The purchase of a property is likely to be the biggest investment most people will make in their life. This means it is essential that you carry out thorough checks or due diligence on a property before you buy.

Items you should look out for when buying a property:

1. Title
  • Are there any unusual covenants or encumbrances on the title imposing obligations on you if you buy the property. For example new subdivisions often have restrictions on the type of homes that can be constructed and can require you to become a member of a resident’s society.
  • Are there any easements on the title that give others rights of access over your property or which give you rights of access over another person’s property.
  •  Are there any other unusual items on the title that may affect the sale and purchase of the property such as a caveat from a third party. A caveat may restrict the ability of the vendor to sell the property.
2. Cross Lease Titles

When the title is a cross lease this gives rise to an extra set of issues to check:

  • The plan attached to the title shows the outline of the house and area leased by each owner in the cross lease to give certainty over what exactly is being leased. You must check that the plan is correct and reflects the actual current position of the outline of the house and the boundaries.
  • The cross lease document normally states that an owner in the cross lease may not make any structural alterations without the prior consent of the other cross lease owners. Therefore, if there have been any structural alterations you should check that the other cross lease owners have given consent.
3. Land Information Memorandum (LIM) Report

A LIM report is a summary of certain information held by the local Council. Examples of the type of information usually included in a LIM report and that you should check include:

  • Building consents issued for the property.
  • Whether the Council has any record of unconsented or unauthorised building work at the property.
  • Resource consents issued for the property.
  • Whether the property is affected by rain overland flowpath making it potentially at risk of flooding.
  • Whether there are any soil or wind issues affecting the property.
  • Whether there is any site contamination at the property.
  • Whether the Council has record of a swimming pool at the property and the date and result of the last inspection of the fencing for the swimming pool.
  • The Council zoning of the property. You may also wish to check the school zones for the property.
4. Agreement for Sale and Purchase
  • Check what chattels are or aren’t included with the sale of the property.
  • Look out for any clauses that limit or restrict the usual warranties given by vendors. For example, a vendor may try to exclude liability for certain unconsented work.
  •  Make sure you are aware of when the deposit is payable and when the settlement date is due.
  •  If you are buying a property by negotiation you will need to insert conditions to cover all aspects you need to check and ensure you have enough time to investigate everything. If you are planning on using Kiwisaver withdrawal funds you will need to allow enough time before settlement for your Kiwisaver provider to process your withdrawal application.
5. Other Aspects to Check

In addition to the above you need to work with other consultants and advisers to obtain finance approval for the property, carry out any other inspections you need such as a building inspection report or toxicology report.

If you are buying a property by negotiation you may be able to sign a conditional agreement first and do your due diligence after signing. If you are buying a property at auction you will need to complete all your due diligence before going to the auction.

Contact the team at Blackwells for help with carrying out legal due diligence on the property you wish to buy.