Property - check, check, recheck
What buyers of homes and sections in Canterbury need to know has become increasingly complex. Lawyer INGRID TAYLOR gives some tips.
The majority of properties for sale in Canterbury have suffered earthquake damage to some degree. Some are repaired, some are not.
There are some key aspects to the sale and purchase agreement that purchasers need to consider.
Properties coming to market can now be broadly categorised into four types: those with earthquake damage yet to be repaired, those where repairs of earthquake damage have been completed, properties sold "as is, where is", and bare land where the dwelling has been demolished.
Regardless of which category the property falls into, a contract for sale and purchase should be subject to the usual conditions such as finance, title and LIM checks. It would also be prudent - where the property is not a new build - to make the contract subject to a property check.
In a recent judgment relating to the pre-purchase property inspection of a leaky home, the Court took the view that where a purchaser failed to obtain a pre-purchase inspection and then later tried to make a claim against the vendor, they were contributorily negligent. The same argument could be applied to earthquake damaged properties.
The pre-purchase inspection should be carried out by a competent inspector. There are many companies offering building inspection services. Purchasers should compare prices and services offered or ask their solicitor for a recommendation.
An independent valuation is also recommended for land and buildings, except where sold on an "as is, where is" basis. Contracts for homes sold on that basis should acknowledge they are being sold as-is, and buyers should make sure water and power can be restored if necessary.
Geotechnical reports are becoming less common, but it is still prudent to investigate which technical category the property is located in as it may impact on the ability to finance the purchase. If the property is on TC3 land, a geotechnical report is probably a good idea.
Depending on the type of property, arranging insurance cover could be challenging. Insurers providing new cover for homes still to be repaired will not cover accommodation costs if it is necessary to move out for repairs. In addition, if the property is subsequently deemed a rebuild as opposed to a repair, then only the indemnity value of the policy will be paid out.
The issue is further complicated by the move to specified sum insurance, where there is a real risk of under- insurance. An elemental valuation of the property, carried out by a registered valuer or quantity surveyor, which takes into account matters such as demolition, swimming pools, paths, retaining walls, legal fees, application and consents costs, is highly recommended. At the same time, it would also be prudent to check the policy's proposed sum insured with the bank to ensure it is willing to lend on that basis.
Where claims are reassigned to the vendor with the contract, the relevant invoices, receipts and sign-offs, claim and policy numbers, copies of certificates, consents and warranties will be needed.
If intending to buy at auction, it is important to carry out due diligence and obtain written confirmation of insurance cover before bidding.
Buying a property is a big undertaking, and prudent purchasers have always undertaken due diligence to ensure that their dream home doesn't become the stuff of nightmares. Christchurch's post-earthquake environment has made things more complicated for those wanting to buy property, but the challenges to completing effective due diligence can be overcome by a methodical and systematic approach, coupled with the right advice and support from experts.
Ingrid Taylor is a partner at Christchurch law firm Taylor Shaw. This column is taken from her recent presentation at a Christchurch property law update, held by the Auckland District Law Society, and is not a substitute for professional advice. Next week she will look at what those selling properties in Canterbury need to know.