Kevin Lampen-Smith
Wellington, August 23, 2017
In the movies, the day someone gets the keys to their newly bought home is portrayed as a golden, stress-free time. The reality can be rather different, especially if you find your dream home has turned into something akin to ‘Nightmare on Elm Street’ since you agreed to buy it.
The trick to a stress-free settlement is to do as much as you can in advance, starting with when you are signing the sale and purchase agreement.
Binding Contract
The sale and purchase agreement is the legally-binding contract agreed between you and the seller that details the property, the conditions of sale and the price.
Make sure that there is an agreed list of chattels, with notes as to their condition, in this agreement. If the property is full of rubbish, and you want it gone before you take possession, make that a condition of the sale.
If there are holes in the fence that the seller has promised to fix, get that in writing on the agreement: don’t rely on verbal assurances that something will be done prior to settlement. It’s far better to get all these niggly details sorted out before you sign the agreement than face protracted battles down the track.
Buyers’ Opportunity
As a buyer, you are generally entitled to one opportunity to inspect the property before settlement day. If the property has sitting tenants, ask your lawyer to ensure there is a ‘final inspection’ clause inserted in the sale and purchase agreement before you sign it.
This inspection is to make sure that it is in the same or better order it was when you viewed it and agreed to the sale. It is not designed to give you the chance to uncover new defects, or to give a rental agent the chance to appraise the place’s value.
A seller does not have to accommodate any extra requests to visit the property prior to settlement.
Remember that the seller may have a lot on their plate; making the property available so your interior decorator can measure up for new curtains is unlikely to be a high priority.
Agents’ role
Your real estate agent will usually arrange the inspection with the seller, and accompany you to the property. Most experts recommend that this inspection takes place around 24 hours before settlement day so there are no hold-ups to the transfer of funds and ownership.
When you come to inspect the property, everything should be as it was when you decided to purchase it (as reflected by the sale and purchase agreement). Lampen-Smith says you can expect chattels to be in a reasonable working order unless it has been agreed and documented otherwise.
You cannot complain to the seller that the oven isn’t clean enough, but you can raise a complaint if it is missing, or it is a different model to the one cited in the agreement. Don’t forget to check that garage door openers and pool covers are in situ, or that locks work properly.
REAA Help
If there is a problem, the REAA says you should speak to the real estate agent and your lawyer in the first instance. They can help you negotiate with the seller to remedy any issues, such as a newly broken window or missing keys. Your lawyer should work with the seller’s lawyer to reach a satisfactory solution, such as getting the seller to make any necessary repairs, or to deduct any costs from the eventual settlement.
Making the final inspection 24 hours before settlement is due gives you and the seller time to reach an agreement over anything outstanding.
This is important, because if you do not complete settlement on the due date and the seller can demonstrate that they were able and willing to complete their side of the settlement, then you will be liable for interest on any portion of the purchase price that is unpaid. The seller does not need to give you access to the property while any amount remains outstanding.
Like any property transaction, success often depends on doing things right at the start. Get the details right at the beginning and you’ve got a greater chance of a happy ending.
For independent advice on buying or selling property, check out www.reaa.govt.nz.
Kevin Lampen-Smith is chief executive of the Real Estate Agents Authority.
