Overview of Property Transaction Process in NZ
The process of buying a property in New Zealand is not complicated, but it is involved. There are a number of steps and it’s important to know what happens and when so you can be confident and get it right. the purpose of this article is to give you an overview of the steps of buying.
Plan Through to Negotiate
This Phase is about getting a property ‘under contract’. Under contract means you have signed a sale and purchase agreement and have agreed the price and the terms of the contract. At this point you are not committed to buying the property, or hopefully not as the contract should at least be subject to a LIM. You simply have the right to buy the property if you are happy with your due diligence, that is your investigations in to the property. See our separate articles on LIM’s and filling out sale and purchase agreements.
Conditional Contract & Due Diligence
So now you have a property under contract. That means you contractually have the right to buy the property, providing that you are satisfied with the conditions negotiated in the contract, namely due diligence.
Unless you are an extremely experienced investor it always pays to fully investigate a property. It might cost you a little bit to do this, but in the long run it could save you thousands. As a minimum we suggest the following due diligence:
- Property Bag
- Building inspection by a qualified builder
- A registered valuation by a valuer that is an expert in the area
- A rental appraisal by a property manager experienced in the area
- Unconditional offer of finance
If you are satisfied with your due diligence, you instruct your solicitor to declare the contract unconditional by confirming that all conditions have been met (there are sometimes conditions put upon the vendor that also have to be met – e.g repairing the building or obtaining consent for an unpermitted structure). You are now legally obligated to purchase the property.
You will need to now pay the deposit. Note that most sales agents will try and get you pay the deposit when you sign the contract. For obvious reasons we prefer to pay the deposit at unconditional date. The deposit is usually paid to the agent’s trust account, unless it is a private transaction and then the deposit is paid to the solicitor’s trust account. You should always get a receipt for the deposit.
Loan Documentation Signing
You now enter the period between unconditional date and settlement. This is the period where you are legally committed to owning the property, and legally entitled to own the property, but you don’t actually own it yet. Usually you will have at least 10 working days between ‘going unconditional’ and settlement date so that the settlement process is not stressful.
You inform your bank or broker that you have gone unconditional. They will then prepare the loan documents in your name/s or the name of the entity you specify. If it is a company or LAQC they will require a copy of the certificate of incorporation. If it is a trust they will need a signed and dated copy of the trust deed.
The loan documents are sent to the solicitor. The solicitor checks them and gets you to sign them. You will also need to sign mortgage related documents. The solicitor registers the mortgage with LINZ (Land Information New Zealand) who are responsible for keeping the title up to date. Recently this has become an electronic process.
Final Check of Property
The day before settlement date you or your agent completes a final check of the property and makes sure the property and its condition is not significantly different from when you bought it and the chattels included in the sale (as per the sale and purchase agreement) are still with the property.
Settlement – Money Changes Hands
You tell your solicitor you are happy with the property. The bank pays any borrowed money in to your solicitors trust account. You pay any further deposit to your solicitor’s trust account. Your solicitor receives a settlement statement from the vendor’s solicitor that confirms the amount that is to be paid at settlement. This will include the balance of the purchase price owing, any prepaid land or water rates that are your responsibility and any penalty interest (see legal section).
If there is an existing tenant you are taking over you should ensure that a bond transfer is signed at this point to ensure the vendor signs the form before they get their money and forget about the property.
Your solicitor will then prepare a settlement statement for you, based on the vendor’s solicitor statement and probably including their fees as well. You check and approve this.
Your solicitor will then deposit the money due to the vendor, into the vendor’s solicitor’s trust account. The vendor’s solicitor will then acknowledge to your solicitor that settlement is complete. Your solicitor will then inform you of the same.
You now legally own the property and can pick up the keys.
Expect to see a copy of the new title showing your name on it to come in the post from your solicitor.