While buying a home can be an exciting time, it can also be a daunting experience without the correct knowledge and expertise. The purchase of a home is likely to be the biggest investment you will make and so you need to get it right. We have compiled relevant and important information regarding buying a home to help you make the best decision possible.
In this section you will find:
When purchasing a home, understanding every aspect of what you are buying is important.
We have created the HOBANZ Guide to Buying a Home with this in mind. It will help you to be informed about the need to obtain title searches, LIM reports (covering potential hazards, zones, storm and sewer services, rates, and consents), a meth test, a valuation and a building survey. Other items to investigate are your local District Plans and Unitary Plans.
Type of Title
If you are looking to purchase property, it is essential you understand what type of property you are purchasing as some are more restrictive than others.
This is also known as freehold and is the most common way to own property in New Zealand. This means you own the land, any buildings on it and have the right to live there as long as you choose.
You own the home and improvements on the property, but you do not own the land. A ‘lease’ gives you the right to occupy the land (also called ground rent). Your lease might also include an option to purchase. Lease hold property may appear attractive as the property is cheaper to buy because land is not included in the sale. Instead there will be an additional payment to the landlord to use the land. A potential downside is that lease costs need to be renewed and current owners have no control over the cost of renewal. Recent examples have seen lease costs increase significantly.
It is very important that you check the terms and conditions of the lease with reference to the ability for the land owner to raise the ground rental charges and in what time frames these increases will occur. If the property is leasehold, check the remaining lease term.
This is where there is more than one dwelling on a fee simple title. All owners jointly own the fee simple title and lease the exclusive right to occupy their own property from all the owners. This often means you may need to get permission from the other owners on the title to conduct a range of activities, including renovations to existing structures.
Also known as Stratum Estate or Strata Title, and used when referring to apartments and multi-units. Each owner has freehold title to an apartment or unit and any additional areas, such as car parking or storage units attached to it. A unit plan shows their locality. Owners of units and apartments share common areas, such as driveways and lifts, and the cost of looking after them.
This section covers information specific to purchasing in a body corporate whether it is an apartment, terrace or stand alone house. Remember, when you buy into a body corporate, you become part of the body corporate.
- Does this complex have a committee?
Under the Unit Titles Act 2010, all multi - unit complexes with more than 10 units are required to have a body corporate committee unless a resolution of the body corporate to not have a committee is passed. Complexes with nine or fewer units may form a body corporate committee. If it does, how active is it?
- What are the body corporate annual fees?
Fees vary; make sure you are aware of the annual cost to live in the body corporate you are interested in.
- Is there a long term maintenance plan (LTMP) in place?
Under the new Unit Titles Act all bodies corporate must have a LTMP in place and this became mandatory as of the 1st October 2012. The LTMP must be for a minimum of 10 years and reviewed every two years. You should be very wary of maintenance plans that are prepared for the minimum of 10 years as there may be some very significant maintenance that falls just outside of the 10 year period that has been assessed. We say that a prudent body corporate ought to have a 30 year maintenance plan and build adequate maintenance reserves in their long term maintenance fund to fully fund the LTMP over the years. You must apply extreme caution when analysing the financial records and the LTMP to ensure that not only is the LTMP adequate, but that the body corporate has built up adequate reserves otherwise you risk assuming a significant contingent liability if you buy the unit.
- Is the apartment in a good state of repair?
Make sure you look beyond the unit you are buying and take a critical look at the entire complex.
- Has maintenance been carried out recently?
If so, what, why and when and by whom.
- Is any maintenance planned?
If so, is it routine maintenance or for another reason?
- Are car parks or storage units allocated to the property you are viewing? If so, how many?
These are noted on the title as Accessory Units.
- Is there any security, security gates, CCTV, etc.? Is it in good condition?
- Is there an on-site building manager?
- Was the property owner-occupied or tenanted?
It is generally accepted that owner-occupiers take more care of property than tenants.
- Are pets allowed?
- How easy will it be to get your furniture in and out of the building?
Body Corporate Check
Determine the date of the next Annual General Meeting (AGM) or if there is an Extraordinary General Meeting (EGM) pending.
- This is important because we have seen a lot of units go on the market prior to a general meeting being called because an owner has become aware of matters that will be raised at the next meeting that will result in a significant increase in the annual levy or will negatively impact the value of the complex.
- If a general meeting is pending you must ensure that you put the question in writing to the agent asking whether the seller is aware of any matters that will be raised at the next general meeting that will either significantly increase the annual levy or have a material impact on the value of the complex - you should insist that the answer is provided to you in writing.
Ask for a copy of the:
- Body Corporate Operational Rules
- Minutes for all general meetings (AGMs and EGMs) and committee meetings for the last three years
- Financial statements for the last three years including audit reports
- Current interim financial statements and approved budget for the current year
- Long Term Maintenance Plan
- Title including the unit plan and supplementary record sheet
- Current insurance certificate for the unit and copies of the insurance policy documents
- Insurance claims history
- A copy of the current building warrant of fitness if applicable
In addition to finding out the above, ensure you carry out the appropriate due diligence, for example, building condition survey, LIM report, pre-contract disclosure statement (highlighting details of body corporate levies, planned maintenance, bank and account balances and information on any claim or proceedings related to leaks).
We strongly recommend that you obtain copies of the financial statements, the total value of outstanding debtors, audit reports, current budget and copies of the minutes of all general meetings and committee meetings over the last three years. This will enable you to get an insight into the fiscal fitness and standard of governance of the body corporate and to enable you to get an insight into whether or not there are maintenance issues, legal action on foot or being contemplated. Many bodies corporate are foolishly sanitising their minutes and not properly declaring the issues at hand so sometimes it is a matter of what is not written in the minutes as opposed to what is - HOBANZ can assist you in vetting this information if you wish.
Once you are satisfied you know as much as you need to know about the property make an offer. Remember, offers can be made conditional on one or a number of factors such as finance approval, lawyer’s approval, building condition survey or LIM report.
- HOBANZ Guide to Buying a Home
- REAA Buyer and Seller Guide
- REAA LIM and Title Searches
- LINZ Order a Title
- Consumer – Buying a House
- Buyer Beware by Maria Slade - HOBANZ has input into this book and we believe it will help you do your due diligence before purchasing a property. It is a must read! Can be found in any good book store.
It is more than likely you will deal with a real estate agent when looking at purchasing a new home. Under the 2008 Real Estate Agents Act, real estate agents and salespeople are governed by a strict code of conduct. The Real Estate Agents Authority (REAA) has a comprehensive website which contains a public register of all licensed real estate agents, branch managers and salespeople. Visiting open homes gives you the opportunity to ask the real estate agent questions regarding the property and the seller’s expectations; however any advice should always be verified in writing. Questions you may like to ask include:
- How long has the property been on the market?
- Has there been much interest in the property?
- What are the seller’s expectations of price?
- Have any offers been presented to the seller?
- If so, what was the price and conditions?
- Why is the seller selling?
- How motivated is the seller to sell?
- Does the property require any urgent repairs?
- Are there any weathertightness issues?
They are responsible for presenting any offers and assisting with any negotiations around the sale of the property. While they are required to treat the buyer fairly, it is important to remember that the real estate agent is accountable to, and paid by, the seller.
Real Estate Licences
With the exception of residential property managers (handling rental properties) all professionals working within the real estate industry are covered by the 2008 Real Estate Agents Act. This act sets the legal processes and principals by which real estate professionals must operate. All real estate professionals must be licensed by the REAA and hold the necessary qualifications and/or experience as set out in the 2008 Real Estate Agents Act. They are also required to abide by the Code of Professional Conduct and Client Care.
There are three classes of licence:
- Real Estate Agent Licence: a licence holder or licensed company can be in business as an agent.
- Branch Manager’s Licence: a branch manager can carry out real estate agency work for an agent - but cannot be in business in his or her own right – and can supervise the work of a salesperson.
- Salesperson’s Licence: a licensed salesperson can carry out real estate agency work for an agent but must be properly supervised by an agent or branch manager.
The Real Estate Agent's Role
As part of the marketing process, a real estate agent will take you through a property for viewing. Many properties are listed with more than one agency; therefore it is important to advise the real estate agent if you have already seen a property with another real estate agent. It is the real estate agent that first shows you a property that is due the commission (paid by the seller) should a sale eventuate.
When an offer is made on a property, it is the real estate agent’s responsibility to present that offer to the seller – irrespective of price or conditions. Any negotiations in respect of the offer (called counter-offers) are then handled through the real estate agent until such point as an agreement is reached (or not) between the seller and buyer. An offer can be presented in the form of a Sale and Purchase Agreement although some real estate agents prefer to wait until a price has been agreed before drawing up the agreement. Other real estate agents are happy to take the offer to the seller in writing. It is far better to put the offer in writing right at the start as it eliminates any confusion as to the price being offered, any special conditions attached to the offer and deposit required.
While there is no legal requirement, if you are the successful buyer in the process it is advisable to ask the real estate agent to arrange a pre-settlement inspection. A pre-settlement inspection is carried out shortly before the property purchase is finalised and enables the buyer to check that it is in the same condition as it was when the Sale and Purchase Agreement was signed. Most real estate agents are happy to co-ordinate this.
If you have any concerns regarding a real estate agent you should contact the Real Estate Agents Authority (www.reaa.govt.nz or 0800 367 7322). Their website contains a public register of all licence holders and allows you to check whether the individual you are dealing with is a licensed real estate person as well as detailing any disciplinary history the licence holder may have.
- REAA Real Estate Agents Act (Professional Conduct Client Care) Rules 2012
- REAA Real Estate Agents Authority – Search the Public Registry
- REINZ – Buyer and Sellers section
- Real Estate Agents Act 2008
- Consumer – Buying a House
Obtain a Building Inspection of the Property
A building inspection, also known as a pre-purchase building inspection, is a non-invasive visual inspection of a property with the aim of assessing the condition the building is in. It is worth noting that there are no formal or legal restrictions to become a building inspector, nor is there any formal code of practice or standard.
A building inspection is invaluable prior to purchasing a property as it will help determine firstly whether you are happy to proceed with the purchase given the condition the building is in and also how much you are prepared to pay for the property. If a report identifies issues that need to be rectified, you are able to either request they be fixed by the current owner or re-negotiate the purchase price taking into account the additional expense that will be incurred once you own the property. In today’s leaky building market, a building inspection can save you thousands of dollars if weathertightness issues are identified prior to purchase.
We would therefore always recommend a building inspection to be carried out by a reputable building inspector before purchasing a home. We do not recommend relying on any building reports provided by the seller or real estate agent.
How to Choose a Building Inspector
A building inspector should not be someone who has a bit of building knowledge, has bought and sold a few properties, or is simply a “mate”. A building inspector needs to be someone who has seen hundreds of properties and is able to identify the problems that can come with different styles and ages of property, and can recognise sub-standard building work.
A building inspector should be a qualified building professional, experienced in assessing residential property. Some inspectors are members of professional organisations, such as:
- New Zealand Institute of Building Surveyors (NZIBS) http://www.buildingsurveyors.co.nz this organisation specialises in co-ordinating and regulating building inspectors and, as a member, the building inspector will have a relevant background, a qualification and will complete the inspection to the New Zealand Standard NZS 4306:2005 (see below).
- New Zealand Institute of Architects (NZIA) https://www.nzia.co.nz and Architectural Designers of NZ (ADNZ) http://www.adnz.org.nz/. NZIA and ADNZ designers can be consulted in relation to the potential for alterations or additions or any limitations in this regard that may influence your buying decision or the price you are prepared to pay.
- New Zealand Institute of Quantity Surveyors (NZIQS) http://www.nziqs.co.nz/
- Institution of Professional Engineers New Zealand (IPENZ) https://www.ipenz.nz/
- NZ Institute of (land) Surveyors (NZIS) https://www.surveyors.org.nz/ Land surveyors can confirm the boundaries of the section and can assist you in determining the building envelope available to you if you are considering alterations or additions to the house you are interested in buying. They can also assist in determining whether or not the section is sub-dividable if this is of interest to you.
- Drainage Surveyors – there is no association governing the work practices carried out by firms carrying out surveys of drainage, sewerage and stormwater services, but there will be local service providers that can carry out a CCTV survey of the underground services. We highly recommend that this is done as part of you due diligence.
They will complete the inspection to the New Zealand Standard NZS 4306:2005 and have up-to-date professional indemnity insurance. This insurance will cover you if, for example, a poor assessment of the property is given or the inspector damages the property during the inspection. It is important that whichever building inspector or building inspection company you choose has up-to-date and adequate public liability and professional indemnity insurance that covers damages and legal costs.
When choosing a building inspector, we would recommend you check the following:
- Does the inspector have any building inspection qualifications and/or are they a member of any professional group?
- Do they follow the New Zealand Standard for building inspections?
- Do they have up-to-date professional indemnity insurance and public liability insurance which will cover any damages and legal costs? Are there any exclusions to their policy?
- Are there any exclusions in the contract you will be signing?
- How much of their work is building inspections?
- What type of report will they produce (tick-box, brief comments or full narrative)?
- How long will the inspection take? A full inspection should take at least two hours.
- Will the inspector explain the report to you?
It is important when choosing a building inspector to ensure that they are independent of the real estate agent and seller.
What to Expect From a Building Inspection
As there is no formal code of practice or standard for building inspectors and there are no formal or legal restrictions on becoming a building inspector, the quality and cost of a building inspection report can vary quite considerably.
Some inspections are simple tick-box forms which offer little more than you would notice from wandering around the property during an open home. Other building inspectors offer full written reports. It is important to remember that the results of a building inspection can save you, in some instances, thousands of dollars and cheapest is not always the best.
In general a building inspection should identify significant defects, overdue maintenance, future maintenance issues, gradual deterioration and any other areas of concern. The examination is visual only, with the inspector checking areas of the building that can be accessed through safe and reasonable means. In reality this means an inspector will not remove wall linings or floor coverings to check below. A building inspector will not guarantee if the property meets the Building Act or has the necessary building / resource consents – this will need to be checked against the LIM report – but they will be able to identify work that is likely to have needed consents.
It is important to read the building inspection contract to ensure you are aware of any exclusion clauses within the contract to know what the inspection will not be looking at or responsible for.
Building Inspection as a Condition of the Sale and Purchase Agreement
A building inspection generally takes up to four days to complete, so if you are making an inspection a condition of the Sale and Purchase Agreement you should allow yourself at least five working days to have this condition met.
If you have concerns around the weathertightness of a property it is best to engage a building inspector specialised in that particular area to carry out a weathertightness survey. They will be able to identify whether or not a property is a leaky building and to what extent it has affected the property. In general, weathertightness issues will not be identified in a standard building inspection.
We recommend that you avoid relying solely on a Thermal Imaging Report for indication of leaks or relying on any building reports provided by the seller.
- Meth Safe Homes
- Ministry of Health - where to find asbestos in a residential home
- NZ Institute of Building Surveyors (NZIBS)
- New Zealand Institute of Architects (NZIA)
- Architectural Designers of NZ (ADNZ)
- NZ Institute of Quantity Surveyors (NZIQS)
- Institution of Professional Engineers New Zealand (IPENZ)
- NZ Institute of (land) Surveyors (NZIS)
- Consumer – Buying a House
- HOBANZ website: see Leaky and Defective Homes page