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Read this before you buy your first property

Wednesday, May 23, 2018

Buying your first ever property, be it a home or a rental, is as exciting as it is intimidating. Chances are this is the biggest financial commitment you've ever had to make. Feeling anxious is part of the process but that doesn't mean your nerves should get to you. Before you dive into the world of property, familiarise yourself with these commonly used terms courtesy of our good friends at Duncan King Law will give you a good head start: 

Agreement: The written contract for the sale and purchase of a property. Its full title is “Agreement for Sale and Purchase”. The Agreement is a binding document: once signed by are bound by its conditions.
Auction Potential buyers bid against each other to buy a property at a public sale, Auction sales are always unconditional and usually a 10% deposit is required on the fall of the hammer.
Body Corporate Used in relation to apartment blocks, the body corporate is the owners’ group that supervises the building maintenance, collects and pays the insurance premiums, runs the block, supervises the use of common areas etc
Caveat A warning notice registered against the title to the land that another party may have an interest or right on that property will prevent title to the land being transferred to anyone else.
Caveat Emptor A Latin phrase meaning ‘Let the Buyer Beware’.
Certificate of Title An electronic document showing legal ownership of a block of land or an interest in land. Also known as a ‘CT’ or simply ‘title’.
Chattel An item of moveable property, such as carpets, curtains, stove, etc which are included in the sale price of a property. Chattels to be included in the house sale must be listed individually in the Agreement. A property valuation is usually made without taking the value of the chattels into account.
CCC (Code Compliance Certificate) Issued by a local authority building officer or other official, stating the building work complies with the provisions in the Building Act and the building permit issued for the work.
Conditional/Unconditional The Agreement allows for both ‘conditional’ and ‘unconditional’ contracts. An unconditional agreement is not bound by any conditions such as finance approval. LIM Report, etc. A conditional contract has conditions attached to it, such as finance being confirmed.
Contract Also known, in this context, as “the Agreement”. A contract is a binding and enforceable agreement between two or more parties. See ‘Agreement’.
Conveyancing In this context, the work carried out by lawyers to transfer property from one person or entity to another.
Covenant An agreement to abide by a particular condition, for example, an undertaking not to fence the front portion of a plot of land. This is registered on the title to the land.
Cross-lease Where a number of people share in the ownership of a piece of land and the houses built on the land are leased from the other land owners.
Deposit A proportion of the purchase price (usually 5-10%) is paid by the buyer when either the Agreement is signed or the Agreement conditions are met.
Disbursements Disbursements are out-of-pocket expenses (such as title search and registration fees) incurred by a lawyer, on a client’s behalf, and reimbursed to the lawyer by the client.
Discharge When a mortgage is discharged, it is repaid in full and formally removed from the title (hence ‘clear’ title).
Easement A right over the property of another, such as a drainage easement over a neighbouring property, or a right-of-way.
E-dealing The term given to electronic land registration in New Zealand. Since 2009 all land registrations have been carried out electronically.
Encroachment An unauthorised extension over a boundary of land, for example, by building on the property of a neighbour.
Equity The amount of the property value that the owner actually owns outright, rather than owes to a lender. For example, a property may be worth $500,000; the mortgage owed is $150.000; therefore the owner’s equity is $350.000.
Fee Simple Title to a property where there are no restrictions in the manner in which it can be held, kept or inherited.
Fixture and Fittings A fixture is an item that cannot be removed from the land or building without damage, such as a built-in bookcase. A fitting is an tern that can be removed from a property without causing damage, such as lampshades.
Freehold Usually refers to land on which there is no mortgage or other debt.
GV The abbreviation for ‘Government Valuation’, now replaced with ‘Rating Valuation’.
Joint Tenancy Two or more people own the property. On the death of one of the owners, that person’s share automatically passes to the surviving owner/s.
Landonline Website providing property professionals with secure access to New Zealand’s titles register. It is maintained by Land Information New Zealand (LINZ) –www.landoniine.govt.nz
Leasehold Land which is rented (or leased) from an owner.
Licence to occupy The occupier of a property does not actually own the property, although has the right to occupy it by signing a licence. Frequently used in retirement homes.
Lim Report A Land Information Memorandum Report is issued by a local authority giving details about the property such as rates owing, consents and drains. The council will release a property’s LIM Report on payment of a fee which varies from district to district. A LIM Report s used for a property with an existing building.
LINZ Land Information New Zealand (LINZ) is a government department responsible for land titles, geodetic and cadastral survey systems, topographic information, hydrographic information, managing Crown property and a variety of other functions. Ail titles to land are registered at LI NZ.
Mortgage A charge over the property of another given as security for a loan; usually required by a lender as security for a loan. ‘Mortgage’ is the commonly used term for a home loan, There are various types of mortgages: table, reducing or interest-only. The mortgage instrument will be registered on the title to the land.
Mortgagee The lender taking a mortgage.
Mortgagor The borrower giving the mortgage.
Nominee The person nominated by a buyer to complete the purchase and buy the property. Under the Agreement form currently used, the buyer named is personally liable to complete the contract.
Possession Date The date on which the buyer physically takes possession of the property. The possession date can be different from the settlement date.
Purchaser Buyer.
Rating Valuation (RV) The new name for the old ‘Government Valuation’ issued by Quotable Value New Zealand or a similar agency.
Right-of-way Access to one property over another property. The right-of-way will be recorded on the title of both properties often in an easement See ‘Easement’.
Settlement Date The date on which a property is fully paid for. It is usually also the date of possession, but not necessarily so.
Tenants in Common A form of land ownership in which several owners have undivided possession of the Land so that none of them is entitled to exclusive possession of any part of the land. On the death of one of the owners, that person’s share passes according to their Will. If there is no Will, the property is disposed of according to the rules of intestacy.
Tender Prospective buyers make written bids, however the seller is not required to accept any of the bids. In an ‘open tender’ the bids are opened when received - there is no deadline. A ‘closed tender’ has a due date and none of the bids are opened until the specified date and time. Sometimes the bids in a closed tender are called ‘sealed bids’.
Tenure The manner in which property is held, for example, leasehold or fee simple.
Term The period over which a loan is to be repaid to the lender or the length of time of a lease.
Unconditional An offer made on a property with no conditions, or when all the conditions have been met in an Agreement the property goes ‘unconditional’. Auction sales are made on an unconditional basis.
Unit Title Where apartments or flats are individually owned as a unit title, but common areas (driveways etc) are owned and administered by the body corporate.
Vendor Seller.

This glossary is intended as general information only. We recommend that you seek appropriate legal advice and guidance to achieve a successful purchase.

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Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

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Tim Duffett, Plan A Investments Limited