How to ensure that one of life’s most important decisions does not turn into a disaster

Jack and Charlotte were desperate to move out of their rented house and own a slice of paradise all of their own.

After a long period of time trawling through the papers and visiting open homes, they found the perfect house for them. It had a nice big yard with plenty of room for wee Oliver and Harper to run (and crawl) around in and an enclosed deck catching the sun which would be perfect for BBQs. There was something in the advertising package about a ‘cross lease title’ but it looked great!

They hastened to submit an offer.

They did so without seeing a lawyer first. Their offer was accepted and they were thrilled, although they made an offer which stretched their cash limit.

On assessing their financial position, the bank required Charlotte’s parents to guarantee the loan. Charlotte’s parents were a little hesitant to do this because they were looking at retiring soon, however they did so, because, well, they wanted to see their little girl into her first home. Anyway, it was just a bit of paperwork.

Settlement went through and initially everything went swimmingly for Jack and Charlotte.

Some months later Charlotte noticed that when it rained, one of the walls in Harper’s room appeared to become progressively damper and the cold air was causing her asthma to flare up, leading to many uncomfortable nights for the whole family and deterioration in Harper’s health.

The deck, after closer inspection, wasn’t finished very well. Oliver had injured himself many times on it by catching his feet on splinters and nails. Jack, being pretty handy, was in the process of ripping the deck up and extending it when the neighbour had popped his head over the fence and told him that he couldn’t.

To make matters worse, Charlotte’s company had undergone a restructuring and her role had been made redundant. Without two incomes, the young couple was struggling to meet their fortnightly outgoings.

They had missed a couple of mortgage repayments and Charlotte’s father told her that they had been contacted by the bank and had been warned to cover those repayments. Charlotte’s father was not happy at all and the stress of the whole situation was beginning to take its toll on Jack and Charlotte’s relationship.

What a mess!

Would this situation occur in North Otago’s property market? Probably not, because the many helpful real estate agents in town would have referred Jack and Charlotte to their lawyer in order to obtain advice which would include:

  • To obtain a pre-approval for finance from their bank, and not to extend an offer above that limit
  • To implement mortgage repayment or income protection insurance, in the event that one or both of them can no longer work or is out of work
  • That a cross lease title is very different from a fee simple or freehold title and contains restrictions around what you can and can’t do to the exterior of the property, and that the title plan must accurately match the dimensions of the house
  • Advice on the appropriate wording of a number of conditions to be inserted into the offer in order to protect their interests, such as obtaining a satisfactory builder’s report and weathertightness assessment on the home; their lawyer’s approval of title to the property; obtaining a satisfactory LIM, electrical or plumbing report and a finance provision allowing them to renegotiate the purchase price
  • That Charlotte’s parents must obtain independent legal advice before committing to guarantee Jack and Charlotte’s loan

All of which would have helped Jack and Charlotte arrive at the decision that, in fact, this wasn’t quite the home of their dreams after all and they would be much better off continuing to look around, and crucially, seeing their lawyer BEFORE making an offer for purchase.

With the information above, Jack and Charlotte will now be in a position to review all of the important aspects of their next intended purchase. They now have the confidence to make a sound, robust decision taking into account all relevant legal, financial, structural, regulatory and lifestyle issues.