Before you buy

Posted by: Hamish Walker on 23 March 2007

It is often said that "It is better to use your lawyer as the fence at the top of the cliff, rather than as the ambulance at the bottom".

This advice applies of course to any legal transaction which you may be about to enter, but for a house or land purchase or sale it is of particular importance because -it may represent the biggest financial transaction you carry out;

• it will either be the home for you and your family or it will be a significant investment and thus should be secure;
• you may not fully understand the document put in front of you to sign - it will contain a number of legal terms, expressions and conditions; and
• it makes sense to seek advice before the terms of the transaction are set and before you have signed any document.

While a standard form of sale agreement is mostly used by real estate agents there can be considerable disadvantages (and costs) to both vendor and purchaser if it is not 'tailored' for each of them.

Seek Advice Early

As soon as you contemplate purchasing or selling a property, you should consider obtaining legal advice. A good lawyer can identify the enquiries you should make; the matters to consider in the negotiations; likely legal fees and other costs that will be involved; and the best places to try to raise mortgage money.

It is not advisable to sign a sale or purchase agreement until it has been independently and professionally reviewed. For most sale and purchase agreements that is something that can be done in less than a day after receiving instructions.

Advice to a Purchaser When you have found a property that you would like to buy, there are a number of things that you need to discuss with your lawyer.

These might include -

• Is there a shared driveway? If so, do any special conditions apply?
• Are there any easements which affect the property or which it requires for proper enjoyment?
• Is the property subject to an encroachment license - many properties are.
• Are all the chattels which you are buying listed in the agreement?
• Do you have the money to pay the deposit when it is required and have you arranged for a mortgage that will give sufficient money for what you need?
• Are there any further conditions which need to be inserted - for instance the sale of your existing house, the receipt of a satisfactory LIM report from a Council, or other conditions particular to an investment property purchase?
• Are there any Council requisitions affecting the property?
• Are there any resource management matters which might affect the property?

We talked about a lawyer being used as the fence at the top of the cliff. In buying a house it is as though there are a number of steps down the cliff. They may all be in order but if there are some loose or slippery ones, or some of them are missing, you could have problems.

Our role is to stop at the top of the cliff, have a good look down and if anything is not safe, make it safe. If it cannot be made safe, we will tell you in advance.

- By Hamish Walker of Walker & Co, Lawyers. If you have a question for Hamish or would like to find out more please visit www.walkerandco.co.nz