Need help understanding commonly used terms in property transactions?
Below is a list of the terms you are likely to come across when using our service – whether you are buying, selling or refinancing a property:
- Agreement (also called the Agreement for Sale and Purchase)
- Back-up offer
- Bright Line Test
- Conditional agreement
- Cross-lease (title)
- EQC Claim
- Freehold (title)
- General authority
- Kiwisaver (First Home Saving withdrawal)
- Kāinga Ora (First Home Grant)
- Kāinga Ora (First Home Loan)
- Kāinga Ora (First Home Partner)
- Land covenants
- Leasehold (title)
- LIM (Land Information Memorandum)
- Multiple listing
- No Move No Fee
- Private sale
- Promotional Coupon
- Property Sharing Agreement (Prenuptial Agreement)
- Residential land withholding tax (RLWT)
- Settlement date
- SMS Updates
- Sole agency
- Title (Certificate of Title)
- Unconditional agreement
- Unit title
- Web Tracker (Honour Law)
AGREEMENT (ALSO CALLED THE AGREEMENT FOR SALE AND PURCHASE)
This is the written contract for the sale and purchase of the property between the vendor (seller) and the purchaser (buyer). Never sign this without discussing it with your lawyer.
This is a method of selling the property where the vendor, either privately or through the real estate agent invites all interested purchasers to meet on one specific day to bid to purchase the property in a public auction process. Usually the vendor will set a reserve price below which they will refuse to sell the property, but if the top bid is over that reserve, the vendor will sell. Auctions can become very pressured for both the vendor and purchaser. The vendor often pays advertising costs – which can be substantial. Auctions should be treated with caution.
A second offer accepted by the vendor, who already has an existing contract that is conditional. Dates and times need to be carefully adhered to. These arrangements can create pressure for both vendor and purchaser.
BRIGHT LINE TEST
As part of Budget 2015, the Government announced that it would introduce a “bright-line” test for the sale of residential property.
The test will require income tax to be paid on any gains from the sale of residential property that is bought and sold within two years, with the exception of the main family home.
You can check from our Bright Line Test tool if you will be required to pay income tax on any gains from this property disposal.
Main home – means the one dwelling that is mainly used as a residence; and with which the person has the greatest connection (if they have more than one home).
Greatest connection – consider how much time the person spends at the dwelling, whether their personal property is in the dwelling, where their social ties are strongest, and whether the person has employment, business interests and economic ties to the area where the dwelling is located.
Meaning of offshore person
For an individual:
- A New Zealand citizen who is outside New Zealand and has not been in New Zealand within the last three years.
- A person who holds a resident class visa granted under the Immigration Act 2009, and who is outside New Zealand and has not been in New Zealand within the last 12 months.
- A person who is not a New Zealand citizen and who does not hold a resident residence class visa granted under the Immigration Act 2009.
For a body corporate or an unincorporated body of persons, including a trust or a unit trust, a person who would be an overseas person under section 7(2)(b) to (e) of the Overseas Investment Act 2005, treating references to an overseas person or persons in that section as including a person or persons described in the previous paragraph.
These are the movable objects found in a house or elsewhere on the property that are included in the sale. Most often they include the stove, television aerial, carpets, blinds, curtains, drapes and light fittings. However, they may also include dishwashers, refrigerators, heaters and so on. It is important that these are specifically listed in the Agreement for Sale and Purchase.
A flat fee or percentage of the sale price paid by the seller of the property to the real estate agent responsible for arranging the sale.
This is a legally binding agreement but it is subject to certain conditions being satisfied. These might relate to: the purchaser arranging suitable finance to complete the purchase, receipt of a satisfactory builder’s report or valuer’s report; receipt of a satisfactory Land Information Memorandum (LIM); or the purchaser’s solicitor approving the title to the property. They may also require the seller to do something by a certain date. Once the conditions are satisfied the agreement becomes unconditional. Whether you are a buyer or seller, it is important to get legal advice to ensure that the conditions are expressed clearly in the agreement.
This type of ownership is common where there is more than one property (often called flats) on a single title. The owners of each property co-own the land and each leases their own property, which together form the cross-lease title.
Part of the purchase price (usually 10%) paid by the purchaser when the agreement is signed or on confirmation or conditions confirmed.
A disbursement is a fee which we have to pay someone else on your behalf.
An example is the fee we pay to the Land Information New Zealand.
The Earthquake Commission Claim is an insurance claim (EQCover) for residential properties in New Zealand which are damaged by a natural disaster. The Earthquake Commission (EQC) provides natural disaster insurance for residential property, administers the Natural Disaster Fund, and funds research and education on natural disasters and ways of reducing their impact.
This is the amount of the property that the purchaser actually owns – rather than owes! That is, it is the value less any amount owed. Initially, it will be the amount of “cash” the purchaser contributes towards the purchase price for the property – not counting any amount borrowed against the property (mortgage). Over time the amount of equity increases as the value of the property increases, provided the mortgage isn’t increased. In shared property arrangements if co-owners contribute in unequal shares to the property, the amount of equity each has provided should be recorded. Co-owners should seek legal advice on these issues, in the light of the potential impacts of the Property (Relationships) Act.
This form of title means that you own the land and the buildings on the property, with few restrictions (although no buildings are shown on the title documents). It is the most common form of title in New Zealand.
With this authority, the vendor gives several different real estate agents the right to try to sell the property.
This tax – not usually applicable in the case of residential properties – is important to consider in the case of lifestyle blocks, farms, commercial and investment properties.
A person who is signing a personal guarantee will be guaranteeing the borrowings of another person or entity. Normally the guarantor should bear in mind that:
- the Guarantee is in respect of all the obligations and liabilities from time to time of the Borrower to the Lender, including future liabilities;
- where more than one guarantor is involved the liability between guarantors will usually be jointly and severally liable as a principal debtor under the Guarantee and the Lender may at its discretion enforce the Guarantee without enforcing any other guarantee or security that the Lender may hold from time to time;
- the terms and provisions that relate to the financial accommodation provided by the Lender to the Borrower may change from time to time and the Guarantee shall not be released by such changes.
The Lender sometimes requires the guarantee documents to be signed only in front of a qualified solicitor who can certify and witness the execution. For this reason, if the guarantors cannot visit our office for signing the guarantee documents, the guarantors will have to appoint an independent solicitor for completing full execution of the guarantee documents.
This is the sum charged by the lender to the borrower over the term of the loan. It will be expressed as a percentage of the loan and collected at intervals such as fortnightly, monthly, quarterly or sometimes six monthly from the borrower.
KiwiSaver is a savings initiative to help set you up for your retirement. Most members will build up their savings through regular contributions from their pay. You can get more detailed information from the government website https://www.ird.govt.nz/kiwisaver
KIWISAVER (FIRST HOME WITHDRAWAL)
If you have been a member of KiwiSaver for at least three years, you may be able to withdraw all, or part, of your savings to put towards buying your first home. Please click the following link for more detailed information. https://kaingaora.govt.nz/home-ownership/kiwisaver-first-home-withdrawal
Eligible members can withdraw their KiwiSaver savings (including tax credits). However at least $1,000 must remain in their KiwiSaver account.
You must intend to live in the property. It cannot be used to buy an investment property.
If you are a member of a complying fund, you may be able to withdraw your savings to help you buy your first home. Not all complying funds permit withdrawals for this purpose, so you will need to discuss this with the trustees of your complying fund.
KĀINGA ORA (FIRST HOME GRANT)
If you’re a first-time home buyer, or a previous home owner and you’ve been making regular KiwiSaver contributions for 3 – 5 years, you may be eligible for a First Home Grant of up to $10,000. You apply for the grant through Kāinga Ora – Homes and Communities.
You can apply for either:
- a pre-approval before you start looking for a property to buy – this gives you certainty around eligibility and how much you may qualify for or;
- a grant approval if you’ve found a property and have a signed sale and purchase agreement.
If you buy an existing home
- If you buy an existing home, you can get $1,000 for each of the 3 (or more) years you’ve paid into the scheme. The most you can get is $5,000 for 5 or more years.
If you buy a new home or land
- If you buy a new home or land to build on, you can get $2,000 for each of the 3 (or more) years you’ve paid into the scheme. The most you can get is $10,000 for 5 or more years.
Kāinga Ora (First Home Loan)
As well as having a 5% deposit, you need to meet certain criteria including an income cap and regional house price cap. You will also need to meet the speciﬁc lending criteria of the participating lender you choose.
The criteria are listed below along with an easy guide to check at a glance if you are eligible to apply.
- Income cap – You can have a maximum yearly income of up to $95,000 (before tax) for 1 person. Or a combined maximum yearly income of $150,000 (before tax) for 2 or more people.
- Minimum deposit – You will need a minimum 5% of the purchase price of the house you are wishing to buy.
- House price cap – The price of the house you are buying with a First Home Loan must be less than the regional house price cap.
- First home buyer – Or a previous home owner, in a similar financial position to a typical first home buyer.
You can get more details at Kāinga Ora Website and the link is as follows:
Kāinga Ora (First Home Partner)
If your deposit and home loan aren’t enough to buy a home, First Home Partner could help to bridge the gap. You apply for First Home Partner through Kāinga Ora.
First Home Partner is a shared ownership scheme to help aspiring first home buyers whose deposit and home loan aren’t quite enough to buy a home that meets their needs, purchase a home together with Kāinga Ora.
If this sounds like you, First Home Partner may be able to help you get your foot on the property ladder.
Many subdivisions now have a covenant or obligation registered on the title limiting the type of structure (including fences) that the owner can build or limit certain activities. These must be thoroughly checked.
This is where someone other than the occupier of the property owns the land and charges rent for a specific term to the lessee. Sometimes buildings on the land belong to the lessee, subject to the terms of the lease. The lessee may have an option to purchase the freehold, giving them full unrestricted title to the land in addition to the buildings. You need to know if you are buying a freehold, leasehold or other form of property ownership as this will determine what you can do with the property and will affect the amount you pay.
LIM (LAND INFORMATION MEMORANDUM)
A LIM (Land Information Memorandum) is a report on the property provided by the local authority from their records. It may give information on many matters including the zoning of the property, whether the proper building consents have been obtained and fulfilled for additions or alterations to the buildings, payment of rates or public works in the area. This information varies from local authority to local authority, depending on the extent of its records. Failure to check some matters could have dire consequences. For instance, a LIM will show if a fire burner has been installed legally. If it has not this could invalidate insurance on the property in the case of fire.
This is the security the borrower gives the lender and which is registered against the title to the property being purchased. Except in rare cases the property cannot be sold without the loan being repaid and the mortgage removed from the title (discharged). If the borrower fails to meet obligations under the loan, the lender can, after giving notice to the borrower and following legal procedures, take steps to sell the mortgaged property to recover the loan. The obligations of parties to a mortgage and their on-going liabilities, need to be fully understood.
This is a process of selling in which contributing real estate agencies list the property with the Multiple Listing Bureau (MLB) to give it as wide a coverage as possible.
NO MOVE NO FEE
Moving home can sometimes be stressful. We appreciate it would be frustrating to pay for a service for which you had no benefit. So Convey Law offers NO MOVE NO FEE guarantee for any simple conveyancing matter to ensure that we will not charge legal fees in relation to your matter if your move falls through or you cancel the contract for any reason prior to the agreement become unconditional. You will only be liable to pay for the disbursements which have already been incurred for such as LIM report fees, LINZ search fees, Office charges and ADLS document fees.
This is the date on which you take physical possession of the property.
This is the total amount of the loan borrowed.
This is where a homeowner sells the property without using a real estate agent. With a private sale, it is especially important to get it right by seeing your lawyer first.
This is our promotional offer which is only valid for Convey Law client. One promotional offer per client. This promotional offer can only be used once, may be forwarded to another Convey Law Client, but cannot be sold or bartered. Promotional credit will be applied when the Client completes to fill in our Instruction Details Form. All Coupons are subject to the Convey Law terms of engagement. Void where prohibited or restricted by law. This offer may be revoked at any time for any reason by Convey Law prior to entering the voucher code by the Client.
PROPERTY SHARING AGREEMENT (PRENUPTIAL AGREEMENT)
In such case where the co-owners are in a relationship, they may required to enter into s21 Agreement which enable parties to a relationship to “contract out” of the provisions of the Property (Relationships) Act 1976. This Property Sharing Agreement can set out what property is to be separate property or relationship property and determine the share of the relationship property which each party will receive when the relationship ends. If the agreement has been properly entered into, then a court will only overturn the agreement if it would create a serious injustice.
However, such agreements are only valid and binding if:
- They are in writing and signed by both parties;
- Each party has had independent legal advice before signing; and
- The signature of each party is to be witnessed by a lawyer who certifies that the legal effect of the agreement was explained to them.
If you are in Auckland, any of Convey Law property lawyers will be able to attend this matter for you. However if you are outside of Auckland you may be required have other lawyer who can be the witness of your signature and explain the legal effect of the agreement. Our property sharing agreement service in our conveyancing quotes system is only limited to preparation of the agreement.
This is the person buying the property.
RESIDENTIAL LAND WITHHOLDING TAX
Residential land withholding tax is a tax deducted from some residential property sales. It’s paid by offshore people who sell their residential property. Withholders deduct and pay the tax to us for the offshore people.
This is the date on which you pay for the property. Usually it is the same date as the date you take possession but that is not always the case.
This is a process of selling whereby the seller gives one real estate agency the sole right to sell the property. It is advisable that this should be for a limited specified time only as it does restrict the exposure the property has to the market. Be aware that if you sign a sole agency agreement with one agent you can be liable to pay the agent a commission even if you, or another agent, introduce the buyer.
SMS Stands for Short Messaging Service. Online Conveyancing is now able to offer this as part of our conveyancing service. If you wish to use this service we will send a text message to your mobile phone to confirm each key stage of the conveyancing process.
This is a process of selling either privately or through a real estate agent where the vendor invites purchasers to submit purchase prices in writing by a set date. The tenders are opened after that date and the vendor selects the tender that suits them best. This may not be the highest price as it can depend on a variety of factors including the price, the settlement date and any conditions the purchaser is seeking. The vendor is not obliged to accept any tender.
This is the period of time over which the loan is to be repaid. The longer the term, the more interest the borrower will pay overall.
TITLE (CERTIFICATE OF TITLE)
The Certificate of Title is the document that describes the property and gives legal right of ownership to the property. It also has other important information about your rights and other people’s legal interests and rights in your land for such as easements, mortgages and covenants. In New Zealand, there are four main categories in relation to land:
- Freehold (types are: Fee Simple, Life Estate or Stratum estate)
- Leasehold (this also can be a stratum estate in Leasehold)
- Unit Title or Cross Lease (the ownership flat situation)
- Company lease or license (Note: Licence is not a title, but a right to enter land)
A transfer is the legal document used for the conveyance of any land or estate or interest in land. Under the Land Transfer Act 1952, this form of transfer is defined as “transfer instrument”.
This form of agreement is not dependent on any conditions. You need to ensure that you have the full purchase price arranged and have carried out your checks on the property before signing the agreement. You should never sign an agreement, conditional or unconditional, without taking advice from your lawyer.
A form of ownership of apartments and units where each owner has freehold title to his/her individual unit and any garage/parking space or similar attached to it, as set out on a unit plan. Owners of units have common legal areas and share duties for any common property, such as driveways. Buyers should be aware of their on-going obligations to the body corporate and rules that limit what can and can’t be done to the property.
Your local authority uses a valuation for rating purposes (previously the Government Valuation). This provides a guide only to the market value of the property. A private valuation, carried out by a professional valuer, will reflect the market conditions at the date of valuation. Quotable Value New Zealand will also carry out a market valuation.
This is the person selling the property. The vendor pays the commission to the real estate agent who arranges the sale of the property.
WEB TRACKER (Honour.law)
By using your personal Web Tracker (Honour.law) you can follow the progress of your conveyancing over the web, 24 hours a day, 7 days a week. The data is updated regularly, as soon as a new stage is reached in your case. Honour.law also gives you access to useful downloads to assist with your move.
No information on this website shall be construed as legal advice and information is offered for information purposes only. You should always seek advice from an appropriately qualified solicitor on any specific legal enquiry. Calls to or from our legal helpline may be recorded for training and monitoring purposes. External links are provided for your convenience, but they are beyond the control of Convey Law and no representation is made as to their content. Use or reliance on any external links and the content thereon provided is at your own risk.