There are checks which you should do before purchasing land especially if you intend to build on the land.  You may find that the council rules, land covenants or the cost of foundations prevent you from building the house of your dreams or the building that you require for your business.  This article gives a brief overview of the checks you should consider completing when buying land.

 

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Set out below are some of the checks you should consider completing.

Finance

If you require finance to complete the purchase of the land then it is advisable to get written confirmation from your bank that finance has been approved. If title to the land has not issued, then you should discuss with your bank how long the loan approval is for and what happens if that time frame ends before settlement of the purchase of the land.

Geotechnical report

A geotechnical report will advise you what type of foundations will be required to build on the land.  Most councils require a geotechnical report to be included with an application for a building consent.  The cost of foundations for a dwelling or building will depend on the structure of the soil.  You may be able to obtain a copy of a geotechnical report from the developer who may have completed a geotechnical report on the land as part of the subdivision.

Development contributions

Development contributions are a levy on new developments.  They are collected under the Local Government Act 2002 and are used to ensure that the costs of extra demand on council infrastructure from the development are not imposed on the community.  It is always advisable to check with the council to find out if there are any development contributions payable when you build on the land.

District Plan

It is important to check the council rules in the district plan to find out how the rules might affect what and where you can build on the land.  For example, the council rules may state that you cannot build within a certain distance from the boundary of the land or there could be height restrictions or a requirement that the dwelling or building on the land is built a certain height off the ground.

Agreement for sale and purchase

If possible, ask your lawyer to review the agreement to purchase the land prior to signing.  If title to the land has not issued, then you may want to insert a ‘sunset’ clause in the agreement which states that if titles have not issued by a certain date then you can cancel the agreement.  You may also want to make the agreement subject to certain conditions e.g. you obtaining approval of finance, being satisfied with a geotechnical report, checking the council rules, being satisfied that you can build the dwelling or building on the land that you want.

If title to the land has not issued, you may want to consider inserting a clause which states that the area of the land is not to be less than a certain size.

Land covenants

If the title to the land has not yet issued, the agreement may contain land covenants which will be registered on the title when it issues.  If the title has issued, then it is important that you ask your lawyer to review the title and check if any land covenants are registered on the title.  The land covenants are normally registered on the title to the land by the developer to ensure that the houses or buildings in the development meet a certain standard and type.  There will usually be building requirements, e.g. the minimum size of a dwelling, the type of cladding to be used, and also some restrictions and requirements around your use of the land e.g. if the land is in a residential area a requirement that no business is to be operated from the land or only a certain type and number of animals are allowed on the land.

Resource Management Act 1991

Section 225 of the Resource Management Act 1991 will apply if the agreement to sell land is made before the survey plan has been approved by the council and means that the agreement will be subject to the following conditions:

  • The purchaser may, by notice in writing to the seller cancel the agreement at any time before the end of 14 days after the date of the agreement.
  • The purchaser may, at any time after the end of 2 years after the date of granting of the resource consent or one year after the date of the agreement, whichever is the later, by notice in writing to the seller, cancel the agreement if the seller has not made reasonable progress towards submitting a survey plan to the council for approval or has not deposited the survey plan within a reasonable time after the date of council approval.

Boundary pegs

Usually a clause is included in the general terms of sale for the purchase of residential land which states that the seller must ensure prior to settlement that all of the survey pegs are in place.  This is important because when building a dwelling on the land the council will require all of the pegs to be in place.  If all of the pegs are not in place, then a surveyor will need to replace the missing pegs.  

Resource consent for the subdivision

If title to the land has not issued then it is advisable to ask the seller for a copy of the resource consent.  The resource consent is issued by the council and will set out all of the conditions required to be met by the seller before titles can issue.  The resource consent will let you know what, if any, consent notices and/or easements will be required to be registered on the title to the land.

Summary

For anyone contemplating buying land advice from your lawyer before the purchase agreement is signed is essential.


Further information