Guide for Buyers of Residential Property

This guide highlights some of the important areas of the Real Estate Institute of New Zealand and Auckland District Law Society Agreement for Sale and Purchase, and other matters that may be of interest to you as a buyer. Every property transaction is different, so it is intended for general information only and is not a substitute for specific legal advice.

This page covers the key points, but our full guide goes into more detail on each stage of buying a home. Every transaction is unique, so please ask us to explain anything you do not understand.

Download the Guide for Buyers (PDF)

Selling a property? Read our Guide for Sellers of Residential Property.

Talk to us before you sign the agreement

We recommend you provide us with the sale and purchase agreement before you sign, so we can advise you before it becomes legally binding. Our involvement at this stage can save costly mistakes, hassle and delays.

If your agreement does not include a due diligence condition, check local Council and Regional Council records, the GIS maps on Council’s website and the natural hazards portal for any settled Toka Tū Ake EQC claims or natural hazards before you sign. If you are buying in Auckland, also check the Tāmaki Makaurau Auckland Flood Viewer. If there are issues, your insurer could decline cover at the settlement date. Without an insurance condition, we also recommend confirming with your insurer or broker that you can insure the property at an acceptable price.

Your real estate agent and your lawyer

Your real estate agent and your lawyer both play an important part in your purchase. The agent is your contact for arranging your pre-settlement inspection, usually holds the deposit, and releases the keys, remotes and alarm codes after settlement. If you are using KiwiSaver, the agent also needs to know so the right clause goes into the agreement.

Your lawyer’s role is to give you legal advice on the agreement and protect your interests. That includes reviewing the agreement and its conditions before you sign, searching the title, raising any requisitions, confirming conditions with the seller’s lawyer, and handling the funds and documents on settlement day. If anything is not right at your pre-settlement inspection, tell us urgently, even if the agent says they will sort it, as it is likely we will not be able to do anything about it on settlement day.

Buying at auction

The auction agreement contains no conditions and does not allow you to challenge or requisition the title. It is unconditional on signing, and you cannot later withdraw even if there is a defect in the title or another issue with the property. If you plan to bid at auction, contact us with plenty of notice so we can complete all checks of the property, title and documents beforehand, and please do not sign an auction agreement without legal advice.

Conditions that protect you

Any agreement you sign should give you sufficient protection. Without conditions, the agreement is unconditional on signing and you are legally bound to complete the purchase, even if an issue with the property or title is discovered later. Common conditions include:

• Finance: Talk to your bank or broker about the timeframe you need. If you are using KiwiSaver for the deposit, allow at least 15 working days from the date of the agreement. Before confirming finance, we highly recommend checking with an insurance broker that you can get full replacement cover at a reasonable price, as insurance is a requirement of bank finance.
• Building report: The report must be written and prepared in good faith by a suitably qualified building inspector. Relying on an oral report, or a report from someone who is not a specialist or not independent of you, may affect your ability to cancel and your right to claim damages.
• LIM (Land Information Memorandum): We strongly recommend ordering a LIM in your own name rather than relying on one provided by the agent or seller. A LIM covers matters such as rates, consents, drainage, zoning, flood plains, some natural hazards and swimming pool compliance.
• Toxicology report: Allows drug contamination testing where there is concern the property may have been used to manufacture drugs, such as some previously tenanted or abandoned properties.
• Due diligence: Highly recommended where possible. It lets you look into many aspects of the property, including natural hazards, rising sea levels and future development options such as subdivision.
• Insurance: If you do not have a due diligence condition, we recommend a specific insurance condition so you can confirm cover is available on acceptable terms.

Escape clauses and confirming conditions

Some agreements include an escape or cash-out clause, which allows the seller to accept another offer and require you to go unconditional within a set timeframe or have the agreement cancelled. If your agreement has any conditions, contact us on or before the due dates. We must confirm satisfaction of conditions in writing to the seller’s lawyer, generally by 5pm on the specified date, or the seller may cancel.

Checking the title

We will search the title and any registered interests, such as easements and encumbrances. If there is a defect, you can serve a notice of requisition on the seller, but this must be done within 10 working days of the date of the agreement or you lose that right. You should also check that the property you are buying matches the plan attached to the title.

Cross leases: Cross lease ownership is more complex than freehold and can lead to neighbour disputes. It is very important to check whether any changes to the building are not shown on the Flats Plan, as a change in footprint can negate the title, be very costly to fix, and affect future sale and lending. We recommend your building inspector examines the property and original plans.

Unit titles: The seller must provide pre-contract and pre-settlement disclosure statements under the Unit Titles Act 2010. Because unit titles are complex, they do not fall within the Smart Move fixed fee criteria.

Notices on title: A notice under sections 72 to 74 of the Building Act 2004 or section 36 of the Building Act 1991 needs great care. It may restrict further building and affect your ability to get insurance or a mortgage. In some circumstances, you should not purchase the property.

Boundary pegs: For bare residential land, the seller must identify the boundary pegs. If you are concerned about boundaries, you may need a site survey.

Your deposit

The deposit is usually 10% of the purchase price and is usually paid once all conditions are satisfied and the agreement is unconditional. How it is handled depends on whether you pay it from your own funds or from KiwiSaver.

Paying from your own funds: Make sure you can access the money in time, especially if it is on term deposit or in an overseas account. The real estate agent holds the deposit for 10 working days, unless the parties agree to an early release. It is then paid to the seller’s lawyer and the seller can use it straight away, for example as a deposit on their next home. If the seller later defaults on settlement, you would be an unsecured creditor and recovering the deposit could be difficult. You can ask for the deposit to be held until settlement, but this is unusual and usually resisted by sellers and their lawyers.

Using KiwiSaver for your deposit

When KiwiSaver funds are used for the deposit, the agreement includes a specific clause requiring the funds to be held by the seller’s lawyer until settlement. Let your real estate agent know you are using KiwiSaver so the clause is included, and we can provide suitable wording if we see the agreement before you sign.

KiwiSaver funds must be used to purchase the property, not to repay a loan after settlement. In most cases, allow at least 15 working days to withdraw the funds, which is why we suggest a finance condition period of 15 working days. This gives you time to complete the forms with us or a JP, and around 10 working days for your provider to approve the withdrawal.

Chattels, pools and fireplaces

The chattels in your purchase are listed in Schedule 2 of the agreement and must be provided in reasonable working order. A LIM will show whether Council approved any swimming pool, spa pool or fireplace. Pools and spa pools require 3-yearly Council inspections, and a fireplace or chimney that is not checked regularly may affect your fire insurance.

Mortgages, guarantees and insurance

A bank loan is secured by an “all obligations” mortgage, which can also secure other obligations to the bank, such as a guarantee you have signed for someone else. We act for the bank to register the mortgage, so we must tell the bank about any issues we are aware of, such as unconsented works or leaky homes.

Once the agreement is unconditional, put house insurance in place as soon as possible, taking effect from settlement. Your bank must be noted on the policy, and your insurer must send us a Certificate of Currency before we can receive your loan advance.

Preparing for settlement

Allow at least 15 working days between going unconditional and settlement, so your bank can issue loan documents and we can meet you for signing. We recommend inspecting the property no later than 2 working days before settlement, testing lights, hot water and ovens. If anything is not working, tell us urgently.

On settlement day, contact us in the morning to confirm there are no unforeseen issues. As timing can depend on factors beyond our control, we strongly recommend booking your removal company for later in the day. We will contact you as soon as settlement has occurred so you can collect the keys, and afterwards you will receive a detailed statement and a copy of the Record of Title.

Relationship property

If you are in, or enter, a relationship that lasts 3 years or longer, or there is a child of the relationship, your partner may be able to claim a half share in the property. A contracting out agreement can set out your contributions and how the property is to be divided. We offer a free 15 minute discussion with one of our property lawyers about your situation, as long as it is before settlement of your purchase.

Download the full Guide for Buyers

This page covers the key points, but our full guide goes into more detail on each stage of buying a home. Every transaction is unique, so please ask us to explain anything you do not understand.

Download the Guide for Buyers (PDF)

Selling a property?

Our Guide for Sellers of Residential Property explains the warranties you give, title requirements, tenancies, deposits, utilities and what happens on settlement. Read the Guide for Sellers.

Fixed price conveyancing with Smart Move

Smart Move conveyancing makes buying simple, with an experienced team focused on straightforward property transactions. Smart Move offers fixed legal fees for residential purchases where the agreement is signed with clear workable conditions, has a current title and no additional complications.

Fixed fees are inclusive of GST and disbursements, and common extras such as KiwiSaver withdrawals are priced upfront. View all Smart Move Conveyancing prices here.

Buying something more complex? If your purchase falls outside the Smart Move criteria, for example a unit title, our property law team can still help, with a pricing structure to suit your transaction. Contact us to talk it through.

Buying with a partner? We offer a free 15 minute discussion with one of our property lawyers about your relationship property situation, as long as it is before settlement of your purchase.