LawWorks News

Buying property in an overheated market - December 2012

When the competition for desirable housing is overheated as it is at the moment it is tempting to make offers to purchase  quickly and on an unconditional basis. However our experience suggests that this can be extremely short sighted and can quickly lead to buyer’s remorse.  

More and more properties are being sold at auction where little, if any protection, for buyers is provided in the standard terms and conditions of sale. It is essential that the purchasers do a thorough "due diligence” on the property and go to the auction with their eyes open. 

Legal title to property can be complex. Leasehold Titles in particular must always be thoroughly inspected as there can be significant "surprises” for the unwary. As leasehold land is not nearly as common in New Zealand as Fee Simple Title, owners of leasehold property sometimes forget that the land owner will charge a Ground Rental. Sometimes there is a ground rent holiday at the commencement of a lease. At sometime in the future the ground rent will become due and payable. The purchaser of the lease of the land will have only a finite interest in the building (apartment on the land).  The lease owner (land owner) will inevitably be entitled to review the Ground Rent periodically (say every seven years) and the increased rental may be significantly higher than any current rental.  It is critical that before purchasing, you seek our assistance to check out the terms of the Lease(s) to ensure that you as purchaser have a clear understanding of what your obligations are and the extent of those obligations. 

Some modern titles in Auckland involve a lease, of a lease, of a lease.  The underlying title might be owned by (say) the Harbour Board, and the building owned by a developer of the land, and then a purchaser obtains a leasehold title to an apartment within the larger complex. It is important to understand the title in such a case before you agree to buy unconditionally.  Leases may contain numerous specific clauses that can limit your use and occupancy of a particular property. 

Sometimes, Titles to land/buildings can be complicated. It can be time consuming for us to examine documentation and advise. That process can sometimes be expensive. We make no apology for that, as the benefits for our clients who invest resources in instructing us to check all aspects of a Title thoroughly, reap excellent rewards in avoiding future surprises and sometimes disasters. 

Attention to detail can be the difference between a good purchase with good re-sale prospects and peace of mind; and a property disaster leaving owners with additional costs, significant stress and the possibility of being unable to sell what they may have considered was a safe haven for their investment.

Please consult us first before you make an offer to purchase a property. Often we can prevent a mistake by the inclusion of a condition in your contract to purchase that will protect you and allow us the ability to check particular matters before the contract is "confirmed” as being unconditional. 

Never be tempted to sign a contract for the sale or purchase of land without talking to us first. Sometimes it won’t be necessary, but if it is, you can save yourself a great deal of trouble by talking to any member of our property team. 

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