December. I know. Crazy busy, flat stick, zilch-time-for-educational-reading-type-hectic. So, for those who can only manage a paragraph or two, I’ll cut right to the chase and give you this column’s key takeaways.
Here goes. If you’ve bought or sold property before, and are planning to again, be prepared for a different landscape – including new rules, considerations, fishhooks and timelines, even terminology. Whether you’ve bought and sold one home, or 101, your next transaction will play out differently in some way shape or form.
And ... regardless if you’re buying or selling, please do call your property lawyer BEFORE anything else. That’s more important than ever. For some of these changes, you need advance warning, understanding and prep time. Scheduling a catch-up with your legal adviser once you’re about to, or – cue, sharp intake of breath – have already signed a contract, is leaving it way, way too late, and exposes you to all sorts of avoidable woes.
There, done. If you’re under the pump, but you’ve managed to digest the previous two paragraphs, my last Hard Case for 2018 has achieved its mission. So, for those too frenetic to read on, Merry Christmas, have an amazing New Year, and a fab holiday season all round. Just don’t forget: if you’re trading property over the summer, a lot has changed: consult your lawyer – preferably right at the outset, and certainly before you sign anything.
But, wait, there’s more ...
... for those who have a few spare moments. Anyone who’s followed the changes in property law – especially since 2015 – could be forgiven for developing a case of whiplash. If anything, they’ve come even thicker, and faster, this year. In amongst the finance, the easements, building reports and LIMs, nowadays there’s something far more basic that can stop any transaction right in its tracks: admin and compliance.
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 – or “AML”, as it’s more commonly known – is part of a worldwide initiative to crack down on illegal activities, including money laundering and terrorism. Nice, law-abiding citizens wonder what on earth such a piece of ominous-sounding legislation could possibly have to do with their plans to buy a three-bedroom home in Albert Town. The looks on many of our long-standing clients’ faces when we ask them to provide documentation to prove who they are is meme-worthy. We get it. The reality is, though, we must have that proof on file for everyone, no matter how well we know them – and, in most cases, the law forbids us from even starting work until we do. Banks, also, are required to capture the same information, as will real estate agents come January. So, be sure to provide whatever your lawyer requests as soon as possible, so they can get cracking.
Foreign buyer laws
One of the biggest property stories of this year has, of course, been the introduction of new laws around who can buy what property in New Zealand, and under what circumstances. If you’re a foreign national, my blanket advice is to touch base with a property lawyer before you even start looking to check your status.
What hasn’t been appreciated is that these new laws affect everyone – not just overseas people – by virtue of the new Residential Land Statement that must be completed as part of every transaction. There have already been cases where sales have come to grief because the required Residential Land Statement, which confirms whether the potential buyer qualifies to buy the property under the new laws, has not been completed until after a sales and purchase agreement has been signed. Where it later transpires the buyer is considered an overseas person, it can lose them their deposit and other costs, but it’s also hitting vendors through lost opportunity and wasted fees. Key message: whichever side of the sale’s fence you’re sitting on, ensure a Residential Land Statement is completed BEFORE a sale and purchase agreement – conditional or not – is signed.
Forewarned is forearmed
Most are across the fact that property tax now applies in New Zealand – but many don’t understand how broadly, and that the rules have changed along the way. Again, another reason to seek early advice, before you commit to something that unexpectedly hits you in pocket. Originally, tax applied on all property traded within two years – with a few exemptions, including the family home, or property that comes as part of a relationship property settlement or inheritance. What changed earlier this year is the threshold – it’s now non-exempt property traded within five years, not two. When the clock starts ticking can also vary, depending on the transaction – so get your lawyer’s advice on what applies in your case. Another fact that’s not widely understood is that the family home exemption is not absolute – you only get to trade twice within a five-year period without incurring tax.
We’ve also just welcomed the Land Transfer Act 2017. It’s a refresh, rather than overhaul, of its predecessor, the 1952 Act. While it brings with it some new legal technicalities, what most people who have traded property before are most likely to notice is modernised, more user-friendly terminology and forms.
And, remember, the slew of recent changes sit alongside the numerous complexities and variables that already underpin property law. The problem we’re seeing is people expecting everything’s like it was whenever they last bought or sold. It’s seriously not. Whether you’re buying or selling, the difference between avoiding the pitfalls, and careering headlong into one, is likely checking the lay of the land with your lawyer before you do anything else. Forewarned really is forearmed.
So, that’s Hard Case for 2018 – I’ll see you again in early 2019. Until then, from all of us here at Aspiring Law, we wish you and yours a very happy, safe holiday season.
Janice Hughes is a Director of Aspiring Law. If you have questions or feedback about this article, please contact Janice on 03 443 0900, or email firstname.lastname@example.org.