Traps for the house buyer

Kapi-Mana News - - CONVERSATIONS - ALAN KNOWSLEY LE­GAL MAT­TERS

There can be mul­ti­ple is­sues to watch out for when buy­ing a prop­erty. In a re­cent ex­am­ple a cou­ple signed a con­di­tional of­fer to pur­chase their first home which was a cross lease prop­erty.

As they be­gan tick­ing off all their due dili­gence checks in or­der to ar­rive at an un­con­di­tional con­tract, they de­cided they were pre­pared to rely on their own judg­ment when read­ing the LIM re­port they or­dered from the coun­cil.

What the LIM re­port re­vealed was that there was no con­sent for a garage that had been built at the prop­erty. This be­came an is­sue when the cou­ple went to their bank for fi­nance. The bank flatly de­nied the cou­ple an of­fer of fi­nance due to the un­con­sented garage.

It tran­spired that the real es­tate agent had pre­vi­ously dis­closed to the cou­ple that there was no con­sent for the garage, prior to them sub­mit­ting their of­fer to the ven­dor.

When the cou­ple ap­plied for in­surance, the in­surance com­pany re­fused to cover the prop­erty for the same rea­son – un­con­sented works at the prop­erty.

It was only at this point that the cou­ple re-con­nected with their lawyer re­gard­ing the garage that was block­ing their abil­ity to ob­tain fi­nance and in­surance for the prop­erty.

They then were ad­vised that coun­cil con­sent was only one is­sue in re­la­tion to the garage. It also cre­ated is­sues with the cross lease ti­tle.

Cross lease prop­er­ties are a type of ti­tle where two (or more) own­ers own the un­der­ly­ing land and are granted a ‘‘lease’’ of their own flat from the other owner.

The ‘‘flats plan’’ is a doc­u­ment that ac­com­pa­nies the Cer­tifi­cate of Ti­tle to a cross leased prop­erty and shows the out­line of the build­ing (flat) on the land.

An im­por­tant fea­ture of a cross lease ti­tle is that the flats plan ac­cu­rately iden­ti­fies the flat you are pur­chas­ing.

If there have been any al­ter­ations made to the ex­te­rior di­men­sions at the prop­erty that re­sults in a dif­fer­ent bound­ary to what is recorded on the flats plan then the ti­tle may be deemed de­fec­tive.

For in­stance, an en­closed con­ser­va­tory that has been added might ex­tend the flat beyond the de­fined bound­aries. A garage that is on a shared area also re­quires the con­sent of the other owner and the flats plan to be amended. With­out that, the ti­tle will be ‘‘de­fec­tive’’.

A bank will not be likely to pro­vide fi­nance for a prop­erty that is sub­ject to a de­fec­tive ti­tle, nor will an in­surance com­pany be likely to pro­vide in­surance.

Once you be­come an owner you must be care­ful not to add on to your flat so that the flat ex­tends beyond the bound­aries shown on the flats plan.

If you plan to ren­o­vate the prop­erty, the agree­ment of the other flat own­ers is re­quired along with an amended plan and new lease.

It is im­por­tant that all in­for­ma­tion about the prop­erty, par­tic­u­larly in re­spect of un­con­sented works, is com­mu­ni­cated to your le­gal ad­vi­sor and it is also highly rec­om­mended that they re­view the LIM re­port and ti­tle for you.

This may al­low you to ter­mi­nate a con­tract if need be, or in a worse case sce­nario, save your­self the costs in­volved in cor­rect­ing a de­fec­tive ti­tle fur­ther down the track.

Col­umn cour­tesy of RAINEY COLLINS LAWYERS­phone 0800 733 484 www.rain­ey­collins.co.nz If you have a le­gal in­quiry you would like dis­cussed in this col­umn please email Alan on aknowsley@rain­ey­collins.co.nz

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