contracts Archives - Apartment Specialists

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Apartment Specialists Podcast No: 127

Summary:

What are these four conditions that should always be present in your contract no matter what type of apartment you are buying? Watch this video to know more.

TRANSCRIPTION:

When making an offer, what conditions should you give?  In buying an Apartment, there is a whole host of conditions you can use depending on the circumstance. For example, the price of the Apartment would depend if it is in a hotel or it is a leasehold property. These kinds of things. There are four conditions, I think, that you should always use no matter what type of apartment you are buying. These are the things we will tackle on this podcast.

The first one is regarding your solicitor. When you go and enter into a sale and purchase agreement and you are with a real estate agent, they need to write it up with you. How often have you done a sale and purchase agreement before? Unless if you are buying a property on a regular basis, very few of us are, it is a very fine issue. You should make sure your solicitor reviews the contract and make sure it is all in order, because real estate agents get very anxious about it. They get very lazy about it because they are doing it so often. You really need to understand what you are entering into and that is why your lawyer’s approval is an absolute must.

You can say this agreement is conditional on the purchaser. Being the buyer, a purchaser’s solicitor being satisfied with all or any aspects of this contract including title and the conveyance of this property. If this clause is not satisfied by 4:00pm on the fifth working day, then this agreement will be at an end. Now, what I am talking about is, if this clause is not satisfied by 4:00pm on the fifth working day, then that means you have got five working days. For example, Monday to Friday not including Saturday and Sunday, your lawyer can only give the sale and purchase agreement the thumbs up. So it is plenty of time.

The next clause I will talk about is about the reviewing of, I suppose it is a health check of the building. Looking at the annual general meeting minutes – if any. Very few people ask about is your extraordinary general meeting that is called the EGM. I will just take a quick look in here so I can show you what I am talking about. Now, this one is really important and very few people actually put it in. They will put in minutes but not the EGM minutes, so I will just read it out.

“This agreement is conditional upon the purchaser’s solicitor being satisfied with the last two years’ of body corporate minutes including any extraordinary general meeting minutes – if any.”

I put if any because extraordinary general meeting minutes are generally, if something has happened that is out of your area. One good example is, when there is leakage, or best case scenario, there is a change of body corporate rules. It is one where a meeting has to be held in-between the annual general meetings to deal with a particular amendment. Obviously, if this order is not satisfied by 4:00pm on the fifth working day, then this agreement will be at an end. Hopefully, that one helps and I hope every single one of you is using that one. That is an absolute must.

The next one is, this is about getting a building inspection and very few people actually do. It is quite surprising, because very few people actually know much about construction. How Apartment complexes are built? This is one that when I bought one of my first apartments a long time ago I wish I did because now it leaks. If I had this clause in it, it probably would have put us off. This agreement is conditional upon the vendor obtaining and being completely satisfied with a building inspection report. If this clause isn’t satisfied by 4:00pm on the seventh working day this agreement will be at an end. Pretty self-explanatory and It means you have a building inspector come in and look at the apartment in the building.

Give you a report on the condition of the building; the materials and all that kind of thing. It will also give you an insight into the building and some confidence with your purchase. At the end of the day you are spending a lot of money. As soon as you do this you could save thousands or tens of thousands of dollars later on. The final clause is a small one, it’s actually not a condition. It’s a warrant because it’s about the appliances. This is one most people get caught out in, because we will go and look at the apartment. But how many of us actually turn on every appliance? How many of us actually put the washing machine through a cycle, I’ve never seen it?

It actually happened when my parents bought one. They just learned the hard way and I learned from my mistakes I suppose we could say. It was a while ago now, but anyway.

“The vendor warrants that all appliances, light fittings and outlets will be in good working order prior to settlement.”

What that means is you go into the agreement, by the time it settles and you actually become the owner, all the appliances are working. And that means if you missed one, when you are looking at it, it is in the chattels list and you didn’t check that and it still has to be working.

if you did not check it at the time of inspection, which most people do not; and if it breaks down in-between the time that you have gone unconditional to the time that you own the property, which is generally about two, three or four weeks’ time, your appliances should still be in working order. It is very very important and it is a pretty simple one, but it can be really frustrating when you move into an apartment and you find that things do not work. Especially things like light fittings and maybe the plumbing’s wrong. Things can get quite expensive.

Anyway, I hope that helps. Obviously, there are a lot of other clauses you can put into a sale and purchase agreement, but these ones I think are standard ones. I think everyone should put these in. I hope that helps.

If you have any other questions, just give me call or book an appointment below and I will answer it.

Cheers.

reliable pre contractual disclosure

Apartment Specialists Podcast No: 41

Summary:

A pre-contractual disclosure informs the buyer that an apartment building has never been subject to any issues or claims. The question however is, is this reliable?

TRANSCRIPTION:

Andrew Murray from Apartment Specialists. Can a pre-contractual disclosure be relied on?

Unfortunately, it can’t. The intention of a pre-contractual disclosure is when somebody goes to buy a new title or an apartment, they go in knowing all the information. They have been given all the facts. They are aware of the standing of the building and the unit. If there have been any leaky issues or if there have there been any problems. Unfortunately, that is not the case and often it can give a false sense of security to the purchaser. Basically, what I’m talking to you about today is making you aware of that and to always make sure you go and look at, at least two years of body corporate minutes and any EGMs if available.

If you look at the pre-contractual disclosure, you can see at the bottom of the screen here, you’ve got information about the unit, that it is all fine. The body corporate fees, what is in the maintenance fund, what is in the operating fund, all kind of things, down here to number 10. “The unit or the common property is not currently, and has never been, the subject of a claim and the Weather-tight Homes Resolution Services Act 2006 or any other civil proceedings relating to water penetration of the building and the unit title development.”

Problem: there can still be leaky issues without a claim. There can still be leaky issues without any civil proceeding because if a building is outside the warranty, there is no claim. You can not make a claim. If the developer has shot through, you cannot make a claim either. He has gone bankrupt.

For example, I’m dealing with a building at the moment, which is outside it’s 10 years. The architect is at fault. They cannot go after the architect because there’s already four other buildings in front of them waiting to get their money. There is no way they are going to get their money at all. In the pre-contract disclosure, it still says that it is not currently or has never been subject to any other claim because there has not been a claim, but there has been leaky issues.

The point of this disclosure is spot on. And it is to make sure the buyer is going in with their eyes open with all of the facts. The intention is there. But unfortunately, it is not being fulfilled and it needs to be tweaked. What it needs to say is “the unit or the common property is not currently or has never had any maintenance done that revolves around any Weather-tightness issues, or claims, or civil proceeding”. If there has been, actually list that. Now most buildings have had some kind of maintenance dealing with watertight situations. For example, there may be a gutter or a roof that may need to be done after 20 or 30 years. It’s just part of maintenance.

But, as a buyer, you want to be seeing what’s done, seeing how it was done, see if it is going to lead to more issues. The unfortunate thing is, that body corporate minutes are turning into – or I suppose, body corporates are being more aware – that with all kinds of apartments, your body corporate minutes are like a marketing document. It does not always give you all the visibility you need. That’s why I recommend for the Unit Titles Act to be tweaked a bit.

For buyers – for now – when you see this, do not pay any attention to it. Still do your due diligence. Still read your last two years body corporate minutes. Still ask the question and look to see if there has been any maintenance done on the building. Make sure you’ve got visibility of that. That should help you. As far as I’m concerned, although the intentions are right, it is not actually achieving it’s point.

Thank you.

RELATED POSTS:

How do AGMs and EGMs Effect Apartment Owners and Purchasers?
Leaky Apartments in Auckland

 

dont make a huge mistake and sign an exclusivity agreement

Apartment Specialists Podcast No: 6

Summary:

Today, we’ll talk about “Exclusivity Agreement” and why you should NOT sign this type of contract. Learn more about it from this podcast.

TRANSCRIPTION
Andrew Murray, Apartment Specialists. Today we’re talking about number three which is exclusivity periods, i.e. you, being an apartment owner, signing a contract with a real estate agent to sell your apartment. Basically, every single apartment agent and agency puts you into a contract but locks you in for the industry standard 90 days. Why? Ask yourself if it was any other service or industry – because that’s what a real estate agent is – we’re providing a service, we’re matching a buyer with you being the seller.

Now ask yourself, Why should you be locked into a contract? In any other industry, if you went and got a cleaner, for example, to come and clean your house and they come in and go, Okay, well, I’m going to be the best cleaner ever, I’m going to clean it so spotless you’re going to be able to look in the mirror and you’ll see no specks, you look out the window and it will be like the window won’t be there. And you’re like, yeah, yeah, whatever. So just before I clean your house, can you please sign this contract. For the next three months you can only get your house cleaned by me? No, you wouldn’t do that, would you?

Would you go to the bank and sign up with a new bank, and they go, Okay, we’re going to do this and provide this and we’re going to improve your service and all this kind of thing. And then sign a contract saying you can only be with them. Doesn’t that give, for example, the cleaner the right to go, Well, I can slacken off, they can only clean the house through me and they have to get it cleaned? So why should it be happening in the real estate industry? I don’t know who made it up, it’s ridiculous. I’ve just come back from the States. I went there and saw some of the top agents in the world.

I mean, they’ve got 450,000 agents over there, and what were they doing? No contracts. You can get them out at any time. So what am I doing? Obviously the same, because at the end of the day, if you’re doing a good job, you think about it, if you employ, for example, me as an agent, and I’m doing a good job and I’m working my * off, right? I’m bringing you offers, I’ve been calling you, I’m getting into communication, I am trying my absolute best to get you the very best value, are you going to fire me? No. Am I worried that you’re going to fire me? No, because I’m working hard for you. So why should you be locked in? I honestly just don’t get it.

Anyway, so this is why I’m talking about it. You can actually talk with your real estate agent, right? Under the act, you do have to have an agreement with your real estate agent. You have to declare it, you’ve got to go through all those points and have a contract and go through all of that fine print. You’ve got to get your lawyer’s advice. You’ve got to know what you’re involved in, all that kind of thing. Yes, there has to be an agreement in place but should you be locked in? What I’m saying is, you should be able to write a clause in that agreement and say: if I feel you’re not performing well, I don’t want to be with you anymore or you’re not basically living up to your promises, or basically you’re just not working for me, I should be able to get out of this agreement at any time. It sounds pretty simple and it sounds obvious and it should be happening but that’s not the case. Where’s the incentive?

For example, if I know you’ve got an aim to sell your apartment within two months, or it there’s a situation, or you’re behind in your body corporate fees, or you need the money for X ,Y or Z, because generally selling a property, there is a reason for it. And if the agent knows that you’ve got to sell your property and they’ve locked you in, is that incentivising them to really go and get the best offer for you? They’re thinking, Yes, I’ve listed them, now I’ve got to sell it. That’s money in the bank. And I’ll tell you what – that’s the same in the industry. What’s getting the listings? Money in the bank. Why? Because they know they have to sell it for you.

So what I’m saying is, and this is one of the reasons which costs owners thousands of dollars when selling their apartment is purely that fact. Go with it, talk to your agent. What are we going to go with? For example, we don’t lock you in at all because there is no point. I don’t want to have a person badmouth me, I don’t want to have a client who’s not happy. And you don’t want to deal with somebody who you’re not happy with. So the business is then for us to lose.

For example, so if I go into an agreement with you, and you don’t give me time, I can lose that. I can lose your business by not delivering. So this is what is incentivising me to deliver. Pretty simple. So that’s how the market should be, and you being the owner, you can actually dictate the terms. What I am saying is I’m educating you on that fact that you should be. So I hope you’ve enjoyed listening to this different perspective on how an agency agreement or that visibility should be done.

I’m going to talk a bit more on this topic because it’s quite a big one. I’m now going to talk about how an owner does conjunctional sales, i.e., how does he let the other agents sell your property, and I’ll talk about that with you in a couple of days. And basically this was from number 3 in the report. You can email me and get it at andrew@apartmentspecialists.co.nz, or you can go to the website, download the report, probably the easiest, at www.apartmentspecialists.co.nz, and just download it there. Cool. Thanks, guys. Cheers!