In New Zealand the buying and selling of real estate is governed by a number of statutes, the most significant being
- Property Law Act 1952
- Contracts Enforcement Act 1956
- Resource Management Act 1991
- Fair Trading Act 1986
- Consumer Guarantees Act 1993
- Residential Tenancies Act 1986
- Real Estate Agents Act 1976
- Privacy Act 1993
- Real Estate Agemts Act 2008
There is nothing to prohibit a private individual from selling their property. However, for a person to set themselves up in business as a real estate agent he/she must be bona fide members of the Real Estate Institute of New Zealand, a body with powers to regulate and discipline its members. To become a member of the Institute certain requirements must be met, including successful completion of prescribed study and examination, practical experience in real estate marketing of not less than 3 years, and the Licensing Board of the Institute being satisfied as to a person's character and financial stability. Real estate agents are subject to very strict controls, and failure to comply with the requirements of the legislation and the Institute result in the imposition of serious penalties, including the possibility of the revocation of a license. These controls exist primarily to protect the public from unethical conduct, false or misleading advertising, misrepresentation of facts, or any other activity which may bring the industry into disrepute and/or harm a client.
For more information on professional conduct and client care rules please visit : www.reaa.govt.nz/page/
Any money which is received by an agent as a deposit on the purchase of a property must be held in an audited trust account for 10 days prior to disbursement, and strict controls govern this account.
Ownership of property in New Zealand is determined by a "Title" system. All essential matters relating to a property are recorded on the title. By "searching the title" a purchaser can be satisfied as to the ownership of the property, the existence of any easements (such as rights of way, water or power reticulation etc), encumbrances such as undischarged mortgages, caveats where a third party has registered an interest in the property (eg in the case of a marriage dispute, or a finance company drawing attention to the fact that they have a financial interest in the property), and covenants relating to such things as the permitted use of the property and the size and building requirements of any dwellings.
It is normal in New Zealand to instruct a solicitor to search the title before the agreement of Sale and Purchase becomes unconditional.
Title to real estate property in New Zealand may be of a number of different kinds, but the most common is "freehold title" This affords the most rights to individual ownership.
The "conveyancing" of title is usually handled by solicitors. One solicitor represents the vendor, and another the purchaser. This affords both parties good protection and ensures their interests are protected in any transaction.
Once a suitable property has been found a purchaser may decide to make an offer by signing an Agreement for Sale and Purchase. The real estate agent then acts as a negotiator between the parties seeking to bring them to a place of agreement as to price and any other relevant terms or conditions.
An Agreement may be signed "unconditionally" or "conditionally". An unconditional agreement is one which is not subject to any conditions and upon signing by both parties becomes a binding contract between them. A conditional agreement is one which is subject to certain conditions for a period, and when these terms are satisfied it then becomes unconditional. Common examples of conditions include:
A financial clause giving a purchaser a period of perhaps 10 working days to secure their finance
A clause giving the purchaser the opportunity to obtain a report from an independent registered valuer as to the market value of the property, or a property inspection company to prepare a comprehensive report on the property including the state of repair of any buildings on the property, as well as confirmation that all required permits had been obtained etc.
Not only do the parties agree as to the sale price, they also agree that a deposit will be paid with the balance becoming payable when the contract is finally settled. Deposits of 10% are typical – that is, a $30,000 deposit would be paid on a property with a negotiated sale price of $300,000.
However, as an expression of good faith, a nominal sum is usually paid by the purchaser on signing the agreement – typically $1,000 – and the balance of the deposit paid when the agreement becomes unconditional.
In the above example, three separate payments would be made:
An initial deposit of $1000 on signing (This is refundable if the Agreement doesn't become unconditional)
A further sum of $29,000 would be payable when any special terms or conditions of the agreement have been satisfied and the agreement becomes unconditional.
A final sum of $270,000 payable on settlement day when keys to the property are made available and the purchaser takes possession.
The above is intended as a guide only to buying property in New Zealand. Obviously much more could be written, and sometimes the legal issues can be complex. We strongly recommend our clients do three things to protect themselves in their real estate purchases:
Employ the services of a competent real estate agent with a good reputation for honesty and professional expertise.
Employ the services of a competent solicitor who specializes in real estate conveyancing.
Be prepared to spend a little on Property Inspection reports and Registered Valuations if they are not already available.
For further information relating to real estate in our country we refer you to the Real Estate Agents Authority website and in particular the Approved Guides to both buying and selling property in New Zealand. To be directed to this website click on the following link: www.reaa.govt.nz/page/approved-guides-0
As required by the Real Estate Authority we refer you to our Inhouse
Complaints Procedures (pdf format)
Also, refer to the REAA Code of Conduct (pdf format)