“Defects” – being made aware of such things!

Licensee must ‘ensure’ Purchaser is aware of Defect 

Facts:

This is a CAC decision concerning the application of Rule 10.7 of the Client Care Rules. The Complainant owned number X (‘Property X’), which is next door to the vendor’s property (‘the Property’). Two days before settlement of the Property, the Complainant informed the listing Licensee that he was in dispute with the vendor over the encroachment of a retaining wall.

The Licensee declined the Complainant’s request to disclose the purchaser’s contact details. On the same day, the Complainant emailed surveying evidence of the retaining wall’s encroachment to the Licensee. Settlement of the Property took place as scheduled but the purchasers were not aware of the encroachment until after settlement.

The Licensee and the Agency responded to the complaint by explaining the steps they had taken after learning of the encroachment. This included emailing the vendor’s husband immediately advising that their solicitor will need to be contacted about the issue, and various telephone calls to follow up. In one call, the vendor’s husband expressed he saw no issues with the wall. The Licensee said she trusted the boundary issue would be passed on to the purchasers.

 

Decision: The CAC determined that the Licensee and the Agency had engaged in unsatisfactory conduct. It also found they had breached Rule 10.7 of the Client Care Rules.

The CAC considered that the alleged encroachment was a defect in terms of Rule 10.7. The Licensee and the Agency did not satisfy paragraph (a) of the Rule because they did not obtain evidence through the vendor to prove there was no defect, nor did they satisfy paragraph (b) because they did not ‘ensure’ the purchasers were aware of the wall issue.

(Licensees should bear in mind that in some instances ‘ensuring’ the purchaser is aware of a defect may go beyond merely expecting the vendor would pass on the information.)REINZ.

 

The LIM Report – What’s in it and why have one!

The LIM Report

Otherwise known as the Land Information Memorandum report. What’s in it and why have one!

Information in this report can include the following:

  • Valuation data.
  • Yearly rates payable for the property and if there are any unpaid rates.
  • Any charges for water.
  • Information about building permits, consents and compliance issues.
  • Information whether it is a protected or historical building or site and any protected trees or structures.
  • Any resource consents issued.
  • Any planning or zone issues.
  • Any resource consents issued in the immediate neighbourhood.
  • Information on subdivisions and developments affecting the property or area.
  • Drainage information.
  • Special land features.
  • Consents, certificates, notices, orders or requisitions affecting the land or buildings.
  • Methamphetamine contamination (where the council have been notified).

If you have your LIM report before you sell (at $289 for a report within 10 working days or $389 within three), the surprises from buyer questions lessen, and you put yourself in a much more informative position.

None of us like to find out things about our house from somebody else, but if we are able to tell buyers that we know everything about our house, we raise our “trust” level in the eyes of the buyer!

Knock! Knock! Who’s there!

Did You Know..?

door knocking

If you have been “Door knocked” by any salesperson regarding a product, and you sign up for it, or it is to sell your house – you have five days in which you can cancel. This is as part of the unsolicited goods and services provisions under the Fair Trading Act for things that you have not asked for. If you ask them to come – then you are back to square one!

(For those overseas who might be reading this – it is what happens in NZ)

Northies News for February 2017

Minister’s Response to REINZ’s Letter concerning Tenancy Tribunal Practice Note 2016/1

Our REINZ(Real Estate Institute NZ) wrote to the Minister for Building and Housing, Hon Dr Nick Smith, in September relaying their concerns regarding the Tenancy Tribunal’s Practice Note.  The Practice Note applies the Osaki decision and limits the amount landlords could claim for damage caused by tenants, if the landlord is insured. Dr Smith responded and confirmed that, among other things, a proposal is being considered where tenants will be liable for negligent or careless property damage up to the value of their landlord’s insurance excess, but not exceeding four weeks’ rent.

A recent case where a tenant had a dog, which was a breach of the tenancy agreement, and caused damage to the property, was held liable by the court, after an appeal, and brings further interest to these situations. Here is the situation:

David Russ of Tekoa Trust took his case to court after the Tenancy Tribunal ruled last year that his tenant, Amanda Stewart, was not liable for damage caused by her dogs urinating throughout the Foxton house she rented.

The tribunal based its decision on the landmark “Osaki” court case, in which tenants who accidentally set fire to their rental house did not have to pay for the damage.

Landlords around the country became concerned that if they had insurance, the tenant would not have to pay even in cases of carelessness.

However, the Palmerston North District Court has overturned the tribunal’s decision and ordered Stewart to pay about $3790 in carpet replacement costs, court costs and lost rent.

Judge David Smith said he was “of the view” that the tribunal adjudicator was wrong for concluding the damage was unintentional.

Not only had the tenant breached a no-dog clause in her tenancy agreement, but she had continued to let them in after perhaps a couple of accidents.(Tenancy Services Newsletter).

(Message: Licensee’s must ‘ensure’ purchaser is aware of defect.)  

Another case of interest.

complaints & consumers

Facts:

This is a CAC (Complaints Assessment Committee) decision concerning the application of Rule 10.7 of the Client Care Rules. The Complainant owned number X (‘Property X’), which is next door to the vendor’s property (‘the Property’). Two days before settlement of the Property, the Complainant informed the listing Licensee that he was in dispute with the vendor over the encroachment of a retaining wall.

The Licensee declined the Complainant’s request to disclose the purchaser’s contact details. On the same day, the Complainant emailed surveying evidence of the retaining wall’s encroachment to the Licensee. Settlement of the Property took place as scheduled but the purchasers were not aware of the encroachment until after settlement.

The Licensee and the Agency responded to the complaint by explaining the steps they had taken after learning of the encroachment. This included emailing the vendor’s husband immediately advising that their solicitor will need to be contacted about the issue, and various telephone calls to follow up. In one call, the vendor’s husband expressed he saw no issues with the wall. The Licensee said she trusted the boundary issue would be passed on to the purchasers.

Decision: The CAC (Complaints Assessment Committee) determined that the Licensee and the Agency had engaged in unsatisfactory conduct. It also found they had breached Rule 10.7 of the Client Care Rules.

The CAC considered that the alleged encroachment was a defect in terms of Rule 10.7. The Licensee and the Agency did not satisfy paragraph (a) of the Rule because they did not obtain evidence through the vendor to prove there was no defect, nor did they satisfy paragraph (b) because they did not ‘ensure’ the purchasers were aware of the wall issue.

(Licensees should bear in mind that in some instances ‘ensuring’ the purchaser is aware of a defect may go beyond merely expecting the vendor would pass on the information.)REINZ.

Northies News for January 2017

Welcome and all the very best to you for 2017!

Some of the things that can happen in real estate. 

Facts: This is a Complaints Assessment Committee decision where the Complainants felt that the Licensee’s marketing of their property and advice made them feel the Property was worth less than they believed it was. The Complainant also said that the Licensee did not insert a cash-out clause as they had instructed. Three offers were involved in this complaint. Purchaser One made the lowest offer which the Licensee advised the Complainants to decline as Purchaser Two would not enter a multi-offer situation. Purchaser Two made an offer, conditional on finance for three days, and said his offer was only valid for that evening. The Complainants felt they were pressured to accept this offer. Purchaser Three made an offer on the day before Purchaser Two was due to go unconditional. At this point the Complainants realized the Licensee did not insert a cash-out clause into Purchaser Two’s offer as they had instructed.

Decision: The Complaints Assessment Committee decided to take no further action on the complaint. In making this decision, the Committee concluded that a cash-out clause would not have given the Complainants any benefit, because invoking the cash-out clause would require the Complainants giving the Purchaser three days’ notice (based on the clause the Licensee used), and Purchaser Three’s offer was made the day before Purchaser Two was due to go unconditional. The CAC found the Licensee correctly explained this to the Complainants and noted the Complainants appeared confused over how a cash-out clause works, as they seemed to believe this would mean they could pull out of the agreement immediately and enter into a fresh agreement with another purchaser. The Committee found no evidence to show the Licensee applied ‘undue pressure’ on the Complainants to accept Purchaser Two’s offer.

This decision illustrates the importance for licensees to ensure clauses such as cash-out clauses and back-up clauses, together with their timeframes are appropriately communicated so that vendors and purchasers properly understand how they work. (information from the REAA & CAC NZ)

 Subdividing on the water front?    

  P1000390                                

Thought you might like to know – In any proposed subdivision of the land the Council has a responsibility under the Resource Management Act and the corresponding rules under the Auckland Unitary Plan to require an esplanade reserve with a minimum width of 20 m around the line of mean high water spring tide.  Chapter E38 – Objective E38(25) on Page 5 of the Auckland Unitary Plan – Operative in Part sets out the basis for consideration of any formal resource consent application for a reduction of width of that reserve.

This link takes you to additional information about it on the council web site.

http://unitaryplan.aucklandcouncil.govt.nz/Images/Auckland%20Unitary%20Plan%20Operative/Chapter%20E%20Auckland-wide/6.%20Subdivision/E38%20Subdivision%20-%20Urban.pdf

This is a process to be undertaken upon receipt of application for resource consent for subdivision, including submissions from your consultants in that regard.

You will also need to engage consultants to advise you further on subdivision / development of the land, and to prepare plans and other required documentation for any resource consent application.

 

 

 

 

 

Northies News for December 2016

Mortgagee Sales – Some of the risks

Potential risk to purchasers can include intentional damage to the property or land by the mortgagor, the possible need for, and additional cost of, legal intervention to remove a mortgagor who refuses to leave, and the lack of other securities due to the absence of vendor warranties.

The standard vendor warranties in the Sale & Purchase Agreement would be crossed out.

This includes the provision of buying “As – where is”. Under this kind of provision, any costs relating to fixing any problems are the responsibility of the purchaser (unless arranged differently).

Purchasers might arrange for insurance to protect themselves against the risk of the property or land being damaged prior to settlement.

If the purchase is at an auction, this would be done prior to bidding.

 

Four Free Tickets Enjoyed!

Congratulations to the people who received the free tickets for this show! Some were even brave enough to join in as a participant, but didn’t quite reach the stage in the photo!

hypnosis show

Unit Title Properties – Disclosures

There are three main disclosures that have to be made by a vendor to a purchaser for unit title properties.

  1. The pre-contact disclosure statement – made available before the purchaser enters into a sale and purchase agreement.
  2. The additional disclosure statement – made available within 5 working days of being requested by the purchaser to provide more information.
  3. The pre-settlement statement disclosure – made available at least 5 working days before settlement.
  4. There is a fourth disclosure that does not relate to the buying and selling of the unit.

It is the turn-over disclosure statement – provided by the original owner or developer to the body corporate notifying them of the new owner and their details.

A recent decision by the REAA highlights that it is important to ensure a pre-contract disclosure statement is properly completed before showing a property to prospective purchasers. This is a requirement under the Unit Titles Act 2010. It is also important to ensure that matters such as the vendor’s preference for settlement timing is conveyed so purchasers are aware of the position and can tailor their offer accordingly.

Interim Guidelines on Meth Contamination Levels – Real Estate Institute NZ

Pending completion and release of the National Standard for the testing and remediation of methamphetamine (MA) affected properties, the committee developing the Standard has confirmed that it supports the Ministry of Health’s (MOH’s) advice that local authorities should continue to apply the current guideline level of 0.5 µg/100cm2 where there is evidence that the property has been used as a  clandestine lab (for example, uncovered by Police or evidence of manufacturing exists, such as the presence of manufacturing equipment and chemicals). Where there is no evidence that a property is likely to have been contaminated by manufacture, the Standards Committee supports the MOH’s advice to use the levels of 2.0 µg/100cm2 (if carpeting and other soft furnishings are removed) or 1.5 µg/100cm2 (if carpeting and other soft furnishings are not removed) as an interim guide until the New Zealand Standard is published.

REINZ has requested an update from the Auckland Council in particular regarding whether it intends to adopt the recommendations of the MOH and Standards Committee.  REINZ has also written to the Tenancy Tribunal seeking confirmation of how it intends to apply the new guideline levels.

 

 National Policy Statement on Urban Development

The NPS took effect on 1 December 2016 and the biggest councils experiencing high growth will be most affected, including Auckland, Christchurch, Tauranga and Hamilton. Smaller, fast-growing cities such as Nelson and Queenstown will also be affected.

‘The NPS requires councils to allow for a greater supply of houses, so prices rise more slowly and houses are more affordable,’ Environment Minister, Dr Smith says.

 

Some things people might not know…about selling homes.

  • When a real estate person, or anyone related to them, wants to buy a house they are associated with in their work, they must obtain the consent of the client, home owner, on the prescribed form and have the client sign it. They must also provide the home owner with a registered valuation of the property. This must be done within 14 days of the signing of the consent form.
  • A licensee must not do anything that will place a client or customer under undue or unfair pressure, especially during the negotiation stage.
  • A home or property cannot be offered for sale by an agency without an agency agreement (listing form) from the homeowner. That also means that a licensee cannot show prospective buyers a property without an agency agreement in place.
  • A property offered for sale by tender or auction can be sold prior to the tender or auction date, but must be advertised as “For sale by Tender/Auction (Unless sold prior)”. All marketing material and documents must make it clear that this is the case. Potential purchasers can register their interest and ask to be informed if someone else makes an offer.

“Northies News” for November 2016

Mortgagee Sales

Future changes in the market may mean that it will pay to understand a little bit about these kind of sales.

A “mortgagee” is the party who has loaned money to another party, the “mortgagor” (usually the property owner), and who has taken security for that loan over a property owned by the mortgagor.

The mortgagee is usually a bank, institution or finance company, or less commonly, an individual person.

A mortgagee sale arises when the mortgagor follows legal process to exercise its power to recover the debt.

They will often give mortgagors who are in arrears time to negotiate a payment plan, or to sell the property themselves.

A sale is often only put in place when all other avenues have been exhausted to recover the debt.

There are a number of risks associated with mortgagee sales that purchasers should be wary about.(Next newsletter).

Selling “As is – where is”

“As is-where is” means a vendor is selling, and a purchaser is buying property/land in whatever condition it represents at the time of signing the contract.

The licensee will still need to make any disclosures that they are aware of to prospective purchasers, when they show them the property and encourage them to do their own “due diligence”.

Properties and land that are sold in “As is – where is” examples are:

  • Mortgagee sales.
  • Ones that are badly in need of repair.
  • Have illegal occupants.
  • Have issues with the title or non-complying structures.
  • Have issues with its zoning or locality.

 

 

 

“Northies News” for October 2016

Property Traders vs Investors.

I think there is a big difference between someone who trades in property and someone who invests in it.

The biggest difference is probably time. A trader will be involved with a property for a short period of time, while the investor’s involvement will be for much longer. For the property trader it will be a business and involve the tax payments, business costs, property improvements and marketing costs associated. For the investor, the tax costs are not likely to be there, no marketing costs because they hang onto the property, but could have the improvements costs before they rent it out.

Each have their own effect on the market, and the business of trading will have a more immediate effect than the investor. The trader could be involved in several properties over a short period of time, but an investor is more likely to be interested in the long term value of the property, and as an asset to be used later.

The Scourge of P.

Something that is not only costly to a landlord, but to the community and our future as well.

To recognise the signs:

  • Unusual chemical smells.
  • Chemical containers in large quantities (labelled solvent, acid or flammable).
  • Glass cookware and utensils that are stained.
  • Chemical stains around the kitchen sink.
  • Cold and flu medication boxes in the rubbish bin.
  • Yellow/brown staining of the floor, walls and ceiling.
  • Missing or broken light bulbs.

If any of these are present, then a test for the dreaded stuff is likely to be necessary! I can refer you to testers if you need one.

The AML/CFT Act.

And what may this be – you might ask!

Our Real Estate Institute of NZ (REINZ) is dealing directly with the Ministry of Justice on the proposal of how Phase 2 of the “Anti-money Laundering and Countering Financing of Terrorism Act 2009” will apply to real estate agents.

Real estate has been highlighted as one of the areas of high risk for money laundering, as was pointed out in a NZ Herald article recently. Money launderers can use real estate transactions to introduce large amounts of illegally gained funds in the financial system, and then gain “clean” funds from a property on-sale or rental.

It is expected that real estate agents will have reporting obligations that will include an AML/CFT Compliance Officer and all the reporting and documentation requirements of an independent audit.

Boundaries on vacant land.

The Sale & Purchase of Real Estate agreement has a clause that says for vacant residential lots the vendor shall ensure that all required boundary markers are present in their correct positions, prior to settlement.  To overcome any misunderstandings and misinformation, it is advisable to have these in place at an early stage in the marketing of such a property. All prospective buyers can then see they are clearly defined, and will then be much more confident about the purchase of the property, and the vendor.

Back Up Offers.

Contracts can often fall over due to inspection and finance issues, so it can be a good idea to submit a back up offer. The timeframes involved need to be investigated and considered. For example, for a LIM report:

  1. There are five workings days for the application to be made to council.
  2. There are ten working days within which the council provide the report.
  3. There a five working days for the purchaser to give any notice to the vendor.
  4. There are five working days for the vendor to respond.

In reality, you could have a total of 25 days before a back up offer can be considered. That’s something to remember!

Signatories

The people who sign the documents, listing forms(Agency Agreements), contracts( Sale and Purchase of Real Estate) and other forms:

  • Trusts – all trustees must sign.
  • Partnership – all partners must sign unless specified otherwise in writing.
  • Company – all directors must sign unless specified otherwise in writing.
  • Authorised persons – verification will be asked for from their solicitor.
  • People must be capable to sign – “entirely” capable so as not to be taken advantage of.
  • Power of Attorney – a copy of the authority provided and verified with their solicitor.
  • If under anaesthetic – signature cannot be taken until 5 days after the anaesthetic was given.

Auckland Housing

Attended a seminar where Jamie-Lee Ross was speaking the other week.

He gave a very good, well prepared presentation of what we already know:

  • what hasn’t been done
  • what has been done
  • what changes they have made

but – and there is a BIG but – there was no long term plan!

[I see in the Herald that the Govt have decided on doing something – but it still seems like a plaster on a cut.]

“Northies News” for September 2016

A great start to a day.

Breakfast finished, so it was into the office and start the day. First daily task – check the emails and do the three D’s – delete/deal with/distribute.

Check the diary for appointments – looks like a quiet day today. Phone goes! Landline, so no number to identify the caller! Wonder who it is?

“Good morning!”

“Good morning. Am I speaking with Ian North?”

“Yes you are. How are you?”

“I’m good thanks. I see you have some properties to rent and we were wondering if you’d like another for your books!”

It turned out to be a property investor with a two bedroom townhouse they wanted a tenant for, had seen my advertising and decided they’d like me to help them.

Man, those are wonderful calls to get! When someone rings you to give you business! Wonderful! These kind of people are the ones you do more for!

The market

Is it too late! Has the market started its downward trend in the Eastern Beaches area, or is this just the “End of Winter Blues!”
The latest data is out from the Real Estate Institute of New Zealand and it shows a 2.27% drop in the median house price from June to July. This is after there was no change from May to June this year.
Have buyers said “Enough is enough!” and are starting to take their hands out of their pockets?
September data will tell us more! I will put an update on my web site and Facebook Business page on the 16th.

 An appraisal is not only a must..!

The reason, the method, and the need for an appraisal of your property has changed.

No longer is it just to get an idea of what it will sell for!

No longer is it given on the spot with a scratch of the head!

And no longer is it just to satisfy your curiosity!

Today, licensee’s in real estate must provide their client with a written appraisal, realistically reflecting the current market conditions, and supported by comparable information on sales of similar properties.

To do this, a licensee must exercise skill, care, competence, and diligence in carrying out that work.

And the advertised price must  then, clearly reflect your pricing expectations.

Being provided with an appraisal also means you have got a much better idea whether the price you are being offered, is a good one or not. There have been recent reports of properties selling several times during a month. If the first owner of the property had used a real estate licensee, they would have had to have been given an appraisal on their property, and would have then had a much better idea of the current market price.

 

 ‘Sleep out’: Take care when making representations.  

Making representations and advertised a property as having such things as a ‘sleep-out’ need to be correct and the legalities of them confirmed. A purchaser bought a property with a ‘sleep-out’ and carried out works on the property only for the Council to order the purchaser to stop work on the ‘sleep-out’ as it was said to be unconsented. The purchaser had not been told that the ‘sleep-out’ was unconsented, but his Licensee was able to show additional evidence to the decision makers, accompanied by an affidavit from the purchaser’s neighbours that Council consent was not required as the sleep-out was less than 10 metres in size. The Council’s order requiring that work be stopped was due to the purchaser’s subsequent construction on the ‘sleep-out’.

This decision highlights the importance of licensees and vendors ensuring that they take care when advertising a property as having a ‘sleep-out’ or making other positive representations, so they are able to substantiate any representations that they make.

 

“Northies News” for August 2016

 

Finance and Bank Rates.

Things have been changing quite quickly in finance circles recently. What the banks have been asked to abide by now is:

  • 60% max LVR(Loan to Value Ratio) for investment properties.
  • 80% for owner occupied properties (10% of the new lending can be for those with less than a 20% deposit).
  • ANZ and SBS max LVR for owner occupied properties is 85%.

There are other aspects to these that Alan Billington of Loan Market can explain for you – 021 800 105 – or you can contact your financial person.

 How some others see the market.

An investor – noticed an attitude change from Banks when loan renewals are being discussed. Investors now looking for longer terms and to maintain the cash flow.

A property valuer – working with some 1st Home buyers and new builds.

A trader – money becoming tighter and feels the market is likely to come back 5%.

A developer – recently spent $12M on land purchase and sees sales as being yield governed, moving into building bigger homes/higher value/higher specs and in better areas.

The “Unitary Plan”

There is plenty of information out now on the Auckland Council web site. For some people it might mean that you are now in an area where you can subdivide to a smaller land size, and so fit more homes on it. The homes will be smaller and so cost less, and you may therefore be doing your bit to provide “More Affordable” housing.

Residential Land Withholding Tax

When does the RLWT apply? If these criteria apply then RLWT will also apply ( unless there is an exemption).

How is it calculated? The amount of RLWT will be the lesser of (a) RLWT rate(33% individuals,28% companies) x vendors net gain on sale (b) 10% of purchase price or (c) Purchase price – security discharge amount (for mortgages etc) – outstanding rates.

The market

It is going to change – but it will do it slowly. There are still not enough products to meet demand, and the additional supplies are not going to happen over-night, the land is not going to become available over-night, and the infrastructure for new areas is not going to happen over-night.

What could happen more quickly is that owners who have properties that are big enough to subdivide could start building extra properties on their land. The infrastructure for these places is already there so enables homes to appear more quickly.

If you are thinking of selling, you should still be able to get a reasonable price while this market exists, and it may last for 6 months to a year.

But there are other introduced factors to quell the market flames that will start having their effect. The LVR rates, the increase of deposits required by different purchasers, the Bright Line test, Banks becoming less generous…will all cause prices to change, adjust, and start dropping.

Building Code Updates

The Government is proposing changes to 32 Building Code compliance documents to ensure standards keep pace with industry developments, best practice and new research, Building and Housing Minister Dr Nick Smith says.

The proposals involve adding two new Acceptable Solutions around waterproofing, and amending 32 existing Acceptable Solutions and Verification Methods. These include changes to the requirements for glass barriers, safety glass, foil insulation and slip resistance of walking surfaces.

Tenancy Tribunal: Practice Note issued re Tenants’ Liability for Damage

The Tenancy Tribunal has issued a Practice Note in relation to ‘Tenants’ Liability for Damage’ in response to the recent Osaki decision in the Court of Appeal. The Practice Note takes effect from 1 August 2016 and relates to applications where the landlord claims damages compensation for damage done to the premises that is more than ‘fair wear and tear.’

Salespeople Must Recognise ‘Issues’ with Titles

As Licensee’s we must make sure that we are aware of, and have some understanding of, the Certificate of Title for properties. This includes seeking clarification about significant issues with the title relating to several things like easements, rights, covenants, restrictions and right of ways. This is so that we are able to inform potential purchasers of the significant issues with a title, or draw their attention to items, so that they are able to seek professional advice if they require it.

This is just one of the very many things licensees need to know, be aware of, understand and inform people – both buyers and sellers – about.