Welcome to the Winter edition of Property Speaking.
We hope you enjoy reading this e-newsletter and that you find the articles to be both interesting and useful.
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Property briefs
The finance condition in the agreement
The finance condition is the most common condition included in an Agreement for Sale and Purchase for a buyer’s benefit.
As a buyer you are likely to have sufficient funds for a deposit but lack the necessary funds to buy your dream home in full. A loan (mortgage) is needed to make up the difference.
Like all conditions, if the condition is contained on the front page of the agreement, you have a certain number of working days to satisfy it (and any other conditions). Once the conditions are fulfilled, the agreement becomes ‘unconditional’ and both parties eagerly anticipate settlement.
As with all required conditions, you must do all things reasonably necessary to satisfy the condition/s by the due date. You will need a formal loan offer and approval letter from your lender. Once obtained, we will notify the seller’s lawyer that the condition is satisfied.
If not satisfied by the due date, the parties can cancel the agreement by giving each other notice. If you cannot satisfy the condition, the seller may request a satisfactory explanation as to why not. In other words, you must show all reasonably necessary steps were taken to obtain finance. In this situation, you could provide communications with your mortgage broker and lender, and provide evidence of having approached different lenders if your first lender declines finance.
LIM condition
The Land Information Memorandum (LIM) ‘report’ condition is another condition often included in the agreement for the buyer’s benefit.
A LIM is prepared by the local council and is obtained at the buyer’s cost. The LIM has information on the positioning of stormwater and sewerage pipes, whether there has been flooding in the area, drinking water quality, council rates, building certificates, consents and compliance, and special land features such as historical sites and sites which are significant to Māori. All this is worth knowing before buying a property.
If you are happy with the LIM, you can satisfy the condition by approving the report by the due date in the agreement. We will notify the seller’s lawyer that the condition is satisfied.
If you do not approve the LIM (on reasonable grounds), you may have to give notice to the seller stating your reasons. The seller may agree to undertake remedial works to correct these concerns. If so, this condition will be satisfied. However, the seller can respond that they are unable, or unwilling, to do so. In this case, the agreement can be cancelled.
Building report condition
The building report condition is yet another condition commonly found in the agreement for a buyer’s benefit.
A building report is carried out by a qualified building inspector; it is obtained at your cost. It can outline structural and weathertightness aspects (amongst other things) relating to the property. These could be, for example, moisture levels throughout the property, whether there are any loose wires, power sockets or other electrical issues, plumbing problems, whether the roof and exterior walls of the house are in good shape and so forth. The report must be in writing.
The seller must allow the building inspector reasonable access to the property. It is usual for you to arrange the inspection through the real estate agent.
If you are happy with the building report, the condition can be satisfied by approving the report by the due date. You can ask the seller to do any remedial work (at the seller’s cost) for any problems raised in the report, or even use those problems as a means to negotiate a lower purchase price for the property. The seller does not have to agree.
If you cancel the agreement because you are dissatisfied with the building report, you may have to provide the seller with the report if the seller asks for it.
DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is
assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors,
and do not necessarily reflect the view of this firm. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source.
© NZ LAW Limited, 2024. Editor: Adrienne Olsen, Adroite Communications. E: adrienne@adroite.co.nz. M: 029 286 3650.
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