As a lawyer who studied Latin in High School, I am delighted to see the phrase ‘caveat emptor’ in the national news this month. Too often we see people choosing to purchase properties without checking things out properly or bothering to talk to a lawyer.
Given the purchase prices paid for real estate these days and the complexities of land titles and planning rules, this behaviour makes no sense. Saving yourself a few hundred, or a thousand dollars by not checking things properly, could cost you millions, as one Auckland property developer recently discovered.
The case of Mitchell vs Zhang made national news because a property developer made an unconditional offer on a property without conducting any proper research or checks, and subsequently discovered that a road would need to be built through the property if it was to be subdivided. This reduced the property’s value by about $1.8M. The property developer was forced by the Court to complete the purchase.
To quote the Court; “the starting point is that unless the terms of a contract provide otherwise, a vendor is not under an obligation to disclose information that they may hold about the property. It is a purchaser’s responsibility to carry out their own research and obtain their own information about the property”. It was also noted that under an agreement for sale and purchase, a vendor is not required to disclose all information known to him that may be relevant to the purchaser’s decision whether to buy, for how much and on what terms.
Despite what many people blindly assume, it is not a contract requiring utmost good faith.
Before buying a property, check it out. What more can be said? You get one chance before a contract is signed or becomes unconditional. As a vendor, understand what you must disclose and what you do not need to say and note that silence is not always a misrepresentation.
Talk to a good lawyer and other property professionals, who understand the complexities of property.