Conveyancing
What's it all about then? Well…
Introduction to Conveyancing
In practice, the likelihood is you’ve just gone and signed a sale and purchase agreement to buy your first home, family home or the home of your dreams. You're excited, you’ve got furniture and curtains choices in your mind, you’re thinking about the taps you’ll change in the bathroom, or maybe you're worried about whether the fridge will fit in that gap in the new kitchen or how the kids will get to school. You just can't wait to get the keys and move into your amazing new place. But then someone asks "who’s your lawyer" and you’re instantly snapped back to the reality of home buying and the humdrum of paperwork.
Of course, if you've previously bought a home you'll know you need a lawyer to complete the conveyancing aspect of the deal for your new home and even if you're new to the property market, chances are you’ve assumed there may be the involvement of lawyers at some stage. But why? What is this ‘conveyancing’ or 'home transfer' stuff all about? What does a lawyer do and surely it's just more money at a time when you're haemorrhaging money on a deposit, or those new curtains, no?
The first thing to appreciate is that part of what we all love about living in New Zealand is our homes themselves. They’re all different sizes, shapes and colours. They all sit on different sized bits of land and they were all built during differing times. This all adds up to the character we love, but those very differences are part of what’s involved in the conveyancing process.
Fundamentally, there are three stages in the conveyancing process. Below we'll explain, hopefully quickly and helpfully, what's involved in conveyancing.
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Step 1.
Identifying exactly what you're buying
Record of Title, Easements & Rights of Way
Record of Title (formerly known as Certificate of Title) is a legal document that identifies the legal owners of a property and the key facts in relation to that property. How big is the land area? What's the legal description? Are there any restrictions such as covenants or rights of way and what, if any, securities, mortgages etc are held against the property?
Easements
An easement is a right agreed between a landowner and another party to use a property for a specific purpose. For example, you may find your neighbours' main water line or telephone services run through your land. These arrangements will be highlighted on your new property's title as an 'easement'.
Covenants
A land covenant limits or restricts the owner and future owners of the property upon which the covenant is listed on the Record of Title. This may be seen in new subdivisions where a developer may wish to enforce a finish level on the homes built. No corrugated iron roofing for example, or in more extreme cases, what colours front doors or fences can be painted.
Right of Way
A Right of Way is like an Easement in that it allows someone access to another's land. As an example, your new home may be a back section. Your proposed new home's title may show that you have a Right of Way to pass over the front section's land. Normally this would be for a driveway. Sometimes it could show that your new home owns the entirety of, or part of, that driveway and both you and the owners of the front section have access over each other's land.
Stage one of the conveyancing process involves your lawyer checking all aspects of your proposed new home's Certificate of Title, through easements, covenants, rights of way, the lot. It's not unusual for there to be accuracy concerns with title documents, but regardless, your lawyer will advise you if there is anything amiss or wrong with the title itself, what their advice to you maybe and most importantly, ensure you are aware of exactly what you are buying.
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Step 2.
Sorting out the money for your purchase
Mortgages
Most of us need a mortgage from a bank when we buy a home. Equally, most of us will have at the very least spoken to a bank and have some form of an idea what we can afford prior to agreeing to an offer on a house.
Your lawyer must liaise with your bank in the first instance to confirm details of the sale and that all is legally as it should be. If your sale and purchase agreement was conditional upon finance, then your lawyer needs to confirm with your bank when that's all good to go. Then there are various signatures required forming the agreement that your bank has a security over your new home and so on.
Some of us are lucky enough to be able to buy a home without the need of a mortgage. While there is less time and effort involved in these transactions, there's still a heap to do between deposit transfers, Trust account records, receipts to be dealt with, the physical transfer of the title and so on.
Guarantor
Sometimes a bank will insist that for them to approve your lending, you'll need a 'guarantor'. In most cases this is a parent, or both parents who are prepared to 'guarantee' to a bank that you'll pay your mortgage. An agreement of this nature is not to be taken likely as of course the 'guarantor' is ultimately responsible for your debt if you do not pay. The paperwork associated with arranging for a 'Guarantor agreement' can be complex.
KiwiSaver withdrawal & Home Start grants
The government allows that if you are considered a first-time home buyer, you are able to use funds saved in your KiwiSaver account to put towards your deposit for a house purchase.
A Homestart Grant is a grant offered from Housing New Zealand to eligible first time home buyers allowing a grant of a specific amount towards a new home purchase.
Both KiwiSaver and Homestart Grant aided purchases can involve lots more paperwork and coordination to bring funds together to enable you to buy your home.
EQC Claims
In some cases in New Zealand, although thankfully these are very few relatively speaking, purchases or sales can involve homes affected by EQC or Earthquake Commission claims. These are homes that have been affected to various extents by damage from earthquake events and are subject to centralized EQC insurance claims to rebuild all or part of the property concerned. As you can imagine, the complexities associated with managing the transference of these homes can make a process involving an EQC home quite involved.
Unconditional Date
This is the day when the deal is a deal. Your sale and purchase agreement may have been subject to finance, a builders report, LIM, whatever it was and today is the day that you are required to confirm that you're happy, or not, and that you’re either proceeding, or not, with the purchase. Your lawyer needs to check with you that you're happy with all you've learnt about the property you're proposing to buy and also that your bank is happy that you commit to the deal. Once everyone from your side has agreed, your lawyer will confirm to the sellers lawyer that the conditions upon which your offer was accepted have been satisfied and that the deal, is now a deal. You’ve done it, you’ve bought a home!
There are occasions when you may have, or be required to make an offer unconditionally on a property. This means you are committed to buy regardless of what you may later find out about the home being purchased. Normally this is the case with homes being 'auctioned' and you are advised to be extremely careful when considering offering 'unconditionally'. Please, please, pretty please, speak to a lawyer and confirm all is as it should be before you do anything that fully commits you to buying a specific home.
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Step 3.
The day you get your keys
Settlement Day
Settlement day or the day you get the keys to your new home is an exciting and at times stressful day. Have the movers got everything in the van? Has your dad turned up with the trailer? Did you get those meter readings or has the cat managed to escape its travel box?
But long before you receive the call from your lawyer advising that the transaction for your new home has settled and you can collect your new keys, a huge amount has gone on in the background to allow this to happen.
Firstly and some days before the big day, you'll have to sign an Authority and Instruction, or A&I form provided by your lawyer. This form essentially provides authority for your lawyer to hit the go button on the big day itself, when money is transferred from your mortgage lender or your bank to your lawyers' trust account. From there the money is sent on to the seller's lawyers account and the property is transferred legally into your name via a national land and property transfer system online. It's all go and often you'll find very stressed out legal staff on a Friday morning, being the usual day that property transactions are settled.
So, there you go. In a surprisingly short nutshell, that's conveyancing for you. Mind you, there is so much more that goes on behind the scenes on your behalf. So much in fact that if we took you through it in its entirety, we're sure you'd be pulling your hair out before the end of the second paragraph.
You will have realised we're sure, that all of the above was from a buyer's perspective. If you're selling your home, chances are you’ll know something of what we've described. But just so you know, conveyancing from a seller's perspective is basically the same as above, but from the opposite side of the discussion.
Rest assured though, whether you're buying, selling, both or you're just refinancing, your lawyer and his or her team work tirelessly on your behalf to ensure your interests are held above everything else. That is their duty and one which they hold dear.
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