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What would happen if I buy a house without a building report or a LIM?

Friday 15 May 2015

When clients buy a property, we always recommend that they obtain a Land Information Memorandum (“LIM”). A LIM gives you all the information that the local Council has in relation to a property.

This information includes building and drainage consents which previous owners obtained for the property and code compliance certificates which have been issued by the Council for work completed.

Not all building and drainage work requires a building consent. It is therefore advisable to obtain a builder’s report. A builder’s report will compare with the consents obtained on the Council’s records with the work which has been completed on the property. It should identify works which would have required building consent but none was obtained, or works which have no code compliance certificate.

If a property has a leaky home problem, a good builder’s report will identify the potential problem and may suggest further investigation by a specialist. The case law in New Zealand relating to leaky homes disputes suggests that if an owner has bought the property without obtaining a building report, it may be difficult for them to claim full damages from liable parties such as the building company, the developer or the Council. The law may attribute part of the owner’s loss to their own lack of checking of the property before buying.

Buying a property with unconsented work could also have insurance implications. Since the Christchurch Earthquake, insurance companies have imposed more conditions to insurance cover as well as claims. Certain unconsented work will affect the ability to insure, or the ability to claim insurance successfully. For example, if there is a burner installed without a consent and your house is burnt down due to the unconsented burner, you may find that you have no insurance cover.  Another example is where if you have a garage which has been converted into habitable rooms but without a consent. When you make an insurance claim, you may find that the insurance company will only pay you to reinstate a garage not the habitable rooms.

In summary, New Zealand law works on the principle of “buyer beware”. You must therefore investigate a property fully before you buy.

If you require legal advice, contact Teresa Chan at Teresa Chan Law Limited, Level 3, Westpac Building, 106 George Street, Dunedin 9016, ph. 477 1069, or email teresa@tchanlaw.co.nz  If you are a Mandarin speaker, please ring Jack Liu at (021) 0233 1168.

                                                                                                       

Note: The information in this article is general only. You should seek advice for specific situations.

KEYWORDS: property, LIM, building, builder's report, insurance, disputes, consent
Dunedin Shanghai Association property law section ADLS