Your rights and problem-solving options when buying privately or through a real estate agent.

Buying a house is one of the largest and more complex purchases you will make. The stress and costs of getting it wrong can be significant.

Even with all the checks and reports, things can go wrong. If you have problems, what you do depends on:

  • where in the buying process you are
  • if you bought privately or through a real estate agent.

Stages of buying

Making an offer: The buyer signs a sales and purchase agreement with or without conditions. Conditions are tasks that need to be completed for the offer to be finalised. For example an offer might be conditional on the buyer getting a satisfactory LIM or building report, or on the bank giving a home loan. The agreement will state a date where the conditions need to be satisfied. The buyer is responsible for making sure their conditions are worked through, ie if a condition is getting a building report, they are responsible for getting it done.

Going unconditional: When the conditions in the agreement are met, the sale goes unconditional, ie the home loan application is approved, the building report is satisfactory. At this point, it becomes very difficult to cancel the agreement.

Pre-settlement inspection: The buyer inspects the property to make sure it is in the same state as when they signed the agreement.

Settlement: The sale is completed on settlement date. The buyer's lawyer works with the lender to transfer the money to the seller. The buyer gets the keys and the sale is complete

It's easiest to fix problems before you go unconditional or before you settle. After settlement it will be more time consuming and costly. 

Working with your lawyer or conveyancer

Issues before signing a sales and purchase agreement

If your conditions are written correctly by your lawyer, you can avoid being stuck with a house with serious problems. For example, if a condition of your agreement is a satisfactory building report, and the report comes back with dux quest piping which will cost thousands to replace, you might be able to pull out of the sale.

Small changes to the wording of the conditions can make a big difference to your rights. Make sure you check everything in the agreement with your lawyer before you sign it.

Example — LIM report condition

Sarah fills in her sales and purchase agreement. She ticks the box which makes seeing a LIM report with no problems in it is a condition of the agreement. Sarah doesn't realise the wording of this condition means she needs to get her own LIM report, not rely on someone else's. The LIM supplied to her by the real estate agent shows an issue with flooding and erosion. She tells the real estate agent she wants to cancel the sale based on this LIM. She can't because the LIM report was not one she requested. A lawyer could have changed this condition to say any LIM report counted.

Issues before settlement

Once the sale is unconditional, it is very difficult to pull out of the agreement. But if you address issues before settlement, it is easier to get them fixed, or get compensation.

You have not paid the full amount of the house at this stage, so you have some leverage. Compensation and addressing issues before settlement are often written into the standard sale and purchase agreement.

You are most likely to find issues during sale pre-settlement inspection.

Pre-settlement inspection

The property must be in the same state as when you signed the agreement. For example, there's a new hole in the bathroom wall downstairs that wasn't there when you first saw the property.

If the property is tenanted and the tenants will continue their tenancy after settlement, you may not be entitled to a pre-settlement inspection.

If you find an issue

Talk to the real estate agent and/or your lawyer if you find:

  • damage not there when you made the offer, eg breakages caused when the owner moved out
  • the items mentioned in the agreement are not there (chattels), eg curtains, appliances, heaters
  • tenants haven't moved out, or aren't ready to move out, and you were expecting them to be.

Your lawyer can talk to the seller's lawyer about getting things fixed. Visit the property again before settlement to make sure it has been resolved.

If the issue will cost money to fix, and there is no time before settlement to get it done, your lawyer can arrange for money to be set aside from the purchase price to pay for the repairs.

If an item is not listed on the agreement as a chattel, the owner can take it with them.

Planning for settlement day when buying(external link) — Settled

Example — Broken heat pump

Michael does the pre-inspection check of his new house a week before settlement. He finds the heat pump doesn't work and it was listed as a chattel in the sale and purchase agreement. He talks to his lawyer who arranges with the seller's lawyer to hold back a portion of the settlement amount until the heat pump is fixed. The seller has the pump fixed and Michael's lawyer releases the rest of the money to the seller.

Example — Missing chattels

Rahera does the pre-inspection of her new home and finds the curtains are gone. She was expecting to see them there. She checks her sale and purchase agreement and finds curtains were not listed as a chattel, so the previous owner is allowed to take them.

Issues after settlement

 Sorting out issues after settlement can be time consuming and expensive. Your lawyer can help you weigh up the costs and benefits.

It is more difficult to get issued resolved after settlement. This is especially true if you buy privately, but it is best to try and sort out issues before settlement whether an agent is involved or not.

If you buy through a real estate agent, and there is a problem because of the agent, you can:

  • complain for free to the Real Estate Authority, (see how to complain under Solving issues below).
  • make a claim through the District Court for claims up to $350,000, or the Disputes Tribunal for claims up to $15,000 or $20,000 if everyone agrees.

If you buy privately, your only option is:

  • make a claim through the Disputes Tribunal or District Court.

Talk to your lawyer or conveyancer about your options.

Make a complaint(external link) — Real Estate Authority

Disputes Tribunal

Example — Broken fence

Benji doesn't have time to do a pre-settlement inspection. When he goes to see his new house after settlement he finds the front deck was broken by owner backing a van on moving day. He talks to his lawyer who contacts the previous owner. The owner refuses to fix the deck. Benji investigates the cost of fixing the deck and decides to fix it himself as it will cost less than trying to have his lawyer chase the previous owner for him.

Your rights

Misrepresentation

It is against the law for either a real estate agent or private seller to knowingly hide or give incorrect information about a property. This is called misrepresentation. For example, if the owner tells the buyer there are no leaks when they knows the house has had problems with leaks in the past.

If the owner or real estate agent seriously misrepresents the house, you may be able to cancel your sale and purchase agreement.

To be serious enough to cancel, the misrepresentation must be:

  • Significant: something which could cost a lot to fix, eg re-cladding the entire house due to leaky house syndrome.
  • Influential in your decision to buy the house: you would not have made an offer if you had known about this issue.

Misrepresentation is the only thing that allows the buyer to cancel the agreement when it has gone unconditional.

The best time to deal with major issues like this is before the sale has settled. At this point you could either get compensation for the work that might need to be done, or the sale itself could be cancelled.

After the sale has settled, you need to take the seller to the disputes tribunal or district court.

Real estate agents

Although they work for the seller, buying from a real estate agent can offer additional protection to a buyer. As professionals they are expected to:

  • understand the house-buying process
  • know how sale and purchase agreements work
  • recognise issues in different kinds of houses
  • tell you about any issues.

Real estate agents follow a code of conduct. They must:

  • treat buyers fairly
  • not put unfair pressure on buyers
  • keep the buyer updated on what's happening
  • not withhold or give information that is inaccurate about a property to a buyer
  • not make statements they can’t prove with evidence
  • not mislead buyers about the seller’s pricing expectations
  • avoid conflicts of interest.

Legally, they must not:

  • mislead you or give false information — in what they say, how they behave or in any advertising
  • use unfair sales practices, eg put pressure on you to buy
  • put unfair contract terms in the sale and purchase agreement or their contract.

Real estate agents must tell you about any issues they know of with the house before you sign the sale and purchase agreement.


Sorting out problems

Example — Customer service complaint

Rachel is interested in a house. She talks to the real estate agent who agrees to meet for a private viewing. The agent is half an hour late making Rachel late back to work. Rachel tries to complain to the real estate agency but hears nothing back. She makes a formal complaint to REA. REA looks at her complaint and sees the real estate agent hasn't breached the code of conduct. REA explains this to Rachel, and contacts the agency about Rachel's concerns. The agent apologises to Rachel for holding her up.

More help

Get support at any point from:

  • Citizens Advice Bureau (CAB) — a free, independent service, run by volunteers. CAB can advise you on your consumer rights and obligations, in person, by phone, or online.

A CAB near you(external link)  — Citizens Advice Bureau

  • Community Law Centre: Free one-on-one legal advice to people with limited finances. The organisation has 24 community law centres throughout the country. You can find legal information and other resources on its website.

Our law centres(external link) — Community Law Centre