By Ben King, Solicitor, Aspiring Law
Selling smart
In a property market this hot, it could be tempting to decide to ride the wave and speed into listing your home to capitalise on the boom.
We’ve all been well and truly conditioned with the “buyer beware” mantra, and so there’s a pervasive, and rather dangerous, misconception: hold your breath and cross your fingers because once the eager buyer’s signed on the dotted line, any liabilities, problems or faults are no longer your responsibility, or headache. Caveat emptor saves the day, right? Not necessarily.
There are, in fact, some really important pre-sale considerations for a seller to be aware of. There are a multitude of issues that can derail the sales process, and others that can come back to retrospectively bite the seller for years afterwards. First up, smart sellers have a seasoned property lawyer on call from the outset. If you haven’t already got a good solicitor, make a call and find one. They will be able to answer your questions and steer you in the right direction.
Carefully consider how you’re going to sell your property. Will you take the private sale route, or will you appoint a real estate agent? If you take the agency path, make sure you’re familiar with the terms of the agency agreement. For example, is it a “sole agency” or “general agency”? Two of the key aspects here are whether you’ll be able to also appoint other real estate firms, which will be a “general agency”, and how much the commission and marketing costs will be. You’ll need to make sure you factor in this sum to your bottom line.
Preparing a house for sale doesn’t stop at a spring clean, and strategic bread baking to fill the home with inviting aromas on open days. Getting your head around which of your chattels will be included in the deal is important. Generally, chattels are items that can be removed, and aren’t permanently affixed to the land and buildings. For example, a stereo system that has wires through the walls is generally not a fixture.
Be crystal clear
Setting everything out in black and white can help to avoid any possible comeback. Make sure you go through the property, and note down all the chattels which you’ll be keeping, together with those that the buyer will retain. Your agreement can then be worded appropriately to avoid confusion and potential arguments leading up to the settlement day, especially for any items that sit on the fence between a chattel and a fixture.
While you’re at it, it’s a good idea to put the chattels you are leaving behind through their paces. The agreement for sale and purchase includes a warranty that all plant, equipment, systems or devices which provide services or amenities to the property are in reasonable working order on settlement. Think heat pumps and air conditioning units, lawn sprinkler system, cooktop and oven. Any problems that aren’t identified and remedied might just leave it open for the purchaser to claim compensation prior to the settlement date.
And, by the way, warranties don’t stop with chattels, fittings and fixtures. Hopefully, you haven’t gone that extra mile, done a bit of DIY, and overlooked obtaining a building consent. In selling your property, you also provide a warranty that any building works you’ve undertaken are appropriately consented, if a consent was required. If the sale goes through and it transpires you didn’t obtain the appropriate consent, you could face serious repercussions, depending what the work involved and when it was completed.
Take stock
As I urged at the start, get advice early, and certainly before you sign your life away. There are a raft of considerations, some little known and others the result of recent law changes. For example, are you selling within two years of the date you purchased the property? If the answer is anything but a resolute “no”, give your lawyer a call before you make another move.
If you’re not crystal clear on the recently-introduced “bright-line test” for residential property sales and the possibility of having to pay tax, consult your lawyer. If your property doesn’t fall into one of the exemption categories – for example, it’s your main family home – then you could be liable to pay tax on any gain you make on the sale. Generally speaking, the two-year time period starts from the date you were registered on the title, and runs until the date you enter into an agreement to sell that property. So, no, you can’t bypass the tax obligations by signing an agreement and extending the settlement date.
Selling a rental? As well as considering potential tax implications, the law also requires you to treat your tenants fairly. You must give your tenant notice of your intention to sell. Also, if the buyer wants vacant possession, you’ll need to ensure your settlement timeframes allow you to give your tenant notice to move out – typically, this will be 42 days under the Residential Tenancies Act 1986.
Unit title apartments come with their own suite of considerations. One case in point: potential buyers must be provided with a pre-contract disclosure statement before they sign the sale and purchase agreement. If you’re not represented by a real estate agent, it’s imperative you organise this yourself, or ask your lawyer for assistance. Be aware that these mandatory statements do come at a cost to you.
Cover your back
Whatever property you’re selling, the offer process, especially for the uninitiated, can be fast and furious. One of the most fraught areas can be around finding yourself with multiple offers on the table. Make sure you only have one live agreement on the go at any one time. If you have multiple offers, or want to sign a back-up offer or offers, ensure you have the appropriate clauses in your agreement to protect you.
If you’re negotiating with more than one party, or have back up offers, it’s imperative your agreement includes the protections you need. Be sure to talk to your lawyer before you make any final decision, and confirm any prior agreements have been properly cancelled, and that it’s safe for you to be signing a new contract.
As a seller, maximise your outcomes by always going in educated and well advised. No matter how buoyant the market, there’s always scope to be burnt if you don’t do your pre-sale vendor due diligence.
Last updated 18 November 2016