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When Do I Get The Keys?!

The most common question a purchaser’s solicitor gets asked is “what time will settlement happen and when can we get the keys to our new home?”

What you need to be aware of is that there are certain things which need to happen before settlement can occur and more often than not, any delay is beyond our control. For that reason, when advising a purchaser on when to book the removal truck we will usually err on the side of caution and recommend late morning or even early afternoon.

Some of the factors which can influence the time of settlement will be looked at in this article.

If your purchase is one of a number where the party further down the chain from you have the sale of an existing property to settle this can contribute to delay. In most cases a buyer cannot settle their purchase in such circumstances until the sale of their existing property has settled. So if you are a cash buyer with no property to sell, you are at the start of the chain and it makes our job easier.

At the time of settlement all money which is required to complete a purchase comes into your lawyers trust account and then we complete the purchase on your behalf.

Another factor which can hold up your purchase therefore includes a delay in you lodging the balance of any money you are putting towards the purchase into our trust account or for that matter, a delay in your bank lodging any new loan monies into our trust account. The latter will often depend on when you signed the loan documents and when we were able to send all signed paperwork back to your bank. Obviously the more notice we are able to give a bank the better the chance that your purchase will settle in a timely fashion.

If you have not arranged the insurance on the home noting your lender as an interested party this might also delay settlement.

If when you did your final pre-purchase inspection the vendors agreed to complete some remedial work, settlement can sometimes be delayed pending confirmation of such work being completed or your lawyer negotiating an amount to be retained or deducted at settlement.

Finally, as lawyers for a purchaser we will not settle your purchase until such time as we have received an undertaking from the vendors lawyer that they have signed the electronic dealing to transfer ownership and are in possession of a discharge of mortgage and on receipt of funds that they will release the mortgage and the transfer to enable us to complete registration into your name.

And undertaking is a lawyers promise to another lawyer and we can be severely censured and even struck off by the law society for breaching an undertaking.

Hopefully this will give you the idea that there are a number of factors which can and regularly do hold up settlement of your purchase. Being organised and having sufficient time between confirming the contract and completing settlement is the recommended solution to these issues.

At Kannangara Thomson we have a large team of experienced conveyancing lawyers to assist you with your purchase.

Why Do I Need a Building Report?

When you buy a home it is likely to be the single biggest investment which you make in your life time for most people.

For that reason many buyers choose to have a condition inserted in the agreement for their own protection which allows them to obtain a building inspection report on the property they are buying.

The cost of such a report can vary between $600-$900 in our experience but when you weigh that up against the purchase price it is in our opinion still a small outlay to ensure that you are not buying a home with serious matters relating to its structural integrity.

The purpose of such reports is not in our opinion to nit-pick over every loose screw or jamming door but, to highlight major items of concern which might see you want to choose not to buy the home or, allow you to ask the vendors to attend to remedial work before you do buy the home.

The temptation for many buyers is to have a mate or an uncle who is a builder do the inspection for them to save money. There are good reasons why you should not go down this particular path and we will highlight those reasons in this article.

The general terms of sale (the standard terms in the pre-printed, Tenth Edition (2019) 2 ADLS, form commonly used) state at clause 9.4(2) that “the report must be prepared in good faith by a suitably qualified building inspector in accordance with accepted principles and methods”.

That same clause then goes on to say “if the purchaser avoids this agreement for non-fulfilment of this condition pursuant to sub clause 9.8 (5) the purchaser must provide the vendors immediately upon request with a copy of the building inspectors report.

So if you have had a friend or an uncle who happens to be a builder inspect the property for you to save money and you subsequently wish to cancel the agreement relying on the building inspection clause you may have problems because you will not have had the report completed following “accepted principles and methods” and more often than not there will be no written report to provide to the vendors on request. Even if there happens to be a report it will almost certainly not be prepared to the required exacting standard.

The easier choice in our opinion is to recognise the quite small cost of a building report in the context of a home purchase and to engage the services of one of the many qualified building inspection companies providing such services in Christchurch. In the long run it may save you money!

Should you require any further information, please phone one of our team on (03) 3774421 or email us at email@ktlaw.co.nz

Property Tax Laws

Buying or selling property?

There are property tax rules which apply to the sale and purchase of property which was effective from 1 October 2015.  These rules have an effect on all those who buy and sell property including those who have existing family trusts which own property.

While all existing tax rules still apply, the “bright-line property rule” imposes an income tax on any gain from residential land purchased or sold (or otherwise disposed of) unless an exemption applies.

What is the bright-line property rule?

The bright-line property rule means that people who sell a residential property might need to pay income tax on any profit.

Whether it applies to your property and what bright-line period applies, if it does, depends on when you acquired the property. In most cases, the date your property is acquired is when the sale and purchase agreement you signed to acquire your property became binding.  The bright-line period starts on the date you bought the property (the date the title was registered in your name with Land Information New Zealand) and ends when you sign a binding sale and purchase agreement to sell the property.

  • Acquired before 1 October 2015 – the bright-line property rule does not apply
  • Acquired between 1 October 2015 and 28 March 2018 (inclusive) – the bright-line property rule may apply if you sell within the 2-year bright-line period.
  • Acquired between 29 March 2018 and 26 March 2021 (inclusive) – the bright-line property rule may apply if you sell within the 5-year bright-line period.
  • Acquired on or after 27 March 2021 – the bright-line property rule may apply if you sell it within the 10-year bright-line period.  

When the bright-line property rule does not apply.

The bright-line property rule does not apply when:

  • The property is your family/main home, and the main home exclusion applies
  • You inherited the property
  • You are the executor or administrator of a deceased estate.

For those of you with family trusts there is a further twist.  A trust may claim the main home exemption but only if the trust owned property is the main home for a beneficiary of the trust and the settlors of the trust do not also personally own a home which the main home exemption has been claimed.  The reason for this is pure and simple.  It is to stop people using their trusts to claim the main home exemption on more than one property, one in a trust and the other in your own name.  Family Trusts also have to comply with all other information required on the tax statements which means that a trust must provide an IRD number on a tax statement signed by the trustees.  

We recommend that all of those with family trusts take immediate action to obtain an IRD number for the trust but do so on the basis that you register the trust as ‘non-active’ with the IRD if the trust will not earn a taxable income and does not therefore need to file tax returns.

The bright-line rule does not replace existing property tax rules.  You might still need to pay tax on property profits even if the bright-line rules do not apply.

Your main home is the property where you live for most of the time or if you have more than one property, the one you have the greatest connection to.  In any case, more than 50% of the property’s area must be used as your main home.  If part of your main home is used for other purposes and that uses more than 50% of the property’s area, then the main home exemption will not apply and you will pay tax on any profit when you sell it.  E.G., if you use 40% of a property as your main home and 60% is rented out as a granny flat, then you cannot use the main home exemption when you sell.

For further exclusions please refer to the IRD Website https://www.ird.govt.nz/pages/campaigns/brightline

Your obligations

If you sell a property that falls under the bright-line rule, then you will need to complete an income tax return and a Property sale information form IR833 at the end of the tax year.  

For advice on hos this may affect you or for assistance with obtaining an IRD number for your trust, please give us a call on (03) 377 4421 or contact us email@ktlaw.co.nz