What does the new Real Estate Agents Act, 2008 mean to buyers and sellers of real estate in New Zealand?
On November 17, 2009 the new Real Estate Agents Act, 2008 came into force. It is changing the face of real estate in New Zealand and how the business of buying and selling a home is conducted. For the better. Real estate agents need to be much more careful and professional in how they interact with both buyers and sellers. The Act gives buyers and sellers more rights, more power and, along with the real estate agents themselves, more responsibility.
This is the first in an occasional commentary on the Real Estate Agents Act and how it affects buyers, sellers and agents. You can find out more about the REAA here.
Should you disclose a defect in the house you want to sell?
The Real Estate Agents Authority has made new rules for Real Estate Agents and sets minimum standards of conduct and client care. The fines for breaking these rules are substantial. While a real estate agent has an obligation to look after the financial interest of the seller when marketing their property, they must also act in good faith and deal fairly with the buyer. This means that a real estate agent must not mislead a buyer.
That sounds like common sense, and under the old rules meant that a real estate agent must disclose any known defect in the property to the buyer.
But the new law goes beyond that. It says that if, on the basis of the real estate agents experience and knowledge that a property might be subject to a defect then the agent must get confirmation from the seller that the property is not subject to a defect , or advise the buyer of any potential risk.
Nick Kearney, of Schnauer and Co, in Milford*, says that buyers will be able to sue a real estate agent if the agent suspected there was a defect and didn’t tell the buyer. For example, an agent should be able to tell from the construction and the age of a house whether or not it is a leaky home and must advise the buyer. The buyer can then get get a building inspection or other professional advice. And, if the agent is instructed by the seller not to say anything to the buyer, then the agent must stop acting for the seller.
For sellers this means when you complete a listing agreement with Harcourts you will be asked to give a warranty that:
- You haven’t given consent to a neighbour in respect of any work proposed by that neighbour.
- You haven’t completed any unconsented works.
- The Council have not issued any requisitions affecting the property.
- You are not aware of any defect in the property that would affect it’s weathertightness, habitability, or durability.
- You haven’t withheld anything relating to the property.
As a seller, when you are preparing your home for the market, you should ask your real estate agent to get a LIM report. The LIM will identify whether there are any Council requisitions,and what the status of any building works are. It is also worthwhile getting a building report. Think of a building report like a Warrant of Fitness for your property – it’s a lot easier to sell a car with a Warrant of Fitness than without one!!
If there are any defects uncovered by the LIM or the building report, you can decide to fix the problem, or disclose it to the buyer. Forewarned is fore armed. It is a lot easier to deal with a problem uncovered by a building or LIM report before a house goes on to the market, than afterwards. Buyers are easily scared off when they discover a defect, so find out beforehand and make a plan with your real estate agent on the best way to deal with it. You may decide to carry out repairs, or you may decide to disclose the problem to a prospective buyer. Either way make a plan with your real estate agent.
For buyers, this means that you should ask about any potential problems you see: the agent should know. Do not be embarrassed about asking about anything that looks dodgy! As a buyer, you might be concerned about asbestos in the ceiling, or cellphone towers, or other issues, and you should tell the agent. Remember, not everyone is worried about the things you don’t want in your next home, but if they concern you then the agent must advise you. However, for weather-tightness, habitability, or durability problems, even if you don’t ask, the agent must still tell you.
Steve Koerber, a Barfoot and Thomson agent in Remuera also advocates greater disclosure of leaky homes in his blog here.
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Useful Links:
- More advice on LIM Reports and council at Property Files.
- You can find council records on your property at North Shore City Council.
Here’s what we say…
The 10 most important things you need to know when buying or selling a property are:
- Foundations are SOLID and RELIABLE
- The Structure is STRONG and DURABLE
- The Roof isn’t leaking
- The External Cladding is in good condition
- The Internal Linings are DRY
- The Electrics are working properly
- The Plumbing is in working order
- The Drainage is SUFFICIENT
- The Home is SECURE
- There are NO signs of PEST problems
* “Onus on Agents under new Law”, article in North Shore Times, Oct 22, 2009, by Nick Kearney, Schnauer and Co Ltd, Milford
