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How to Purchase a Residential Property

February 20th, 2025 -
William Swan
Guides

Table of Contents

Purchasing a residential property is one of the most significant financial decisions most people will make in their lifetime. The process can be complex, requiring careful attention to detail and expert advice to ensure everything is in order. While many buyers may focus on finding the right property, it is essential not to overlook the critical role a lawyer plays in the property transaction process. In this article, we will explore how the property purchase process works in New Zealand and, more importantly, how your lawyer can help ensure a smooth and secure transaction.

1. Pre-Contract Advice and Due Diligence

Before committing to a property purchase, it is crucial to conduct thorough due diligence to confirm that the property is a sound investment. This is where a lawyer’s expertise is invaluable. They can assist you by reviewing the title and providing information on any potential legal issues that may arise.

Your lawyer will:

  • Review the Title: Your lawyer will obtain a copy of the property's title from Land Information New Zealand (LINZ). This document details who owns the property, any existing mortgages, easements, covenants, and encumbrances that may affect your use or enjoyment of the land. They will ensure that there are no unexpected surprises, such as an outstanding mortgage, or restrictions that could impact your plans for the property.

  • Review the Sale and Purchase Agreement: The Sale and Purchase Agreement (SPA) is the legal contract that governs the sale. Your lawyer will carefully review the SPA to ensure that all the terms are fair and favourable, protecting your interests. They will ensure that any conditions related to the property’s purchase, such as finance and inspections, are clearly stated and legally enforceable.

2. Making an Offer and Conditional Agreements

Once you have found the property you wish to purchase and agreed on a price with the seller, your lawyer can assist in drafting the formal offer to purchase. This process typically begins with a negotiation phase, where the terms and conditions are discussed and agreed upon.

  • Negotiating Terms: Your lawyer can help you negotiate the price and other critical terms of the contract. This might include settlement dates, inclusion or exclusion of specific fixtures or chattels, and specific conditions such as the approval of finance or the successful completion of a building inspection.

  • Conditional Agreements: If you are making an offer that is conditional (for example, subject to obtaining finance or a satisfactory building inspection), your lawyer will ensure these conditions are appropriately worded in the SPA. They will also provide you with advice on how long these conditions should be set, ensuring that you are not locked into an agreement prematurely.

3. Pre-Settlement Process

Once the agreement is signed, the next step is to ensure that everything is in place before settlement day. During this stage, your lawyer will manage all the legal aspects of the transaction to ensure a smooth transfer of ownership.

  • Organising the Deposit: Typically, a deposit (usually 10% of the purchase price) is paid at the time of signing the SPA. Your lawyer will ensure that the deposit is handled correctly and is held in trust until the settlement date.

  • Arranging Finance: If you are financing the property with a mortgage, your lawyer will work with your bank or lender to ensure all the legal documentation related to the mortgage is completed.

  • Reviewing the Settlement Statement: Your lawyer will prepare a settlement statement that outlines the total amount due at settlement, including the balance of the purchase price, any adjustments for rates or utilities, and the cost of the legal services provided.

4. Settlement Day

Settlement is the final stage of the property purchase process. On settlement day, the buyer pays the remainder of the purchase price, and ownership of the property is officially transferred from the seller to the buyer.

  • Finalising the Transaction: On the day of settlement, your lawyer will liaise with the seller’s lawyer to ensure all the documents are signed and the money is transferred. They will also ensure that any adjustments to the purchase price (such as rates or rent paid) are calculated correctly.

  • Transferring Ownership: Once the transaction is complete, your lawyer will register the transfer of ownership with LINZ, ensuring that the title of the property is transferred to your name.

5. Post-Settlement Matters

After settlement, your lawyer’s work is not over. There are still a few final tasks to complete.

  • Registering the Mortgage: If you are financing the property with a mortgage, your lawyer will register the mortgage with LINZ, ensuring that your lender’s interest is secured against the property.

  • Providing a Copy of the Title: Your lawyer will provide you with a copy of the updated title showing that you are now the legal owner of the property.

Conclusion

Purchasing a residential property involves numerous steps, and having an experienced lawyer by your side ensures that the process goes smoothly and that your interests are protected. From due diligence and reviewing the Sale and Purchase Agreement to managing the settlement process and beyond, a lawyer plays an integral role in making your property purchase a success. If you are considering buying property in Wellington or elsewhere in New Zealand, make sure you have a trusted legal advisor guiding you every step of the way.