Legal advice for house buying and selling

Press, 30 June 1988, Page 14

Legal advice for house buying and selling

Law Week

This week, the Canterbury District Law Society is running a free phone-in legal information service (phone 650-090 between 10 a.m. and 7 p.m.) each day of Law Week. “The Press” will run an article about an aspect of the law, written by a local lawyer. Today’s article is by LINDSAY NORTH, of Rhodes and Co.

If you never deal with a lawyer at any other time, you will need one when you buy or sell a house. First-home buyers are well advised to visit or call their lawyer before even starting to look seriously for a property to buy. There they can get an overview of the steps that are involved in house transactions, and hear a warning on some of the problems that can arise. The lawyer will offer information about contracts to purchase and sell property, advice about approaching a lending institution with a view to finding out how much finance is likely to be available, and advice on costs that are likely to be involved in the investigation and final transaction. Your lawyer will advise you not to be rushed into signing a contract simply because you think you might miss out on the house — there are usually a lot of houses on the market at any time. Your lawyer will also advise you not to sign a contract unless you are quite sure that you know what it means and that if you have any doubts about the contract, you should speak to your lawyer before you sign.

Most real-estate agents now use a form of Agreement for Sale and Purchase of real estate that has been approved by the Real Estate Institute and the Law Society. Lawyers are very familiar with this contract, and if you want to seek legal advice before signing it, it becomes a simple matter to telephone your lawyer and read out the conditions that have been added to the standard form of the contract. When signing a contract, you should be sure that you understand completely what is meant by the condition, “Subject to finance.” It should more specifically say that the contract is subject to finance arrangements that are satisfactory to the purchaser, or at least be worded so that the purchaser has the final decision on the financial arrangements. You should avoid making your offer subject to the approval of your solicitor. This phrase is dangerous in a contract, because it does not mean what people sometimes want it to mean. They may think that if the solicitor says they have offered the vendor too high a price, or that if

the purchaser somehow changes his mind, that he will be able to get out of the contract. The courts have ruled that it does not mean that at all. These words mean that the purchaser can only get out of the contract if the solicitor objects to the contract on the basis of conveyancing aspects. This would cover, for example, town planning problems such as a road widening designation or impending zone changes. It does not mean that the purchaser can instruct the solicitor not to approve the contract because the purchaser has changed his mind. Another factor to determine at contract stage is that everything you think you are buying with the property is itemised on the contract. This may

include such things as built-in bookshelves and wall units, wall heaters, light fittings and light shades (after all, a light fitting could be said to be just the part to which the bulb is attached — and may not even include the bulb). If it matters, make sure it is spelt out. There are other areas where a lawyer can be helpful. A lawyer can help to ascertain the effect of easements (such as rights of way) on a property. Where a property has multi-use facilities — such as a right of way — the maintenance and other obligations of the various users can be a significant factor. On hill sites, the physical path of a right of way may not be the same as the legal path, and the consequences of this may need to be considered. When a purchaser is

looking at an ownership flat, a lawyer would be able to check the composite title (lease-back) or unit title rules relating to the body corporate, to ensure that they have been properly set up and that there are unlikely to be problems in the future. Do-it-yourself conveyancing is not to be recommended and can cause enormous problems for the unwary do-it-your-selfer as every transaction, no matter how simple it might appear on the surface, has the potential to go wrong. Doing it yourself will be very difficult when you are borrowing money as lending institutions require solicitors’ certificates to ensure that the documentation is all in order before they will pay out the mortgage money. Doing your own conveyancing can lead to problems in synchronising settlements, which can be especially difficult where there are five or six chain transactions orginating from one house sale. If the settlement dates are not carefully co-ordi-nated, they can lead to a purchaser or vendor having a cash problem when the money does not come through at the right time. Where a lawyer is involved in the transaction, he can speak to the lawyers acting for the other parties involved to minimise the chances of settlement not happening when it is supposed to. Often, because of the

close relationship that exists among the legal profession, arrangements can be made to minimise problems if they arise. A lawyer can be helpful in anticipating a problem before it worsens. One example would be where a vendor finds out on settlement day that he does not have enough money to repay his mortgage and cannot offer the purchaser clear title of the property. If both parties had been represented by solicitors throughout the process, the vendor’s solicitor would very likely have anticipated this problem much earlier. If a purchaser is not able to take possession on the agreed date, but does have to move out of his existing home, a lawyer will be helpful in negotiating compensation from the vendor.

A lawyer can also be a helpful negotiator when a contract is collapsing with agreement of both parties but compensation for one still has to be determined. If there are going to be any snags in a house transaction, they are likely to be detected much earlier if a lawyer is involved.

The buying and selling of a house will be the biggest financial transaction in which most people will be . involved. The expenses and losses involved when things go wrong can be substantial. It makes sense, therefore, to employ an expert to protect your interests.