When you buy a house our advice is to check the Land Information Memorandum (LIM) and to consider getting a builder's report, and making these conditions in the Agreement. We have a story below which highlights the issues that a buyer found when purchasing their house.

In 2000, Mr & Mrs Ford bought a home from Mr & Mrs Ryan. A few months after settlement, the Fords problems began. The house and garage lacked flashings at strategic points and some of the downpipes had been incorrectly sealed. These problems led to water leaks, significant cracks both to the exterior and interior, and swelling timber framing and mould stains. A subsequent builder's inspection identified a number of faults with the house. The cost of repairs were estimated to range from $50,000 for targeted repairs to $90,000 for a full reclad.

The Fords applied to the court to have their Agreement for Sale & Purchase (the Agreement) cancelled. They argued that the Ryans had warranted that all work on the property had the necessary code compliance certificates, when in fact some of the work did not. The District Court held that the Fords did not have grounds to cancel the Agreement.

Judge McKenzie confirmed the basic rule that it is entirely the buyer's responsibility to be satisfied as to the quality of the property being purchased.

 

What steps can you take?

How can you as a buyer be satisfied as to the quality of the property you intend to buy? There are two types of conditions which can be included in your Agreement which can help avoid any nasty surprises for you in the future.

One condition is to obtain a satisfactory Land Information Memorandum report (LIM) from the local authority.
The LIM contains a host of information about the site, such as information on drainage, zoning and other planning issues, protected trees, builder's certificates and council permits, resource consents, special land features such as erosion and any rates owing.

When buying a property you should always bring your LIM to us so that we can help you with the information contained in it. We can discuss whether the LIM data will impact on your future use and enjoyment of the property, not to mention the future value of the property.

However, a LIM alone is not enough to avoid the situation in which the Fords found themselves.
The LIM does not tell you about the condition of buildings on the site, and does not reveal any work that has been undertaken without the necessary permits. The LIM on its own would not have revealed all of the defects in the Fords new home.

A second condition is to obtain a satisfactory builder's report which will give information on the structural soundness of the buildings on the property. We can include such a condition for you in your Agreement.
 A builder's report can ensure that any structures on the property have been built in compliance with the relevant permits and regulations.
This is important not just to ensure the property is safe for your use, but also to avoid any adverse effect on the future value of the property.

Once all the conditions are met, the Agreement is legally binding.
If you have included a LIM condition but not a builder's report condition, and it turns out that building work on the site has been done without a permit, in most cases you are still legally obliged to complete the sale.
If you have included a builder's report condition in your Agreement, there are a number of options open to you to complete the sale. You could negotiate repairs with the seller, or negotiate the price down.
To avoid any issues at settlement, you should consult with us to ensure those negotiations are recognised in the Agreement.

When you are buying a home, we strongly recommend that you see us before you sign the Agreement. We can help to ensure the home that you intend to buy meets your requirements, and there are no nasty surprises.