Section Purchases: Why do you need a property lawyer?
It is the dream of many New Zealanders to buy a section and build their ideal home, but what starts as an idealistic step towards ‘living the dream’ can turn into a finance guzzling nightmare if you go into it with your eyes wide shut. Your home will likely be the most valuable asset you own, so it makes sense to take every step you can to protect it and your future financial security.
A great location is crucial if you want your build to provide you with a healthy capital gain. Never underestimate the value of having a fantastic view, a north-facing garden, or being in an established popular neighborhood – people will always pay a premium for these features if you do ever decide to sell. However, no matter how great a section looks, it is critical you don’t take the vendor’s word as gospel when it comes to building consent, power and sewage connection, or anything else you need. You have to do your homework!
Why you need a property lawyer to help with due diligence
Due diligence is when you investigate the section before you purchase it. Many a landowner has been caught out by misunderstanding reports and failing to recognize the significance of some of the included information. Professional interpretation by a specialist property lawyer is paramount for the:
Certificate of Title
This is to check who has legal ownership of the section and if there are rights and restrictions associated with the land including (but not restricted to) mortgages, easements, and covenants.
The importance of this document cannot be underplayed. It tells you whether the section has the right zoning and covenants for the type of build you want. Some restrictions found in Certificate of Titles go far beyond the expected building height and size stipulations: where you can build a shed, the type of fencing you must use, or where you can position the washing line, etc. Similarly, people often assume (especially when purchasing a lot in a subdivision) they’ll be able to get services connected, but if it’s not documented in an easement it’s not guaranteed.
Land Information Memorandum report (LIM)
This report is Council issued and contains legal information related to the section such as earthquake damage (liquefaction, lateral spread, and changes in level), erosion or flood risk, potential contamination, drainage systems, and consents or notices from power or gas companies, etc. Crucially it also tells you about future new developments - is there going to be a motorway built or roads widened in the local area? Or conversely, if there are protected historic features such as trees on the section which will put a stop to your development.
You really cannot afford to skip or botch these due diligence investigations; they are there for your protection!
Many subdivisions are subject to Land Covenants which are a set of guidelines that section owners need to abide by when building and utilizing their section. Each sub-divisions covenants can vary, but most will have building guidelines, fencing guidelines, and developer approval. You must be aware of what is in the covenants, an example is a subdivision that might prohibit caravans from being parked on the site. Now if you live on-site in your caravan during the build of your home to save money, you may find that you could get a fine from the developer of the subdivision. Some covenants might prohibit the use of gas cylinders (except BBQ), so you might not be able to have a gas hob in your kitchen. It is important to know what is in the Land Covenants before your contract goes unconditional.
Why you need a lawyer to help with a section purchase
The complexity and interlinking nature of the information found through due diligence can often hide issues that give the purchaser power. Identified areas of concern are bargaining tools for negotiating on price and/or introducing a sunset clause. Your property lawyer will advise you on how to negotiate the best price for the section and review the sale and purchase agreement. Remember, your property lawyer works for you and will ensure your position is protected.
Yes, legal fees are an additional cost to add to your build, but compare them to the cost of having to remedy an issue (either to fix or insure) and the impact it may have on any resale value. You really cannot afford to skip or botch these investigations; they are there for your protection.
Weston Ward & Lascelles are a highly skilled team of specialist property lawyers in Christchurch with great success in negotiating contracts of sale for section purchases in Canterbury and across New Zealand. If you have any questions relating to section purchases, get in touch today with our property team. Click here to arrange a call.