For those readers who are looking to purchase their first home, it can be a daunting experience understanding what needs to be covered off, in terms of doing your due diligence on the property.
This article looks at some of the common conditions that are inserted into the agreement for sale and purchase.
Firstly, you have your builder's report condition.
This allows time after the agreement has been signed for your builder or building inspector to go through the property, inspect it and give you a written report on the state of the property.
If the report identifies significant problems with the property, you will usually be able to cancel the agreement.
Alternatively, some purchasers either agree in writing that the vendor will rectify the issues before settlement, or negotiate a reduction on the purchase price to compensate the purchaser for the work that they will need to do after settlement.
A LIM report or council records condition is also common.
This allows you to obtain a LIM report from the council, and if the LIM identifies issues that the vendor cannot rectify, the purchaser is entitled to cancel the agreement.
A LIM report usually contains all of the information that the council has on file about the property and the area in which it is located, such as if there is a history of flooding or land contamination.
It may also show if any consents have been granted for developments in the area.
It should also contain a record of building permits, building consents and code compliance certificates for the property, which should be checked to ensure that all known building work has received an adequate permit or consent.
Most purchasers, at a minimum, insert a finance condition.
This gives time for your bank to review the agreement for sale and purchase, for any valuation report to be ordered and checked by the bank, and for the bank to give final approval for you to proceed with the purchase.
A finance condition is also useful to cover off all necessary steps for your KiwiSaver withdrawal, if you are making one.
There are also other conditions that can be used, such as an insurance condition if the property is in a flood-prone or high-risk area.
Some purchasers also require a toxicology report condition, although these are becoming less and less common.
As regular readers will know, my number one rule is: talk to your lawyer about what you need, before you sign anything.
It is usually too late to make any changes once you have put pen to paper.
- Richard Small is a senior solicitor at Jacobs Florentine. The information above is general only and cannot replace specialist advice. The writer accepts no responsibility or liability for reliance on, or use of, this article.