you, or if you went traveling for a year, that would constitute.But if you go to the States for three weeks, or you go to visit family over in the UK, that's not going to trigger, an issue. Yeah, yeah. And that just as a bit of background, the reason for that is that if you've lived overseas, then the KiwiSaver provider is going to seek confirmation from the Inland Revenue Department as to whether there's any issues with releasing the funds out to you.And what they're really checking for is to make sure that an overseas contribution hasn't been paid into the KiwiSaver. That shouldn't be released because it's only funds that have been deposited into KiwiSaver domestically that come out. So like if you're Australian or you lived in Australia and you paid into a super and you've transferred that into your KiwiSaver, that portion of your KiwiSaver will not come out as part of your first time withdrawal. That portion will stay in your KiwiSaver no matter how long you've been contributing for. Okay, so that's that's a trap for young players. and then the first time Grant is very similar. So it's basically and this grant is the free money that currently Kāinga Ora, operate and, and this is the money that if you meet certain income criteria and the property value is under a certain threshold, both of those things can be found online. So I haven't clogged up our information today with those thresholds. But as long if you're under the value and under the income, then you're eligible for this grant. And it's basically for an individual up to $10,000 for a new build and up to $5,000 for an existing property. So if you're purchasing as a couple, then you could get up to $20,000 towards a new build or up to $10,000 towards, an existing property. And that's based on a minimum of three years in KiwiSaver up to five years. So if you've been in for five years, then you'll get $5,000 or $10,000. If you've been in for three years, you'll get $3,000 or $6,000. So that's directly proportionate but then with a maximum of $10,000, so you have to have been in for three years again, must be towards a first home purchase but it could be that you're, part of the exceptions for second chance purchasers. If you think you might be in that category, which is where you don't own a property now and you're in the exact position of a first time buyer, then talk to a trusted advisor before proceeding and then an extra condition for the first home grant, is that you have to live in the property for a period of six months after purchasing. So that's one of the provisos. Now, the application process - very similar. It's going to do the initial one electronically. Once that approval is accepted then the formal application comes through to your lawyer automatically. And then that's signed and the funds will be released prior to settlement. And those funds are released for settlement date, not for the deposit so in terms of the application, that form, the one that comes through your lawyer, as I said, that's just going to be done for settlement, not for the deposit. And the supporting information is stuff that your lawyer will be able to collate, put together so that when that application goes off, hopefully it'll just be a case of getting money in. now the timeframes in there, I've actually not, updated those time frames and they are not really relevant to this. So the timeframes for this application are as soon as possible once you have once you're on conditional, once you've got a contract and then effectively they require us to return the application at least five working days before settlement date. So that's a week before settlement date. We have to return the application signed back to order for processing. So it's a bit of a different time frame. It's more focused on settlement day and then working backwards. and that's something that we handle on your behalf to make sure that you're going to be sitting in our office or, meeting with us virtually to sign it with plenty of time for settlement. So the only thing that is going to stuff that up is if the date that you go and conditional on your purchase is less than a week to settlement date, which is going to be very rare for for our lovely first time buyers. But that is critical that you make sure you've got enough time between unconditional date and settlement date, and that you don't make it too tight.now due diligence that we're doing into the property. This is and we talked so this at the start we talked about the fact that due diligence as your investigations into the property, it's what you're looking into to make sure you understand the property itself, any issues that there are and that you're actually going to be in a position to complete settlement on Cinnamon Day.so the things that we're going to investigate, firstly, we're going to look at the actual agreement itself and what terms are included in the agreement. Now, I've put up on my slide there the cover page of a seven page agreement which will not be visible to people online watching or, later watching this video, because the print is tiny.But the purpose of putting out there is just to show that it's a legal document. So it looks formal, but also that front page has a lot of information on it. So we're going to have our purchase price, our deposit, our settlement day, whether there's a relevant GST status that we need to take into account with the current owner. So we need to make sure that our purchase price is what we're actually paying and that we're not going to have to pay GST. On top of that. So that's something to look out for. and then down the bottom we've got all our core conditions. So we're going to be able to indicate what conditions are the baseline ones that we're dealing with in the and the purchase. So we can glean a lot about the property just from the front page. But as we go into that document, we're also going to say the chattels that are included in the and the sale. And we're going to say the further terms which are towards the back of the agreement. And that's anything weird and wonderful that's specific to this particular property purpose, purchase. So that's going to be anything from the vendor saying that they put a spa pool in the ground and didn't get code of compliance from the council for it, and you're just accepting it. Answers to that. There's water ingress and the basement and that they're not going to do anything about it. And you're accepting that it's the, or, that if you buy the property, you're also buying the six chickens that, live in the backyard and that the vendor doesn't give any guarantee that they'll all be alive, that cinnamon date, you know? So it could be anything. It could be the weird, the wonderful. But it also could be things that are critically important. So it could be something like, that the water supply in the backyard will be available following settlement date. if you're on a rain tank system or, or that or that certain elements, the property will be in a specific way. So it's not just negative. So it can be real positive since that's important to check out those terms. and that's really going to inform whether you understand the whole property. So your due diligence is not just looking at the documentation, it's taking the documentation and then being at the property. Is it reflected in what I say when I look around the property? Is everything here that should be here is everything that shouldn't be here, not there. so you really looking? Not just not just at the technicalities, but like walking through the house, checking that it's in a condition that you're happy with. You know, when you buy a home. and like, when I bought my first time, three of the door handles, just slightly, just jagged. And when we moved and and we didn't think anything of it. And when we moved in, we were like, oh, we should really replace those. And then when we looked at the cost of replacing door handles to do it around the whole house because we didn't want three random ones, suddenly it goes from like, $30 Bunnings trap to like a $500 landing strip. And if you have ten of those that suddenly five grand that you didn't know that you were going to spend or want to spend the moment you moved into the property. So that investigation is not just the big stuff, but it's also the little stuff. What makes this property livable? What is it that I would want to change straight away, and have I built those costs into my purchase prices?So I know what I'm getting into. Next up on there's Healthy Homes. So, we've got specific requirements in New Zealand for being able to tenant properties has to comply with specific Healthy Homes requirements, which are over and above the basic building code requirements for buying for building a property in New Zealand. So that means that a property that is built still may not meet the requirements of the Healthy homes, provisions. And that means that if you're buying it, that you might want to tenant it in the future. It needs to comply. The other thing that it means is that if you buy it and it's not compliant when you come to sell, investors will factor in that. They'll want to update the property to be compliant before they buy it, so that'll affect what they pay. So either you're buying with the intention that you'll fix it up, or you're buying with eyes wide open as to the things that aren't compliant. So the main things we're looking at, ventilation, insulation and heat source, those are those seem to be the big ones that, that can catch you out. next up, we're looking to look at whether the vendor has done the work on the property, to make sure that it's compliant with council requirements. And just and also to make sure they haven't done anything to cover up, any issues that they may have been with the property in the past. They might have tried to do a facelift to cover up water ingress from last winter. And so you're just wanting to understand where there's any potential problems that you haven't seen. And that's going to fade into making sure you can get property insurance. So my suggestion would be that if you're serious about a property before you sign the agreement, you check out whether you're going to be able to get insurance for that property. A really good question to get a lay of the land as to ask the risk that agent whether the vendor has current insurance and whether they had any issues obtaining that insurance. And that's going to give you a really good baseline as to whether there's a potential problem. and then a particularly conservative purchaser would go ahead and contact an insurance company with the property details to make sure that they're going to be out to get insurance. but the question to the vendor might be sufficient. 100%. Yeah. So and one of the things that you're battling with is do we do our due diligence before we sign the agreement, or do we get an agreement signed and then do our investigations of the property? So the critical point there is that once you sign the contract, whatever is in there is in there. So if you only have a finance condition, you can only get out because you can't get finance if you only have a building report condition, you can only get out because you've got an issue with the actual building report, not because you have an issue with the property title, not because your lawyer has an issue with something else, not because you can't get finance. So whatever conditions you've got is going to dictate how wide or how narrow your scope of being able to get out is. And if you have a general due diligence condition, then you have taken the property off the market and you have the ability to get out for whatever reason you want. So if you are in the position to be able to get a 10 or 15 working day due diligence condition, then that is primo. That's where you want to be because it means that no one else can buy the property whilst you do your investigations. but you've got as wide a scope as you possibly can have for that property. Now, what is probably more common is being able to get finance Lem building report as your core conditions and being able to get maybe 15 working days on all three. And that's going to cover broadly your bases. You may also want to insist on an insurance condition that it's conditional on you being able to get insurance. but those three are going to be your core because your finances. Can I actually afford to buy this property? Your finance condition is going to also potentially the bank is going to be interested in the condition of the property itself.But then your building report condition is, is that any current issues with the maintenance or construction of the property that require attention require me to do work to it? So that's what that's going to show up. And then the report, the main thing that that's showing up is whether the property has, the appropriate consents and permits. So did it get the consents and the plans submitted to council and approved that the building that was going to be done was going to be compliant with the building code? And then the sign off that actually the building was constructed in accordance with those plans. the starting point is no. So if building work has been completed and code compliance. So this is post 93 1993 lease. We'll talk about that period of time because that's when code compliance certificates came into play. If the works were completed after that point and a code compliance certificate was not obtained at the time, then the only thing really that can be obtained is what's called a certificate of acceptance. And that's the council saying that it wasn't issued at the time. It should have been issued. And we're issuing this acknowledging that it is in fact compliant. Now, that requires generally the work to to still be to a good quality. And the bigger problem that's basically going to require that the building work itself is up to current code generally. And so the rescue ran is that the council turned around saying, no, we need a full new inspection and that they, and if it fails that inspection and the building work needs to be redone and a full new consent issued and a full new compliance issued, then the cost goes through the roof and I have had that happen. So it goes from thinking it's a little like fixer fix up job to 300,000, you know, potentially depending on what the issues are. So my advice would be, to be very careful about that situation. And really what you wanted to check is has any work been done that needed consent? If it didn't need consent, then no problem. If it needed consent then it has to have had the consent. Otherwise you are buying that rent and then it will be and then it will be yours to deal with basically. Yeah. so you're going to work through those conditions, make sure that you complete them, understand what the reports are saying. If it flags any issues, then you're going to then you're going to deal with them and So yeah, the the answer is yes generally that you'll do your own report, you'll do your own report, except for if the agent or the vendor has decided to do those reports and provide them in the bundle that they give out to purchasers. Now that is fairly common, particularly for auctions. You'll get a little bundle, you'll get the draft agreement, you'll get a limb report or a property file. You'll get a building inspection report, potentially, you'll get a, rental appraisal. and then sometimes some other bits of fluffy information about the process of buying and that bundle. a couple of really important points is that although there is recently a case that may change this, generally contracts are between the people that entered into that contract together.And so the vendor has got a report from council and you over here weren't involved in that. So if it turns out that there's something wrong with the report and missed something, you relied on it in a way that was erroneous. Folks, you shouldn't have. and the council would normally be at fault because you didn't order the report. There's an argument that you've got no recourse against that, against council or against the vendor. So you just have to be kind of eyes wide open. most people will rely on the limb report that they provided with the reports, standardized reports. So, so the only thing that we're talking about as an error, a mistake, something missing that should have been there. my my perception would be that the risk is low. But if it did happen, then it's a major problem that you might not be able to. So anyone over. So that's that's really what you're buying into in those reports can be reviewed by a lawyer. I review those reports all the time. Now, the benefit of someone like me looking at it is that I look at them every day. So particularly a limb report, I can sift through the things that are not super relevant, find the bits that are relevant, point you in that direction, and then it's back on you to then do the investigation. Building report is slightly more tricky because they are generally in plain English, and they are generally going to address a whole bunch of building work, which I'm not an expert and building. So although I can draw your attention to certain elements that the building inspector is drawing your attention to, I'm effectively doing what my client would do, which is to look through that agreement and look at anything that's highlighted red or in bold and underlined like or like just isn't that it's something that's flagged as a problem. And then I would just be saying to you, these are the things that have been flagged as a problem. You need to go back to the building inspector and ask for the for their further opinion. Or if they can't give any further opinion, then you need to talk to a contractor or other person to get a gauge of what the costs might be like to rectify that stuff. So yeah, it's kind of it's a good thing to run past your lawyer. I generally prefer my clients to run them past me. and it also is the opportunity for me to say this particular report is 80 pages longer than what it would normally be. Do you want me to review it? Here's the cost. That's going to be over and above the standard cost for me to deep dive into this document. So and so from that perspective, it's all about control of information and power through information. So as long as and then you can just decide do I want that or do I just look through it myself and then flag certain things either with my lawyer or other building specter or other ways that I don't, and and just ask questions to try to try and glean information out. Now, once we've got through our due diligence and we're going unconditional, we're looking to satisfy our conditions. So that process is being locked into the contract, after which there it is, the point of no return. And so we're looking at do we have an unconditional finance offer. If your finance offer is conditional on x, y, z, my strong recommendation is you assess whether x, y, z is in your control. Now, what I mean by that is that some conditions will be, you need to pay off your cue card before the loan will be drawn down. Right now, that is something that is in your control. And if you're a partnership, you need to trust your trust your partner. They're not just going to rack up a whole bunch of debt in the meantime and buy a new dishwasher or TV or whatever, but but it's something that's in your control. You know, the balance. You know when it's going to be. Therefore, you should be able to assess whether you're going to be able to pay that off before settlement. So that's something that that's a good one, one that is out of your control is, that you need to confirm from council that the garage does not require consent. Now that would be an example of something that's not in your control, because you have to go to council and you have to get the information from them. And then they are deciding whether it's consented or not. Considering whether casinos require or not. So there's an element of risk that you are now not fully in control of satisfying that condition. and that's, that's the distinction on conditions on your finance is if it's within your control, then you may still feel that you can go on conditional. If it's something that's not in your control, then you should treat it with a bit more caution as to whether you want to satisfy that condition before you are ready to be locked into the deal. Okay. and then have have any of your other investigations revealed issues that need to be negotiated with the vendor to either for them to rectify or for them to pay you, like for you to get a reduced purchase price. So you discover that the heat pump in the two bedrooms doesn't work. The two broad options are either the vendor rectifies the issue and repairs the existing units or replaces them, or there's a price reduction and you deal with that pay settlement, and then you put in new ones yourself. and that's just going to be a negotiation process, either through the agent or through lawyers, depending on the seriousness of the issue. Often I find with lower value issues that it can be negotiated through the agent, and it's when it starts getting up into higher value or a long list of things that, as lawyers, need to get involved just to formalize things. But either way, that process is formalized prior to going on condition or to make sure those terms are in fact agreed between the parties because, critically, agreements for land must be in writing, so anything said does not constitute a grant and a variation of the agreement. So if you are doing if you have a signed agreement and then you agree verbally with the vendor that they will include the spa pool in the deal, unless that is transposed to writing between the parties, that does not form part of the contract. So it's really important that you don't rely on anything verbal that said to you that you get it in writing, and the best way to do that is to get it an email or and a straight text message. it seems real 90s of me to say, but email just seems to be a little bit stronger, than a text message. and it's a yeah, it's just easier to clearly communicate terms rather than on short form. And so then the final question is what we've been bouncing around, which is are you ready to be locked in? So this is the moment, and it's it's the time when you're going to now be locked into the contract. No going back. And then once you go on conditional, the first next step is that you have to pay the deposit. So when you're preparing to go on conditional, you have to have the cash ready to go to pay the deposit. It can't be that the cash is going to be available in a week or in two weeks. Needs to be that it's ready to go. So if you're relying on KiwiSaver, IT funds have got to be in the lowest trust account as at that date. If the money is coming from mum and dad, then mum and dad have got to be ready to wire that money across. If it's coming from, investments or shares, then you already need to have liquidated it into cash so that it's ready to pay. So ever it's coming. You want to have it ready to go? And then between unconditional date and settlement date, you're going to finalize the terms of your lending direct with your broker or with the bank. That's things like the interest rates, the term of the loans, the extent of the loans, all those, all those kind of details confirm direct with the lender and then they produce bank instructions, which they then send to the lawyer's office. You're going to finalize your house insurance. And again, a copy of that insurance certificate needs to be sent through to your lawyer. So once you get a copy of that, you need to bang it through to them. And then you're going to sit down with your lawyer to sign all the documentation for the bank, and also to transfer the property into your names. After that, your lawyer will confirm what you need to put into their trust account in order to finish the purchase. So between your deposit, which you've already paid, the bank money that's come in your KiwiSaver money, or your bank money that's going to come in your KiwiSaver money that's already come in first time grant, if you've got it and then whatever balance needs to come in from your savings, then you'll be told what you need to pay across and that needs to go in before cinnamon date. last thing is, you're going to organize yourself a moving day. get a moving track sorted. If you've got lots of stuff. Otherwise, sort out friends and family with pick ups and utes. make sure that we're there's going to be goods. And then prior to Settlement Day, you're going to complete your final inspection. Now your final inspection is an opportunity to check that nothing has been damaged in the property since you signed the agreement, and that all of the chattels, in working condition and otherwise, in the condition they were in when you signed the agreement, you're going to be checking that the lights are working, not because you want to check that the bulbs are working, but because you want to make sure that the wiring to the fixture is working. You're going to plug in your phone charger, or you're going to go to Bunnings and buy an image tester and plug it into a wall, sockets. You're going to plug it in, particularly in rooms where there's only one socket. So it's more important that it's working. If it's in a room with insects, you might just try a couple and then move on to the next room. Most important thing with your pre-purchase inspection is number one. It has to be before cinnamon day. We can only raise issues if it is before cinnamon day that we are raising the issue. So we can't raise any problems on cinnamon day. So that means your inspection needs to be at least 2 or 3 days before cinnamon date. So you've got we've got time to work through any issues and then address them. So that's number one. Number two is don't be afraid of being thorough. pride in the pockets and do your, do your investigations. Look at things asked to turn on the oven. you know, if something looks awry, ask about it. This is the last opportunity for you to catch any issues. Otherwise you are going to be dealing with it after segment. So, so it's, it's kind of, speak up or, or it's it is what it is. Okay. Now saving for your deposit. The big one. So this is this is obviously hard. Now, this isn't a financial, seminar designed to teach you how to, stop drinking lattes and stop eating avocados and all that kind of stuff. This is about, a bit of a broader picture of what you need, what you need to achieve. So for your deposit, you're probably going to need a 10% deposit of actual cash when you're going unconditional to be out of pay to go unconditional in order to get lending, you're probably going to need at least a 10% deposit in order to get the balance as 90 to 90% lending. And banks really want 2080, you know, that's that's their maximum in terms of sweet spot. So so as a minimum your needing 10% of that deposit. So that's kind of that's kind of your benchmark. now that 10% does include what's in your KiwiSaver and the first time grant. So if you are doing a new build and you and your partner, they, have 30,000 in their, in their KiwiSaver and you have 40,000, and then you're doing a new build and you're under the thresholds. And so you get the 20,000 cash 30, 40, 20. So 90,000 that is funds towards your deposit. So 90,000. If we look at a 10% deposit that could be a $900,000 new build that you're looking at without any other cash savings that you've got in addition. So then if you're adding in another 20, 30,000 in cash savings and you're starting to get into a bit more of a sweet spot, particularly if you start looking down at the six 700 new build range. So it's certainly not easy, but it's achievable as long as you're focused on this, on purchasing property, being your goal. So so that's something you can work towards now. The war chest. This is a concept that I'm waiting to catch on, but it's basically when you're going after property you need to pay for reports. You need to pay for valuations for the bank loan reports, building reports, legal fees and it all adds up. You know, you might go after a property and it might cost you 2 or 3000 and due diligence just to go after that one property. And then you've got to do it again. And then you got to do it again. And by the time you get to the second or third property, you go, we're spending so much money on this investigations, we're just going to risk it. Otherwise we're not going to be able to afford it. The purpose of the war chest is to have a separate bank account that has money in it for your due diligence investigations, the idea being that you're not taking away from your deposit funds when you're paying for the reports to do your investigations, and it's really to get you in the mindset of do the investigations because you're buying a big asset that could cost you a lot more if it goes wrong. And in my view, you don't want to skimp on the investigations because the risk that it introduces is potentially significant. So having a separate bank account, you can call it whatever you want, like what we called ours, the war chest. And it's basically just said that you're not eating into your deposit when you're paying for reports. And hopefully that will put you in a better mindset of doing your due diligence so that it doesn't feel as horrible that you're taking away from your ability to purchase I generally throw around 5000 as a good figure to bang in there, and what you want to do is treat it like a flexi account, which is basically that if you draw from it, then instead of saving for your deposit, the next paycheck, the savings that you would have put towards your deposit, you're now bringing back in to replenish your warchest. And so you're always wanting to have a buffer. The benefit of doing it that way is that when you do end up getting a property, there will be a sweet little extra nugget of cash that you can then move from your warchest into the deposit fund because you've kept it nice and healthy, and so hopefully you won't have used it on that last purchase attempt. And then there'll be an extra little sweetener. And either you can I mean, like we in my family, we use that to to go out for a special dinner when we nailed our purchase. So it was like free money basically because we'd already assigned to costs. And now those costs weren't going to be incurred moving forward. So it's just it's a good opportunity to kind of see the money in a different way. That's the main reason that I that I recommend that, now the family contributions, they can also be part of that 10% deposit, big things with family contributions as you want to avoid drama at all cost. That's the dream. So confirm early whether it's a loan or a gift. And sure, the transfer is documented and check whether there's any strings. So, and those are family discussions better head first rather than the day before settlement, or when mum and dad are meant to be transferring the funds. And they say, by the way, we are transferring this on the basis that our friends are invited to your wedding next year. Right? You got that, you know, so like so it's important that you kind of have a good lay of the land, open conversations is definitely my advice with family stuff. And then the last thing is relation property considerations. So if two people are in a relationship and they're putting different amounts into a purchase, then it may be a trigger to have a discussion about whether they should be entering into a relationship property agreement to protect those contributions as separate property. That's a bigger topic, which I don't. We're not going to get into today.but certainly if that information alone flags a question in your mind, then it's worth talking to a lawyer to make sure you understand your position. So that's fair. That's for couples. So. Which kind of leads nicely into the different ways that we can own property. So if we're first time buyers either individually or as a couple, they were just generally going to be looking at buying in our own names. The KiwiSaver and first home grant restrictions are going to mean that we almost certainly need to have the property in our personal name, rather than in some kind of ownership structure. But if we're going to go in with someone else, a friend with family, or in more of a business sense, then a co-ownership structure is going to become relevant, because that's where I'm buying half. You're buying half, and then we're going to actually own it. And half shares contribute the amount equal and then be responsible for debt equally responsible for outgoings equally. But if I put in 30,000 and you put in 70,000, well then mortgage repayments like, utilities maybe all of that will also be 3070. So the purpose of figuring out the Co ownership structure is to make sure that all those discussions ahead upfront. So it's crystal clear what everyone's expectations are, the big things that we're going to be covering off. And any kind of co ownership structure agreement is how the property is going to be used. So whether it's going to be tenanted by the owners or rented, how improvements and maintenance will be paid for. When can the property be sold. So can either party force a sale or does it need to be unanimously agreed? And then also what happens on the death of one of the parties? So does the survivor have the ability to remain living in the property for a period of time? Do they have to get out straight away? When is the property sold, etcetera, etcetera. Those that those are big questions to now process of kind to say no if it's just a couple then you wouldn't go through this. The depth of process like it's more if it's outside of a couple. Because the big one being that really it's different for a capital because whatever contributions you're putting in, if you want to protect the amount, then you have to do a relationship or property agreement. You can't just do a standard basic agreement and it just has extra legal requirements basically. So these agreements, partnership agreements for partnerships, property sharing agreements for individuals or shareholders, agreements for companies, these agreements are are not take into account any relation of property matters so are not suitable for couples basically suitable for other for other people's So and basically that's a that's you have demonstrated my point almost perfectly that the more people you get involved, the more complex it's going to get and it's not even that there's more chefs in the kitchen. It's just that the more people that are involved, the more likely it is that there'll be disagreement about something. Yeah. And so then the number of somethings that are critical to the deal, is not just one something. You know, there's a number of things. When can the property be sold? How can it be sold? What value is attributed when it's sold, if it's bought out by someone in the arrangement, is the value different than if it's sold on the open market? So each of the different ways of owning have different pros and cons. It's super difficult to, gauge exactly what the best solution would be for you without knowing more of the background. Right. But but what what it comes down to is the structure has to be protecting people and providing for people. So, so it's it's kind of on both sides and depending on the structure that you put in place, you're either limiting the control that each person has and and you kind of sometimes you're going to end up in a situation where some people get zero control. Yeah. in particular, if you go down the route of trust and it's not necessarily that everyone involved has day to day control over the industry. So it's about kind of working out what's best in the circumstances, what's best for the family. in particularly when you're trying to manage risk around other people that are not paid into the transaction, then it adds an extra layer of complexity. Yeah, yeah. So that's kind of not super helpful. But but in terms of the broader topic and broader question, it's that having the structure in place up front, that's the critical element, because once an issue arises, it's too late. And if you've got the structure up front, the thing that I love is an issue arises and the parties go, well, hang on a second. We already agreed that if mum died, that's this would happen. So that's what we're doing. But if you don't have an agreement, then there's nothing to point to. There's nothing to turn to. And so then if someone has a cuckoo idea, then that might just be the way things go, because there's nothing grounding everyone. Okay, so lastly is what cinnamon looks like, which seems to be a bit of a bit of a Bermuda Triangle of information. So, so hopefully this is going to break down nice and easy. What cinnamon day looks like. So the first myth is that you as the purchaser have to do anything in terms of signing documents or as part of the legal process of changing ownership. You don't everything is handled by your lawyer at that point. So the funds, from your bank will arrive into my trust account on the day of settlement, not before they'll arrive on the day of settlement. That's how the banks operate. The contribution that you have needed to pay to top up, to make sure that we've got enough money to complete settlement. I'm going to want that before cinnamon day. So I don't want your funds arriving. Cinnamon day. I want your funds arriving 3 or 4 days early, just in case we've got the figures wrong, just in case something unexpected crops up. We know that we can have that sitting in the trust account ready to go. So that's going to be ahead of time. Now, the vendor's lawyer is going to confirm that they're ready to go. And the biggest element of what will delay that is that on the settlement day, the vendor bank will tell them what they need to repay in order to clear the mortgage. And again, that doesn't happen before. So anything that happens on settlement day, so whatever is needed to pay back the existing mortgage is told on the day.And then the vendors lawyer confirms to us that, yep, we're going to get enough money from you to pay that back. And so now we're ready to say to you. Then as soon as you pay us, we'll give you the property. So that's basically how that's how that's operating. And from there it becomes relatively mechanical. So I'll then pay the settlement funds across the vendors. Lawyer then authorizes the releases of the case with the agent and gives me access to be able to register the updated ownership of the property. And then I go and I update the ownership of the property. And then I give my very happy purchaser a call to confirm that they are now the proud owner of XYZ in property. And then that's our settlement day completed. Any reporting that I need to do come subsequent, but effectively now my client is the proud owner of the property. Okay. and that's really that's it in a nutshell. So if it's a house that is on land, yeah, then it's fine. As in like an existing house, then that's fine. If it's a bare piece of land that you're then going to buy the land and put a relocatable on. The transaction that the KiwiSaver funds can be used for is the purchase of the land. So the purchase of the relocatable, if it's a different contract, you can't withdraw your KiwiSaver for that contract. You can only withdraw your KiwiSaver towards the purchase of the land contract. If it's all in one contract, then it doesn't matter. So. So that's that's fine. And then and then the only thing when people get caught out is if it's a land and build package, where it's where they're buying the land and the builder is then going to build on it for them and it's progress payments. And the first progress payment might be purchasing the land. And then after that, it's progress payments towards the build. If you don't use your KiwiSaver for that first payment to buy the land, you can't use it towards any of the progress payments because those are payments towards the build, not towards the land. So if you enter into a land build contract where you buy the land first and then you pay the builder at each stage, you have to do the KiwiSaver front. You can't do it at the end. And so if the build is going to take a year, you can't have it in your mind that you're going to get an extra year's worth of KiwiSaver out. If you withdraw it at the very end, you've got to take it out to buy the land. Now, if you do a land build package and it's what we call a turnkey, where you don't pay anything until the end, then you're fine again because you're buying the land and the build all at once at the very end, because that's when you're paying the money.Yes. Yeah. Yeah yeah.So the idea being that generally it's going to be for younger folk who are trying to get ahead and buy an asset that is going to contribute to their retirement anyway. And that's kind of the policy. Genesis for it. So yeah, so if you don't do it and you buy a home, then yeah, just stays there for your retirement. So the idea being that generally it's going to be for younger folk who are trying to get ahead and buy an asset that is going to contribute to their retirement anyway. And that's kind of the policy. Genesis for it. So yeah, so if you don't do it and you buy a home, then yeah, just stays there for your retirement. Now the follow up questions on that as well Simon, if I buy a property overseas, does that disqualify me from buying a first home in New Zealand? And the answer to that is my favorite phrase in the law that it depends. But I have a suspicion that if you've sold that property that you would be fine to then go ahead and buy a first home. A first time in New Zealand, because that is your first time. Now the alternative would be that you would be a second chance purchaser effectively. So you're saying I'm not an A? I have owned property before, but I don't currently and I'm effectively a first time buyer. And that's kind of that's the exception to the only being for first time buyers role and that probably is what applies to that overseas. Overseas purchase and then buying back in New Zealand. So it's a maybe If you haven't purchased the property, then the general position would be that you haven't fallen foul of the rules in New Zealand. To buy your first time. If I was to take them to a context where I can answer it with content, with with confidence, it would be if your parents have a trust that owns three properties and you're a beneficiary of that trust. So technically you have a beneficial interest in those three properties. can you still buy a first time? The answer is yes. So I can't say for certain in terms of the overseas land and depending how it's how exactly it's owned and depending on how it was gifted into the family. But in that broader context of land that you have not acquired, but is owned by your family through various means in New Zealand, you're still going to be able to buy your first time yourself. And the. And the main thing in that scenario is that a trust can't have more than one first home, sorry, more than one main home. So if Mum and dad are living in a property owned by a trust, then that is that trust main home. So if there's a second property that you're living in, that's not a main home for the trust, even though it's your main home but in terms of you then buying your first home, then that's out in your personal names, and that's unlikely to be affected by the trust's ownership model unless you have contributed to the purchase of those properties.if you buy with other people, the relevant thing for you and being KiwiSaver out is what is your position and your position as first time buyer. So you can pull funds out and to, to do your purchase. But of course your parents, if they were, if they were wanting to pull their KiwiSaver out, then it would be a hard no. Yeah. Assuming they've got other property and I'm not a first time buyer, so just because you can doesn't mean so. Like the fact that you can doesn't mean the whole transaction is now suddenly a first time. And therefore everyone that's buying can pull it out. Each purchaser is assessed individually for the value that you need to be under for that first home grant. It's the that is the total purchase price including the deposit. So for total that that would be I think I think it's 800 for an existing and 850 for a new build. So that includes the deposit. Okay.Thank you for watching, and I hope you've managed to take away at least one thing that's going to be a help on your property purchasing journey. During the conversation, I was asked about whether you can use your KiwiSaver funds to purchase property in the Cook Islands, and I didn't know the answer. So I've done a bit of digging and it looks like you can use your KiwiSaver funds to purchase property in the Cook Islands when you are permanently emigrating there. In any other instance, I suggest that you talk to your trusted legal advisor to confirm what you can and can't do. But today, Simon Says if you've enjoyed this video, then hit that like button, follow our channel to keep up to date with future videos and leave a comment if something in this conversation has sparked a thought worth sharing. I look forward to bringing you further legal chats and remember at LOA Law, we are good lawyers for good people.

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