Selling a House: Guide for Sellers of Residential Property - Henderson Reeves Connell Rishworth Lawyers

Selling a House: Guide for Sellers of Residential Property

Selling a house in Whangarei? Before you sell - see our guide for sellers of residential property, for important advice about sale and purchase agreements.

This guide gives general information about some points you should consider before selling a house. This guide is not transaction specific and is intended for general information purposes only.  The guide is not intended as a substitute for specific legal advice – each property transaction is different – so please contact us for advice about your specific situation and needs.

This guide refers to the Real Estate Institute of New Zealand and Auckland District Law Society Agreement for Sale and Purchase (called “the standard agreement”). It highlights a number of important areas of the standard agreement and some other areas which may be of interest to you.

Contractual Warranties

The standard agreement contains warranties or promises by you that:

  • you have not received, nor have any knowledge of any outstanding requirements from any local or government authority which you have not disclosed to the purchaser – for example a notice to fence a swimming pool, or that a building does not comply with the building code.
  • you have not given any consent or waiver to any application under the Resource Management Act directly or indirectly affecting the property which has not been disclosed in writing to the buyer, for example, for a neighbouring property development.
  • all electrical or other installations are not subject to a security interest (ie there is no charge on them for money owed).
  • all chattels you have agreed to sell to the buyer will be in the same state of repair on settlement as they were when the contract was signed.
  • if you owe money on any chattels which are subject to a charge in favour of the lender (eg a hire purchase agreement) then the money will have to be paid and the charge cleared before settlement. Please call us to discuss if that is an issue.
  • where you have done any work to the property which required a building consent:
  • you have obtained the consent;
  • the work was carried out in accordance with the consent;
  • where appropriate, you obtained a “code compliance certificate”.
  • you have complied with all obligations imposed on you under the Building Act.

The full extent of the warranties is set out in clauses 6 and 8 of the standard agreement.

If you are not able to give any of the warranties, please speak to us so we can protect you from liability.

Requisitions of title

If the buyer requisitions the title and you are unwilling to satisfy that requisition then you must advise the buyer within five working days to this effect otherwise you will be deemed to have accepted the requisitin and comply with it before settlement, which may be impossible to do. This time constraint is critical and must be complied with strictly for you to avoid impossible or unacceptable requirements.

The buyer has a further five working days to waive the requisition. If the buyer does not waive the requisition, either you, or the buyer, can cancel the agreement.

We repeat, if you do not respond to the buyer’s requisition within the five working day period, you will be deemed to have accepted the requisition, and must comply with it. The time limits are very important.

Goods & Services Tax

Usually Goods & Services Tax will not be payable on the sale of a home and will be stated as being “inclusive of GST”. However, if you are a “registered person” for GST purposes, it is important to check the legal position.

Tenants

If the property is tenanted, the contract must state whether the property is sold with “vacant possession” or “subject to existing tenancies”.

Where the property is tenanted you should let us know immediately.

If you have tenants, and agree to sell with vacant possession, you are required at law to give the tenant at least 42 days (but preferably a little longer, say 50 days) notice to vacate the premises. Therefore, you need to ensure that settlement occurs at least 42 days after the date on which the agreement becomes unconditional; to give you time to give notice to the tenant.

The option of terminating by notice is not possible if you have a ‘fixed term” tenancy and you will need to sell “subject to existing tenancies”.

Where the property is sold “subject to existing tenancies”, you must give notice to the tenants of the buyer’s name, address and occupation at time of sale, and rental will be apportioned along with rates. If the tenant has paid a bond, it will need to be transferred to the buyer.

Important Dates

The agreement includes a number of important dates e.g. the dates on which the conditions in the contract are to be satisfied, and possession/settlement dates.

Conditional Dates

The conditional dates are the dates on which the various conditions in the agreement must be satisfied. For example, the agreement may be subject to the buyer selling another property or obtaining finance. If a conditional date is not met, then either party can cancel the agreement.

Settlement Date

The settlement date (usually the same as the possession date) is the date on which:

  • the buyer is required to pay the purchase price;
  • you must hand over the keys of the property;
  • sign the documentation authorising the registration of the property into the purchaser’s name with Land Information New Zealand;
  • obtain discharges of all mortgagees and charges affecting the property; and
  • vacate the property.

The agreement refers to ‘working days’. Please be aware that weekends and public holidays do not count as working days. Also the period commencing on 24th December and ending on 5th January the following year are not considered to contain any working days for the purposes of the agreement.

If the agreement specifies settlement on a day which is not a “working day” eg a weekend, the settlement must occur earlier than the dated specified, i.e. on the working day before.

Insurance

Your house insurance should remain in place, until settlement.

Even though the contract has become unconditional, the buyer may elect to cancel the contract if for any reason the house suffers major damage and becomes un-tenantable prior to settlement and the damage has not been put right by settlement.

You should only cancel your existing insurances after settlement has taken place.

Utilities

General rates

Please pay all rates bills that fall due for payment before settlement date. This will include both local authority and regional council rates. Rates will be apportioned between you and the buyer on settlement. Where the rates have not been fixed for the rating year by the settlement date, estimates and allowances may be made to cover the position. These are included as adjustments on the “settlement statement” we give to the buyer’s solicitors before settlement.

Water rates

Where your property is on a water meter, we arrange for the meter to be read, and pay for your water use up until the settlement date from settlement funds. We will retain funds from the settlement to pay the water account.

Automatic payment to Council

We will advise the relevant Council of the sale, but you will need to cancel any automatic credit or debit authorities you have given to the Council.

Telephone, Power and Gas Connections

It is your responsibility to arrange directly with the telephone company for the transfer and disconnection of your phone. You must also arrange with the Electric Power Supply authority and the Gas Authority for final electricity and gas meter readings to be taken, and for accounts to be forwarded to you at your new address. You are responsible for paying for consumption up to the date of settlement.

Legal Formalities

Registration of the transfer of the property out of your name into the name of the buyer will be done electronically by us.

Before we can proceed to register the transfer to the buyer we will need you to sign authorisations with photographic proof of your identity. Acceptable forms of identification are your current driver’s licence, passport or other Government issued photographic identification. We will contact you to make the necessary arrangements. Once you give us your authority, it is irrevocable.

If you have a mortgage over your property, it will need to be discharged on settlement. This will usually mean the amount secured by the mortgage must be repaid. Arrangements will need to be made with your lender, if this is not to occur.

Generally, banks will charge a fee for early repayment, and an administration charge in connection with the execution of the discharge.

Settlement, Possession & Keys

On settlement, the electronic transfer of title and discharges of all mortgages is transacted with the solicitors for the buyer, in exchange for the payment of the purchase price. At this time the property ceases to be yours.

Keys are normally required to be handed over on settlement through the land agent or through your solicitor, although occasionally the parties make some private arrangement. You should not allow the buyer into possession until settlement has taken place as you could be severely disadvantaged if for any reason some unexpected difficulty arises, causing settlement to be postponed.

Unless the agreement provides otherwise, the buyer is entitled to vacant possession of the house on the settlement date. If for any reason you are not in a position to move out by the settlement date, you should make some mutually satisfactory arrangement with the buyer. If you do not, you may have to pay interest or rental to the buyer as a penalty for breach of your agreement. In addition, you may be liable to the buyer for damages (including the buyer’s costs of temporary accommodation).

Insurances

House insurance

You will need to cancel the house cover after settlement.

Contents Insurance

You must advise your insurer of your new address for cover.

Cross Leases

If your house is on a cross lease, there are special provisions in the standard agreement relating to this type of ownership.

If there have been any alterations to the flat since the Flats Plan was deposited, the consent in writing of all other owners should have been obtained. If alterations extend the dimensions of the flat and are enclosed, then the flats plan should have been amended to show the alteration. If this is not the case the buyer can require you to rectify the title, by obtaining the consent of other owners, depositing a new cross lease plan (and possibly cross Lease) and getting a new title issued. This will involve a considerable extra cost and complication for you. Should these circumstances exist, the sale will no longer qualify for the Smart Move fixed fees.

In the case of buildings and structures erected on “exclusive use” areas, after the deposit of the original flats plan, the purchaser generally has no right to requisition, provided the consent of the other owners was obtained to the building or structure. You can, however, be requisitioned to provide a copy of the written consent. If you cannot satisfy the requisition and advise the buyer within the five working day period, then, unless the buyer waives the requisition, either party may cancel.

It is therefore important:

  • if your property is a cross lease; and
  • if you have made any alterations to it (or are aware of any alterations which have been made to it), which are not shown on the cross lease plan; and
  • for which the written consent of the other owners was not obtained; and/or
  • in respect of which a new flat plan was not deposited;

that you immediately seek our advice, preferably before signing the agreement.

Unit Titles

Similar provisions apply in respect of Unit Titles, except that to remedy the defect you will need to obtain the consent of the body corporate and deposit a redevelopment plan or a new unit plan. You may also need to register transfers and other documents before you can provide good title to the purchaser.

Pre-contract disclosure to buyer

Before you sign an agreement to sell a unit title, you must provide a “pre-contact disclosure statement’ to the buyer, setting out prescribed information as required by the Unit Titles Act (Section 146 and Form 18 of Unit Titles Regulations).

The buyer can then seek further information which has to be provided within five working days, for which the buyer pays the costs for supplying the additional information (Section 148).

Pre-settlement disclosure to buyer

Not later than the fifth working day before settlement, you must provide a pre-settlement disclosure statement to the buyer, setting out information prescribed by the Unit Titles Act.

You must also supply a certificate from the body corporate certifying that the information in the statement is correct. A body corporate can withhold its certificate if you owe any money to the body corporate, and this can delay settlement – our undertaking on your behalf to pay on settlement will normally resolve this issue (Section 147).

Delay to settlement

Delays in providing the pre-settlement disclosure or additional information can result in a delay in settlement and consequential penalties for late settlement or cancellation by the buyer (Section 149 and 151).

All disclosure documents must be dated and signed by the seller or the seller’s agent (Section 152).

Unit titles are complex and for this reason do not fall into the normal Smart move fixed fee criteria.