Purchasing a House? - Buyer Beware

Purchasing a house? Buyer Beware!

A purchaser's right to obtain a Land Information Memorandum Report (LIM) and complete a building inspection on a proposed purchase are fundamental clauses in the Sale and Purchase Agreement.

The purpose of these conditions is to ensure that prospective purchasers have the time to complete due diligence on the property they are considering. As a purchaser, you are likely investing a large up-front deposit on the property and committing to 20 to 30 years of loan repayments. This makes a property purchase one of, if not the highest, value transactions a person will make in their lifetime.

If the investigations as to the suitability of the property are not dealt with correctly, situations may arise post-settlement that may cause years of heartache, stress and financial losses for an unsuspecting purchaser. 

The media is littered with very sad stories about purchasers being "duped" into purchasing substandard housing based on doctored LIM reports and vendor-instigated building inspections. 

What is a LIM Report?

A LIM report is a document provided at a cost by the local council. It will typically include information specific to the property and certain other localised information. You would usually expect to see zoning information, information about rates and/or outstanding rates (if any), general land information, such as resource and building consents, and utility supplies that connect to the land and/or run over the land.

In some instances, LIM reports can also include notations about moisture-related cladding defects in the property and/or toxicology or other health and safety matters affecting the property. Historically as a cost-saving exercise (particularly in a sale by auction scenario) vendors and/or their real estate agents would obtain a copy of the LIM and provide it as part of a disclosure package to prospective purchases. However, LIM reports are only valid for a small window of time from the date issued by council. We have had some instances where clients potentially relied on LIM reports that were over a year old or obtained before an adjacent property was granted consent to subdivide and build apartments or townhouses. In some extreme cases, vendors have "doctored" the LIM reports to remove information about weather tightness, which would concern most prospective purchasers.

In a recent high court hearing, a property purchased on the North Shore in 2015 was the subject of an allegation that the then vendor had removed information from the LIM report detailing weather tightness issues and a need to reclad the property. The purchaser, unfortunately, relied on the LIM report and only found out about the potential weather tightness issues when ordering their own LIM report years later when preparing the property for sale.

Building Reports

A building report allows a purchaser to understand the state of repair of a property. This document should be prepared by a "suitably qualified builder" and usually reports on some of the following key items: moisture testing, foundation, roof and attic space, spouting, drain parts, and the quality of interior and exterior paintwork and cladding. 

The importance of obtaining a building report cannot be understated. 

If unconsented works have been completed or chattels, such as water systems, kitchen appliances, and heating are not working, or the roof is leaking, then a building report should pick up on these issues.

Like the LIM report, a building report should be conducted independently of the vendor. There have been many instances where purchasers depended on a building report provided by the vendor only to find out later that there were subsequent building issues, far more extreme or simply not represented in the vendor-instigated report.

Any property that you purchase is a substantial investment. While spending $1,000 to $2,000 prior to confirming it is the right property for you may seem illogical, the cost of not conducting comprehensive purchase due diligence could be far more considerable in the longer term. 

At Turner Hopkins, we are here to help you through every step of your purchase process. We will always recommend that you obtain thorough building reports and a LIM report directly commissioned from the local council.

It is important to us that our clients enter into a property purchase with the most complete knowledge about the property, and we work to ensure our clients are satisfied that the property is indeed the one for them.

We are here to support you in all your property matters, including sales, purchases and refinances. Contact one of our experts today.