Common Property Terms
There's plenty of jargon when it comes to buying and selling property! Here's some common property terms you'll likely come across:
A & I Form (Client Authority and Instruction)
The authority the lawyer will ask you to sign to transfer the property and to register any interest electronically against your title. The lawyer will need to sight your photo identification and take a copy of that to attach to the form.
A group to which all apartment or flats owners of a unit title property automatically belong. A common example of a unit title is an apartment block but body corporates are used in other situations such as a managed complex. The body corporate is responsible for the management of the property including maintenance and the insurance of the building. A secretary or body corporate committee normally manages the Body Corporate and an annual levy is payable by all owners to the body corporate to cover its expenses.
Body Corporate Levy
An annual levy often payable by instalments during the year, payable to the body corporate, to cover the costs incurred by the body corporate in managing the property levies that do not include local council rates.
Body Corporate Rules
The rules that the unit owners have to comply with. The rules could include restrictions such as whether you are permitted to have pets. You should always review these rules before buying property to ensure you are happy with them.
Cash Out Clause (Escape Clause)
A clause in a conditional contract that allows the seller to continue to market the property and receive offers. If another offer is received, the seller can give the first buyer a specified number of days to confirm the contract. If not confirmed within that time, the contract can be cancelled.
Record of Title
The legal document that records the owner of the property, the legal description of the land and its area and any other interests in the land such as mortgages, land covenants, fencing covenants.
The items that will remain in the property when sold, usually the light fittings, fixed floor coverings, drapes, stove. If there are additional items included in the sale they must be recorded in the contract.
A lawyer acting for the seller must be in a position to give clear title to the buyer on settlement. This means that any items noted on the title that are specific to the seller, for example, mortgages, caveats, statutory land charges, must be removed.
An agreement for sale and purchase (contract) is commonly signed with conditions that need to be satisfied within a specified time. The most common conditions include the buyer obtaining satisfactory finance, arranging a builders report and/or valuation report, or an unconditional contract for the sale of their current property.
Company Share Flat
A form of ownership where you own shares in a flat owning company. The company owns the land and buildings. Ownership of the shares entitles you to occupy the flat (and garage or carport, if any). The owner must also pay a levy towards the running costs of the company. Your rights and obligations are contained in an occupation licence or lease.
This is sometimes called a land covenant or restrictive covenant. Covenants are binding on subsequent owners and may restrict how you can use the land or what you can build on it. Typically, developers who want to control the use of land in a subdivision impose covenants and the quality of houses erected on a section in a subdivision.
A type of ownership of a unit on what is known as a cross lease title. The buyer is purchasing a share in land in common with other unit owner/s plus the leasehold title to a specific unit for a period of 999 years from the date of the lease. The buyer has exclusive occupation of the unit and the area of land allocated to it, but with joint responsibility with other unit owners for any common areas.
This is a process very similar to a tender where there is a set period of time for buyers to submit their offers on a property. You can make your subject to any conditions you may wish to include before you are committed to the purchase if you are successful. A deadline sale may allow for the seller to take an offer before the deadline date.
The initial payment you make in part payment of the purchase price. This is paid either when the offer is accepted by the seller or when all the conditions have been confirmed. The amount of the deposit is usually between 5% - 10% of the total purchase price, but is negotiable between the buyer and seller. If a real estate agent is involved in the transaction, the deposit is usually paid to the real estate firm. This should be seen as distinct from the way the bank uses the term deposit - which is the amount of money you are putting towards your purchase that isn't the loan you are getting from the bank.
These are additional costs that your lawyer incurs on your behalf, such as search and registration fees for the title.
Discharge of Mortgage
When a property is sold, the mortgage must be removed to give the buyer clear title. Usually this will require the seller to repay the loan to the lender and in return the lender will provide the seller with a discharge of its mortgage. A mortgage is not automatically discharged when a loan is repaid but will remain in place until a discharge is requested.
A real estate agent is required by law to hold a deposit for 10 working days from receipt. Both the seller and buyer can waive this requirement if they agree to an early release of the deposit funds. The seller and buyer or their lawyers sign an early release authority. This authorises the real estate firm to release the deposit prior to the expiry of the 10 working days.
An entry on a Certificate of Title showing the land has certain rights over other adjoining land or is subject to certain rights in favour of adjoining land. This could be a right-of-way, right to the supply of water, electricity or other services. There can also be easements in favour of local Councils or supply authorities providing for the laying of pipelines or cables over the land for council or other services.
This is the electronic registration of documents affecting the title.
Generally, an easement, covenant or some other restriction recorded on the title to a property, such as fencing covenant, building line restriction, or building covenant. It can also be a set of rules for a residents' association and can be associated with a requirement to pay levies in this case.
The market value of your home minus the amount owed on the mortgage.
First Home Grant (Kainga Ora Grant)
This is a sum of money between $3,000 and $10,000 each applicant that may be available to you to assist with your purchase if it is your first time buying a home. To check your eligibility click here.
Fixtures and fittings
Items that are considered fixed to a building such as shelving, bathroom vanity, door handles. These are assumed to transfer with the sale of the property unless specifically excluded in the agreement for sale and purchase.
This is a type of ownership of the title. It means the entire interest in the land as distinct from say, leasehold where you do not own the land itself. Many people use the word freehold to describe land that they own without a mortgage.
GST (Goods and Services Tax)
A residential property transaction will more than likely include GST (if any) in the purchase price. If you are selling or purchasing a commercial property or investment property subject to a lease, you will need to contact your lawyer and accountant to ascertain whether the transaction will incur GST.
KiwiSaver withdrawals are the funds that you currently hold with your KiwiSaver provider that you withdraw to assist with your purchase. You must be eligible as a first home buyer or a second chance buyer and you need to complete your provider's withdrawal form for signing with your lawyer. The withdrawal process takes 10 - 15 working days from when the provider receives your application so make sure you factor in this time frame - particularly if you are using the funds as your deposit for the agreement.
You do not own the land but have a lease with the owner of the land giving you a right to occupy the land. Often leases are for the land only and give the lessee the right to build. Such leases are for a lengthy term or may be perpetually renewable with rental set at a percentage of the market value of the land. This is not to be confused with a short-term residential lease of a house covered by the Residential Tenancy Act.
A Land Information Memorandum (LIM) is a report from the local Council setting out all information held by it in relation to a property. It provides information on building consents, zoning, location of drains and any other information held. The costs of a LIM vary depending on which local Council you are dealing with.
The security registered against a property's title to secure the lender's loan to you. The title will show that the lender has a mortgage over the land. A mortgage allows the lender to sell your property if you default under the mortgage.
On the front page of the agreement you will see this "and/or nominee". If this is not crossed out, it is notice to those reading the agreement that the buyer listed on the agreement may choose to add another buyer or replace themselves with a different buyer (like buying in the name of a company rather than buying personally or adding their partner as a buyer).
Notices of Sale
The document sent to the local Council to inform it that the property had been sold. It includes the name and address of the buyers.
The right to move into the property, not to be confused with settlement, which normally occurs on the same day.
An occupation licence sets out the rights of a shareholder in a flat owning company to occupy the flat and common areas of the building, the rules of how the flats can be used, and the obligations between the company and the shareholder. These can sometimes also be called leases.
Power of Attorney
A document that gives someone the right to act on your behalf. Learn more about Power of Attorneys here.
Project Information Memorandum (PIM)
A report that a local Council can provide disclosing information likely to be relevant to proposed building work on a property. Examples of the type of information provided is, the heritage status of any existing building, any special features of the land and details of any existing stormwater or sewage pipes.
Under a contract, a buyer is entitled to carry out an inspection of the property before settlement (no later than the day before settlement). The buyer should make sure the property is in the same condition as it was on the day the contract was signed. If any damage has occurred since signing the contract, the buyer can ask for compensation or for the problem to be remedied.
If a buyer cannot settle their purchase by 4:00pm on the nominated date of settlement, the seller is permitted to charge penalty interest, which is at the rate set out on the front page of the agreement for sale and purchase or double the 90 day bank bill rate if no other rate is set.
The collateral that a lender takes in case of a default on your loan. The security is usually a mortgage registered over the title to a property. The mortgage agreement will give the lender the powers it needs to sell a property if the borrower fails to pay the mortgage.
The date specified in the contract for the buyer to pay for the property and take ownership and (normally) possession of it.
A statement prepared by the seller's lawyer. It sets out how the amount to be paid to the seller is calculated and includes an apportionment of Council rates, body corporate levies (if any) and a credit to the purchaser for any deposit paid.
The process by which a seller calls for offers on a property. In closed tenders, offers need to be in by a certain date and may have to be in a particular format. An open tender is a more informal process with, normally no set deadline. An offer by tender can contain conditions but if you are in a competitive situation the inclusion of conditions may make your offer less attractive to the seller.
Tenants in common and joint tenants
Tenants in common or joint tenancy refers to the way you are registered on the title of your property if there is more than one owner. Owning a property with someone (or two etc) as joint tenants means you own the property together as if you are one person. If one of you was to pass away, that person's name comes off the title and it cannot be passed on to anyone else through their Will, it stays with the remaining owners. With tenants in common, each person owns a set share individually and they (in theory) can deal with their own share individually.
"Whenua" is the Maori word for land, among other things. In New Zealand, land is generally divided into two types - General land and Maori land. About 1.3 million hectares in New Zealand is designated as Maori freehold land - just under five percent of the total 26.4 million hectares in the country. Maori land is governed by the Maori Land Act 1993/Te Ture Whenua Maori Act 1993 and administered by the Maori Land Court (Te Kooti Whenua Maori) and Maori Appellate Court, quite separately from General land. As a generalisation, Maori land is characterised by multiple ownership by family groups and is therefore difficult to sell or mortgage. It is possible for Maori land to be converted into General land, and vice-versa, though this can be costly and difficult to achieve.
Got questions? [Here's where] you can find some of the most common questions that come up when you're buying or selling property.