Conveyancing
Australians Guide to Buying in New Zealand
Have Your Got Your Property Information Pack?
The Property Law Section of the New Zealand Law Society and the Real Estate Institute of New Zealand (REINZ) have issued a joint guide for lawyers and real estate licensees endorsing the use of Property Information Packs. A Property Information Pack is a report that will be ordered from a lawyer by a Vendor or with the Vendor’s authorisation by a real estate agent. The Property Information Pack is handed to the Purchaser and provides information on the title, LIM report and other records held by the local and/or regional authority on a property being sold.
The increased popularity of Property Information Packs comes about as a result of the Real Estate Agents Disciplinary Tribunal’s decision in LB & QB v Real Estate Agents’ Authority & Li [2011] NZREADT 39. The important points to take from that decision are:
“We consider that a licensee, upon taking instructions for a sale of a property, should search its title, or have some competent person search it for the licensee, and be familiar with the information gained from such a search. In this case it would have also been necessary to search the content of a transfer shown as containing a restrictive covenant. Such a search is not a difficult task to carry out or arrange. Similarly, the licensee should ascertain such matters as zoning and compliance with town planning regulations or Council requirements. We do not accept that a licensee can simply regard such matters as within the realm of a vendor or purchaser’s legal adviser. Licensees should be familiar with and able to explain clearly and simply the effect of any covenants or restrictions which might affect the rights of a purchaser. This is so whether that purchaser is bidding at auction or negotiating a private treaty” [18]
In short, real estate agents should be able to explain the effect of covenants and restrictions on a property’s title to prospective Purchasers. An agent should have the title of a property searched. Furthermore, being able to search for, read and understand a title is a core component of the national real estate qualifications and is required before one can become licenced. A well prepared Property Information Pack can protect a real estate agent and serve as an effective marketing tool for a Vendor. There is huge value in these packs for Purchasers. What is less obvious is the value to Vendors.
A restrictive instrument on a title might upon first glance be viewed negatively by a Purchaser, but after a good explanation, could be viewed more positively. For example a covenant restricting the building materials to be used when building a dwelling within a particular locality could be disclosed with emphasis that such a covenant ensures the quality of the homes in the vicinity and therefore the value of properties in the neighbourhood.
In summary, the Tribunal’s decision in the above case is compatible with broader consumer protection laws. A house purchase is a huge investment and it is important that a Purchaser has adequate information available to them. Real estate agents must be knowledgeable about the products they are selling and should familiarise themselves with the above obligations. In addition, those managers responsible for supervising other agents should ensure their agents are adequately trained so they can meet their obligations.
Bonnie Zareh - Commercial Solicitor
30 January 2013