You have probably heard the expression “Buyer Beware” when it comes to buying a property, but if you are selling a property, you should realise that you are under the standard sale and purchase agreement published by the Auckland District Law Society/New Zealand Real Estate Institute, which is the most widely used document in New Zealand, the vendor does give some warranties to a buyer. A warranty is a promise by the seller of a property to the purchaser that certain facts are true or will happen. If they are not true, then the buyer can make a claim against the seller for any loss suffered by the buyer. 

The warranties given by the seller of the property are contained in the small print of the standard agreement, so it is important that if you are selling a property you read the warranties contained in the fine print to make sure you are able to give them. If the warranties are not correct, you need to delete some or all of them or change the wording. 

In summary, the warranties include the following;

• If the property has a building on it, the seller does not have to mark out the boundaries of the property, but if bare land is being sold, then the seller must make sure the survey pegs are in place marking out the boundary as at the settlement date. 

• That the seller has not received any notice from the local council or the government or any other statutory body, or from the tenant of the property, or under the Resource Management Act 1991, or from any other person which directly or indirectly affects the property, and which the buyer has not been told about. 

• That the seller has not given any consent or waiver which may directly or indirectly affect the property. For example, the seller may have signed a consent for a neighbour to build on the property and where the building infringes the rules in the District Plan in some way. 

• That any chattels, plant, equipment, systems or devices which are included in the sale and which provide services or amenities to the property (e.g. security, heating, air conditioning systems) will be in reasonable working order on settlement, and otherwise in the same state of repair as at the date that the agreement is signed (fair wear and tear excepted). 

• All electrical or other installations on the property will be free of any charge (for example, not subject to finance).

• On the settlement, there will be no arrears of rates, water rates or other charges. 

• If the seller has done any works on the property, or arranged for anyone else to carry out works on the property, then all necessary permits and consents have been obtained, and to the seller’s knowledge the works were completed in compliance with those permits and consents, and a code compliance certificate was issued for that building work, if required. A code compliance certificate is a certificate from council confirming that any work authorised by a building consent has been satisfactorily completed in accordance with the terms of the building consent. Please note that just because a code compliance certificate has issued, it does not mean that a seller does not have any other liability under this warranty. The seller is warrantying that any building work completed in accordance with a building permit or a building consent, shall even if a council issues a code compliance certificate, and there is a problem with the building work, the seller can still be liable for faulty work. The time period during which a person can be sued for a breach of warranty is 10 years from the date the warranty is given, not 10 years from the date the work was completed. 

• If the seller receives any notice after signing the agreement, the seller must give a copy of that notice to the buyer. 

• The seller owns any chattels included in the sale. If you are selling a property, you should make sure any chattels listed in the sale agreement are in good working order. If they are not, you should not include them, or you should change the warranty to make it clear that they are not. If you are buying, you should check before you enter the agreement that the chattels are in good condition and record what the state of repair is, as you may not remember when it comes to settlement. 

• If the property being sold is a unit in a unit title development (e.g. an apartment), the seller warrants that it is not aware of any claims made against the body corporate, and no special resolutions have been passed affecting the common property. 

• If a crosslease property or unit is being sold, there will be no structures built which have not been authorised by the appropriate bodies or people. 

If you are not sure about whether any of the warranties which are contained in the agreement can safely be given, then you need to take appropriate steps to check, for example, you could check council records to make sure that all necessary code compliance certificates have been issued for building work which you have carried out. 

If you are buying a property, you should also read the warranties being given by the seller to see whether you can make a claim. A prospective purchaser should carefully inspect the property before settlement to make sure that all chattels included in the sale are of an acceptable standard and any issues are dealt with at that time. 

The warranty about work done to the property will not extend to work done on a property by a previous owner. A buyer should therefore carry out their own investigations rather than relying on the warranties contained in the agreement. Extra care should be taken if a property is a crosslease or unit title, as there may be additional requirements for any work carried out on these types of properties. 

Conclusion

The fine print of any agreement needs to be carefully considered and understood by all parties to the transaction. The implications or consequences of giving warranties that are not correct can be significant. If there are warranties that you cannot truthfully give, amendments to the warranties will be needed before signing the agreement. Consulting a lawyer from the outset is highly recommended. 

Feedback, comments and questions are always welcomed – please feel free to e-mail me on [email protected]

T: 03 443 0900

W: www.aspiringlaw.co.nz

Mike Toepfer is a Director of Aspiring Law.

Please remember, this information is designed as a general guide, and should not replace specific legal advice on a particular issue.