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Buying and selling property during COVID-19 alert level 4

Buyers  & Sellers  |  27 August 2020  | By The team at settled.govt.nz

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This page explains some of your options if you’re buying or selling property during COVID-19 alert level 4.

New Zealand is in the middle of a unique situation, and it is likely to be stressful for all parties involved in a transaction. Be kind and consider the needs of others when you’re communicating about a transaction.

To see what alert level your region is at and for general information about the current COVID-19 situation please visit covid19.govt.nz.

Summary

  • Land Information New Zealand (LINZ), most banks and many lawyers, conveyancers and real estate agents are working remotely, and this may cause delays.
  • Talk to your real estate agent and lawyer or conveyancer about what to do if you’re in the middle of a real estate transaction.
  • The Real Estate Authority (REA) recommends that you and the other party defer settlement until both the buyer and the seller are at alert level 3 or lower.
  • Real estate business can only go ahead if it doesn’t require people to break alert level 4 restrictions.
  • During alert level 4, buyers cannot move into new properties and sellers cannot move out of their properties.
  • Read the government alert level 4 guidance on the COVID-19 website.

Sellers who have received an unconditional offer

Where possible, the Real Estate Authority (REA) recommends that both parties agree to delay settlement until alert level 3.

If there is a clause in your sale and purchase agreement that addresses how settlement should occur if the alert level changes, talk to your lawyer or conveyancer and your agent about the best approach for your transaction.

REA recommends that settlements are deferred for at least 10 days after alert level 3 begins. Be aware that if all settlements are deferred for the default 10 days, it may be difficult to find a moving company to help the settlement process. Consider choosing a longer period.

During alert level 4, buyers cannot move into a property because only movement in order to access essential services is allowed. It may be possible for settlement to go ahead if it doesn’t involve people moving.

Here are examples of compromises that could allow settlement to take place during alert level 4:

  • The seller stays at the property on a rental basis.
  • Both parties agree to share any late settlement interest penalty.
  • The seller leaves money in the sale for later payment.

At alert level 4, LINZ, all banks and many lawyers and conveyancers are working remotely, so it’s likely there will be delays in service.

Pre-settlement inspections cannot take place at alert level 4. REA recommends that pre-settlement inspections are delayed until alert level 3. Pre-settlement inspections may be able to take place by video or similar, however both parties should seek legal advice about the risks of a video inspection. This type of inspection may not pick up issues you would see if you were physically inspecting the house.

Be aware that the buyer’s situation may be uncertain. If the buyer’s purchase was conditional on selling their own house, they might not be able to settle on their own transaction if they can’t physically move out of their house. Be considerate of the circumstances and needs of the buyer.

Sellers who have received a conditional offer

We recommend that you talk to your lawyer or conveyancer and your agent and agree with the buyer to extend the conditional period until alert level 3.

During alert level 4, your buyer may not be able to access the services they need to fulfil their conditions, for example, local councils may not be able to provide a LIM and property inspectors will not be able to visit the property to inspect it. Also, you may not be able to fulfil conditions the buyer has requested.

Some law firms and agents are working remotely, but there may be delays in service.

Sellers who haven't received an offer

If you don’t yet have an offer to buy your property, we recommend you talk to your agent about how you might market your property during this time.

During alert level 4, you won’t be able to hold open homes or have potential buyers visit your property. You could explore other options, like virtual open homes.

If you don’t want to continue marketing your property during alert level 4, talk to your agent. You might agree to withdraw your property from the market or put your marketing campaign on hold. Usually, sellers pay the marketing costs upfront, and it may be that most of the budget has been spent, for example, Trade Me advertising may have been placed and paid for. Talk to your agent about what will happen to any unspent funds if you put your campaign on hold.

Sellers who are thinking about selling

It’s a good idea to wait to list your property until alert level 2 or alert level 3, when movement for non-essential reasons is allowed.

If you choose to list your property, your agent won’t be able to physically inspect the property in order to appraise it and then disclose any problems to potential buyers. Please note, your agent may make changes to the appraisal or disclosure statements when the alert level lowers and they are able to physically inspect the property.

You may also want professionals to visit your property, for example, photographers, property inspectors and valuers, and they cannot visit a property at alert level 4.

Buyers who have made an unconditional offer

At alert level 4 the Real Estate Authority (REA) recommends, where possible, that both parties agree to delay settlement until alert level 3 is in place.

If there is a clause in your sale and purchase agreement that addresses how settlement should occur if the alert level changes, talk to your lawyer or conveyancer and the agent about the best approach for your transaction.

REA recommends that settlements are deferred for at least 10 days after alert level 3 begins. Be aware that, if all settlements are deferred for the default 10 days, it may be difficult to find a moving company to help the settlement process. Consider choosing a longer period.

During alert level 4, you cannot move into a new property because only movement in order to access essential services is allowed. It may still be possible for settlement to go ahead if it doesn’t involve people moving.

Here are examples of compromises that could allow settlement to take place during alert level 4:

  • The seller stays at the property on a rental basis.
  • Both parties agree to share any late settlement interest penalty.
  • The seller leaves money in the sale for later payment.

REA recommends that, where possible, pre-settlement inspections are delayed until alert level 3. In-person pre-settlement inspections cannot take place at alert level 4. If you are offered a pre-settlement inspection by video or similar, both parties should seek legal advice about the risks of a video inspection. This type of inspection may not pick up issues you would see if you were physically inspecting the house.

At alert level 4, LINZ, all banks and many lawyers and conveyancers are working remotely, so it’s likely there will be delays in service.

Buyers who have made a conditional offer

If a seller has accepted a conditional offer from you, it is likely you won’t be able to fulfil your conditions during the lockdown. At alert level 4, non-essential services are closed or not operating, for example, property inspectors. The seller may also not be able to fulfil any conditions you have requested.

It is recommended that you talk to your lawyer or conveyancer and agree with the seller to extend the conditional period until both parties are at alert level 3.

Some lawyers and conveyancers are working remotely, so there may be delays in service.

Buyers who are searching for a property

At alert level 4, open homes and private viewings are not allowed. Real estate agents are also not permitted to visit properties in order to appraise them and disclose any potential problems buyers, and professionals such a property inspectors and valuers also cannot visit.

If you have a problem or concerns

If you are concerned that a real estate agent isn’t observing the COVID-19 health requirements, you can report a COVID-19 breach using the form on the New Zealand Police website.

If you have a problem with a real estate agent that you can’t resolve directly with them, find out how the Real Estate Authority (REA) can help you on the REA website.

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