Talk to your lawyer

Consulting a conveyancy lawyer can protect your interests, whether you are buying or selling a property. By VICKI HOLDER.

In a heated market when property is moving fast, it's tempting to rush in and sign a contract without getting it checked out first by a lawyer. All sorts of pitfalls may arise, because decisions are made in haste.

Conveyancing, the transaction of transferring property from one owner to another, appears simple. Some consider it merely a form-filling exercise. But what the client sees is like the tip of an iceberg, says Tim Jones, of Glaister Ennor, a legal firm specialising in property matters.

"A lot of what we do is behind the scenes, dealt with without facing the client. Sometimes the client needs to be there to make a judgement call. When we sit down and go through the exercise with them, they are staggered at the time it takes to make a single transaction," says Jones.

"Even basic conveyancy is tricky. There are traps throughout the whole process. Although some contracts are definitely defective, there's a lot of skill and negotiation even in a standard transaction. Some have huge great holes in them with misleading information for a variety of reasons. The council's information-gathering exercise may have only picked up part of the information needed."

Jones has seen Land Information Memorandum reports (LIMs) that state a property is not in a flood sensitive area on one page and, several pages over, that 'the property has known flooding - please check with an engineer'. "If they hadn't checked it with a lawyer, they would have missed it," says Jones.

In a conveyancy transaction, the lawyer will check any potential problems by doing an on title search and an off title search. The on title search involves checking all aspects of the title, ensuring there are no complications. If, for example, it is a cross-lease or unit title property, a plan must be obtained so the purchaser can verify the plan of the building is identical to the actual building. If the purchaser is not happy that the title reflects this, they can ask their lawyer to put it right.

The off title search considers a variety of information depending on the property and its location. It starts with the information contained in the LIM report held by the council on the property. For the purchaser, this will identify all features such as easements and rights of way, which are important if clients are looking to carry out alterations or subdivide.

If the purchaser is dissatisfied with any aspects of the property discovered in the LIM, the lawyer can insert clauses in the agreement, which request the seller to fix the dissatisfactory aspect or possibly cancel the contract.

The off title search can include analysis of many documents, such as building and engineering reports, local authority reports, council plans, survey plans, geo-technical requirements for seismic conditions, the Hazardous Waste Register and valuations. This research is insurance against disappointment and perhaps substantial additional costs if you have to fix something later.

The lawyer can also explain the terms of the loan, repayment requirements and the terms of the mortgage you will sign, which will be registered against the title of the land.

It's worth noting that when buying a property by auction, the normal vendor warranties about features of the property and the purchaser's right to requisition the title are removed from the agreement. This means purchasers must carry out enquiries before the auction. Getting a lawyer to check titles and reports pre-auction can save a lot of hassles.

Although the standard agreement states the contract is subject to the solicitor's approval for 10 working days, approval clauses may not protect purchasers. Lawyers can only review the form and content of the agreement. "For example," says Jones, "I can't disapprove the contract merely because I know it's a leaky building and the client was not told. I can only say the clauses are not beneficial. It's better to talk to a lawyer before signing a contract."

The conveyancy lawyer's role is about minimising risks. If those risks are too great, then lawyers can help resolve problems before you commit to a legal document.

Conveyancing in New Zealand is simplified by the act that created the LIM report structure. It conveniently puts a lot of information in one place. The process is also made easier by the standard sales and purchase agreement developed by the District Law Society and the Real Estate Institute of New Zealand (REINZ). Lawyers are familiar with one basic document. "Property transactions would be a lot more complicated if you had a different one each time," says Jones, who notes that it's common for developers to produce their own form, which makes it even more important for those buying apartments or townhouses to get a legal appraisal first. Lawyers provide a whole list of things they require as pre-purchase checks.

While you can do your own conveyancing, it's hard work as the average person doesn't have access to the sales and purchase agreement or standard transfer documents. "Nor do most people know how to analyse a LIM," says Jones. "It's not impossible, but most Kiwis like the security of legal protection and getting a lawyer to do it right."

Jones says even if buyers and sellers are in a hurry, it's easy to fax an agreement through to give protection. "Lawyers should be able to provide a fast turnaround to help a sale proceed," he says.