Written by James Leggat - Solicitor (Property)

Early access and early possession clauses present a great opportunity to facilitate transactions where the settlement date does not line up with the parties’ objectives. Commonly they are used to allow developers to commence repairs on an earthquake damaged property or to complete improvements before tenants move in. Purchasers might also request access when they need to have moved out of their current property before the settlement date.

There are a couple of risks to be aware of with early access arrangements.

Who bears the risk of the property?

The provisions of clause 5 of the ADLS agreement set out that the risk of the property stays with the vendor until the settlement has occurred. In the case of early access (when the purchaser intends to carry out building work on the property before settlement), we would normally expect the risk to pass over to the purchaser, at least in terms of the repairs being carried out. After all, the works being carried out by the purchaser may invalidate the terms of the vendor’s insurance.

Depending on the scale of the work the vendor might also require the purchaser to obtain contract works insurance. A vendor also needs to ensure that the purchaser obtains any required consents before carrying out any works.

Where the purpose of early access is simply to store items on the property (e.g. furniture in the garage) the items left on site would similarly be left at the risk of the purchaser, with perhaps an added warranty not to move any dangerous material onsite (e.g. flammable substances).

Deposits and the cost of remedying works.

Another factor to be aware of is the deposit payments. In a nightmare scenario where a purchaser commences works on the property before settlement but then defaults, the vendor will look to use the deposit to remediate any damage. Often with “as is where is” sales a nominal deposit of $10,000.00 or a sum that is less than 10% of the purchase price is entered.

Vendors need to consider whether this will be enough if the purchaser has partially completed work, or completed works in a poor manner so that the property is left worse off. In the case of a defaulting purchaser, the deposit may be the only expense that can be recovered if other creditors are also pursuing the purchaser’s assets. Ultimately the deposit should ideally be high enough to protect a vendor client.

What if the purchaser is moving in prior to settlement?

Sometimes a purchaser will take early possession of a property so they can begin living there before settlement. In this case, purchasers will usually be asked to complete their final inspection at that point to minimise the chance of a dispute further down the track.

Our team would be happy to advise on how to best tailor early access arrangements to protect either party within a transaction.

Written by Nicole Burrows-Healy - Solicitor (Property)

To be eligible to make an early withdrawal for a first home from KiwiSaver a purchaser must intend to be the occupier of the property. This normally simple test becomes muddled when a trust is purchasing the property. It is important to understand when a withdrawal can be made. By signing up for an agreement under the false impression that they are eligible to withdraw their KiwiSaver, a client might end up having to cancel the agreement, or significantly delay the confirmation and settlement.

Withdrawing from KiwiSaver

As a general rule, KiwiSaver providers advise that trust purchasers are not eligible to withdraw from KiwiSaver regardless of how the home will be used. Properties must normally be bought by the purchaser in their personal capacity in order to be eligible to make an early withdrawal. There are some exceptions to this rule. For instance, ANZ will allow a trust purchaser to withdraw their KiwiSaver if the applicant is a trustee and beneficiary of the trust (click here to read the guide). This may not be the only exception, and a lucky few may be able to withdraw from other providers. However, it is important not to rely on these unusual occurrences and plan ahead to ensure a better experience for clients.

We suggest if a trust is purchasing a property (and you become aware that the clients are first home buyers) you ask them whether they want to withdraw their KiwiSaver. If the answer is “yes”, you can direct them to speak to their lawyers before signing, or suggest they consider purchasing in their own name.

While we are responsible for having this conversation with our clients, our involvement is often too late in the transaction. The issue can be remedied, however, the process involved is lengthy and can, therefore, be daunting for our clients.

Although we are always available to provide guidance over the phone in these types of situations, there are often times where we may be unreachable (especially if agreements are signed outside of office hours) and clients are eager to sign an agreement. We hope that by asking this question before the agreement is signed, our clients can easily avoid disappointment and unnecessary stress further down the line.

Written by Louise Maginness – Registered Legal Executive (Property)

Selling a property where the homeowner no longer has capacity can be quite complicated.  Usually, only the person who owns the property can transfer it to the buyer. 

Enduring Power of Attorney (in relation to property) (EPA).

Obviously, our advice to clients is to organise their legal affairs while they are able to do so.  The client will then be able to have a say over the decisions that affect them.  Planning also helps to avoid expensive legal problems and headaches for family members in the future.

If you have an agreement where an attorney is going to sign under an EPA, the first thing you need to do is obtain a copy of that EPA.  You need to check (or ask the lawyer acting for the vendor) that the EPA grants the attorney the power to sell the property on the client’s behalf and that there are no restrictions or limitations in the document. 

If the EPA allows the attorney to sell the property and sign the agreement on the vendor’s behalf, the attorney needs to complete a “certificate of non-revocation”.  This certificate confirms that the attorney has been granted the EPA and that it has not been revoked or suspended.  Both the EPA and this certificate should be attached to the agreement for sale and purchase (or any other document you ask the attorney to sign, e.g. the listing authority).

What if a client does not have an EPA?

It gets more problematic if your client has not completed an EPA and cannot now do so.  In this case, an application must be made to the Family Court for the appointment of a property manager to make decisions for the person who is unable to do so themselves.  Bringing proceedings in this manner can be expensive and time-consuming, and therefore if an application to the Family Court is necessary, we need to know as early as possible.

Property managers are bound by specific duties and restrictions and have to report annually to the court to show they are managing the person’s property appropriately.  Again, if the agreement is to be signed by a property manager, you need to check with the vendor’s lawyer that any court order grants the property manager the power to sell a property.

If an agreement is not signed correctly by someone with the power to do so, then it may not be binding.

If you have any queries regarding acting for clients without capacity, please feel free to contact one of our residential property experts.  They will be happy to discuss it further with you.  If you would like a blank Certificate of Non-Revocation, we can provide this to you.

Partner - Property

Phone: +64 3 339 5642

Email: janine.ballinger@cavell.co.nz

Solicitor - Property

Phone: +64 3 335 3470

Email: nicole.burrows-healy@cavell.co.nz

Solicitor - Property 

Phone: +64 3 339 5614

Email: james.leggat@cavell.co.nz

Registered Legal Executive - Property

Phone: +64 3 339 5643

Email: louise.maginness@cavell.co.nz

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