What must you disclose when you sell your property?

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When you are selling your property, the contract isn’t just all about the price. The standard agreement for sale and purchase (S & P) also contains protections for purchasers called warranties and these can cause headaches for you if you are not aware of what you must tell your purchaser. This article runs through what warranties you are giving in the S & P, so that you can make sure you can deliver on those crucial little promises.

The key warranties relate to:

  • Notices from Council and third parties about the property;
  • Disputes that may turn into claims e.g. with neighbours;
  • The condition of chattels and the working parts of the home;
  • The compliance of work you have had done on the property.

It’s easy to dismiss these warranties, but they are important rights that are relied on by purchasers. Breaches of warranties are often the cause of last minute claims for compensation, settlement delays and disputes tribunal claims after settlement.

Have you have received any notice or directive from any local or government agency or any other that directly or indirectly affects your property? Has your local council done a flyer drop to ask for your consent for a subdivision down the road? Have you received a letter from Land Transport New Zealand notifying you that they are expanding the road that runs along your boundary? Has a tenant given notice of a failure to meet any Healthy Homes Standards? All of these notices must be passed onto the purchaser.

Claims / proceedings
You must tell the purchaser if you are aware of any fact that might result in proceedings against the owner of the property. Neighbourhood disputes are not uncommon, and flicking a property on (without making proper disclosure) is not a good way out of a brewing issue.

If you are not selling a new build, it can be easy to assume you are selling your home “as is”, with all the quirks you learned to live with. That is not the case. In the S & P you give a warranty that all of the chattels and any plant or equipment, systems and devices that provide services to the property are in reasonable working order. They do not need to be in a brand new condition – they should be in the same state of repair as at the date of the S & P – but they do need to perform the job they were designed to do. So if an element on your stove is out or the rangehood has never worked, and you have no intention of fixing this before settlement, let your lawyer know before you sign the S & P so an appropriate amendment can be made.

You are also promising that there are no charges over any electrical and other installations on the property, and that the chattels are yours to sell – think about solar units installed under a rent to buy arrangement or a retrofit plan with the Council. Again tell your lawyer before you sign the S & P.

Council Consents
Unconsented works are a common source of breach of warranty claims. If any works have been done on the property while you have owned it that required a consent or permit (e.g. under the Building Act or the Resource Management Act), you are promising that you obtained the necessary consent, the works were done in accordance with the consent, and that the works got final sign off if required. The costs of obtaining consent and a compliance certificate can be significant, so you don’t want to get this wrong. Again, tell your lawyer before you sign the S & P.

Early legal advice avoids expensive fix ups later on. Tell your lawyer early about notices, claims, proceedings, broken chattels and unconsented works before you sign the S & P.

This article is general in nature and doesn’t replace individual legal advice.