The Leaky Home Crisis - The Do's and Don'ts

Sunday April 1, 2012

In this article, published in the Winter 2012 edition of the Tauranga & Rotoura Porperty Investor magazine, Michelle Paddison, Senior Solicitor with Holland Beckett Lawyers, considers what to do if you're a purchaser and what not to do if you're a vendor.

The consequences of buying a leaky home have been well published, and as such all prospective purchasers should be on the look out for signs that the house they are considering buying may be a leaky home, and take appropriate measures to protect themselves.  

However, owners who may be considering selling their homes should also be aware of the risks they also face if their homes are or have the potential to be leaky homes, even if they are not aware that their home is leaky.

Below we set out a list of do's if you’re a purchaser, and a list of don'ts if you’re an owner of a leaky home and looking to sell it.  This should be considered a guide only as every situation is different and as always, if you are considering selling or buying a home, you should seek the advice of your lawyer.

WHAT TO DO IF YOU'RE A PURCHASER

  • Do ask the question – is this or has it been a leaky home?

    Why? Vendors do not have to tell you what is wrong with the property. But if asked, Vendors are potentially liable for misrepresentation if they lie.   Note that some Vendors may, quite innocently, tell you it is not a leaky home when it is (and in some cases can still be liable to you).   However, even though you should ask the question, you should also carry out your own investigations.
  • Do record any representations as to the property that are made to you by the Vendor or their real estate agent before you entered into the agreement for sale and purchase:

    Why?  Although you might have a claim against the Vendor or the real estate agent, you still have to prove what was said.  Most times it is a matter of their word against yours.  If you are told something about the property that you consider is important in your decision to buy it, ensure that you record what was said, when and who said it.  If possible follow up with a written letter or email.   Note that a real estate agent has to disclose any defects they know about the property.
  • Do see your lawyer before signing any agreement:

    Why?  You will want to ensure that the agreement contains various clauses that enable you to carry out proper due diligence on the property and withdraw from the agreement if those investigations uncover issues that mean you do not want to go ahead and purchase the property or allow you to negotiate a reduction in the purchase price.
  • Do ensure you obtain a LIM:

    Why?  If the house has been a leaky home and has been repaired or if the home is going through the Weathertight Homes Tribunal, then this should be signaled on the LIM.
  • Do get your own pre-purchase inspection report:

    Why?  Often Vendors will hand over reports they have had done on the property.  However, if those reports are wrong and you relied on them, you may be left without a remedy.  You are best to engage your own suitably qualified and properly insured building inspector. 

WHAT NOT TO DO IF YOU’RE A VENDOR

  • Do not try and cover up signs of damage:

    Why Not?  There have been a number of situations where an owner has deliberately tried to conceal that their home is leaking.  The risk for an owner in doing this is a purchaser can potentially bring a misrepresentation claim against the vendor on the basis that they have deliberately concealed the defects which amounts to a misrepresentation by silence. 
  • Do not say (or advertise) that your home is not a leaky home, even if you are sure your home is not a leaky home:

    Why Not?  Vendors are not obliged to tell prospective purchasers about any defects associated with their homes.  However, a vendor can be potentially liable for misrepresentation, even if innocently made, if their house turns out to be a leaky home.
  • Do not provide purchasers with any reports you have had on the property saying it is not a leaky home – unless you have first spoken with your lawyer:

    Why Not?  If the report is wrong then you want to be sure that the purchaser does not have a claim against you because they relied on the report.
  • Do not sign an agreement for sale and purchase if you were the owner of the property when the house was built, before talking to your lawyer:

    Why Not?  The agreement for sale and purchase contains warranties that apply if you were the owner of the property when the house was built.  You will need to be sure that you can comply with these warranties, or otherwise consider whether they may need to be amended.
  • Do not enter into an agreement for sale and purchase without seeing your lawyer, even if your purchaser knows the house is leaky and has negotiated a discount:

    Why Not?  You will want to be sure that the agreement records exactly what the parties understand the position to be and protects you in case further issues come up.

 

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