“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.