In this guide, we explain how the purchase process works for off the plan apartments in New Zealand if you’re a foreign buyer. The processes to acquire, manage and maintain property differs between countries, so we’ve written a series of guides for different countries so you know what to expect when buying off the plan.
So let’s assume you’ve done your research, gathered data and information, run analysis of the likely performance of the property you want to buy and have secured the lowest possible price. What next? What is the purchase process for buying off the plan New Zealand property?
The purchasing process is generally the same regardless for most apartments in New Zealand, although there may be some minor variations depending on the developer, such as the requirement for stage payments.
Purchase Process – Step 1- Overseas Investment Act 2015
If you’re from overseas, you must ensure the apartment you are purchasing has the relevant exemption certificate for foreign buyers, or you must submit an individual application to the Overseas Investment Office.
Many foreign investors mistakenly believe they are unable to purchase property in New Zealand. But there are exceptions to this. If you’re a foreign buyer, you can purchase apartments off-plan in large apartment developments if the development has one of three certificates. Each certificate carries different rules, obligations and rights. You can read more about restrictions on foreign ownership in New Zealand in our article here and on the New Zealand government website.
Most sale and purchase Agreements will require you to confirm that you are a New Zealand citizen or are able to purchase property in New Zealand in accordance with the Overseas Investment Act 2005.
If you’re from Singapore or Australia, different rules apply.
Purchase Process – Step 2 – Make sure you buy in the right entity
As a foreign buyer purchasing in New Zealand it is critical to ensure you are purchasing the property in the correct entity (such as an individual, company or trust) that’s right for your needs and investment strategy. If you make changes to the entity which owns the asset at a later date, this could trigger a taxation event, so get it right from the start.
It is really important to make sure that you have thought about this carefully, so make sure that you’ve thought about this well in advance of entering into the legal process of buying a property. You should seek independent specialist taxation advice on this matter.
Purchase Process – Step 3 – Offer
When you have identified the property you wish to purchase and your offer to is accepted, you will need to pay a First Deposit (this is the equivalent to a reservation fee for UK property). You’ll pay this to the developer directly or to the property agent. The first deposit fee may vary but will be in the region of $NZD 1,000 – $NZD 5,000 depending on the development and the developer.
Purchase Process – Step 4 – Agreement for sale and purchase of real estate (Particular Terms and Conditions of sale)
The agreement for sale and purchase will be provided to you. This is a legally binding contract between the vendor and you. The agreement will detail the terms and conditions of the sale, and the general terms and conditions of sale, together with schedules and annexures such as floor plans and outline specification.
Purchase Process – Step 5 – Appointing a solicitor
Before signing the Agreement, you should appoint a solicitor, conveyancer, or licensed real estate agent. Your appointed representative will review the sales contract prior to you signing the Agreement. Before signing the Agreement you will be advised that you must not rely on any information from a property agent and must seek your own professional advice including but not limited to legal advice, accounting advice and financial and investment advice.
Where an agreement relates to the sale of a residential property and the agreement was provided by a licensed real estate agent, or by a licensee on behalf of the agent, you must be provided with a copy of the ‘Sale and purchase agreement guide’ by the Real Estate Agents Authority. You will be required to acknowledge receipt of this document.
Your purchaser’s solicitor will carry out the necessary due diligence with regard to the terms of the Agreement and purchase of the property. Your solicitor should request a Land Information Memorandum (LIM). This is prepared by the local council and provides a summary of the current information pertaining to the property / land held by various council departments.
Purchase Process- Step 6 – Signing the Sale and Purchase Agreement and Deposit
When you have satisfied yourself that you are happy with the terms of the Agreement, you will sign the contract. The Vendor will also sign the contract. A second deposit is then due within 10 working days to bring the full total paid to date to 10% of the agreed purchase price.
The total Deposit required is 10% of the agreed purchase price. This is payable in 2 tranches:
|First Deposit:||NZ$1,000||Payable on signing Sale and Purchase Agreement (S&PA)|
|Second Deposit:||10% of purchase price less NZ$1,000||10 working days after signing the S&PA|
The Deposit will be transferred to the trust account of the Stakeholder. On settlement the Deposit will be paid by the Stakeholder to the Vendor.
At this point the contract is legally binding, both you and the developer are committed to the sale. Should you withdraw from the sale, you will forfeit the deposit you have paid and have no recourse for this to be returned.
You also risks being sued by the developer for any financial loss if they subsequently sell the property for a lower price than was agreed with the you.
Purchase Process – Step 7 – Construction Updates
As an offshore investor you may well have purchased the property off the plan, 2 or 3 years prior to the building being completed. Reputable developers will keep you regularly updated regarding the construction process and advise if this impacts the settlement date.
Purchase Process – Step 8 – Obtaining a Mortgage
If you require a mortgage, you should seek the advice of a mortgage broker. As a foreign buyer you should start your preparation at least 3 – 6 months in advance as the process will take longer than for resident purchasers.
Purchase Process – Step 9 – Practical Completion Certificates
Residential property developers in New Zealand must complete their developments to a specific standard. The Building Act 2004 requires developers to apply for a Code Compliance Certificate (CCC) which confirms that the Council is satisfied on reasonable grounds that all building work has been completed in accordance with the building consent issued for the development. Residential developers must have a CCC to complete the sale of a property.
Purchase Process – Step 10 – Settlement Preparation
A settlement date will be included within the contract with a provision that this may change due to the construction process taking more (or less) time than anticipated. The developer and agent (if any) will keep you updated with changes should they arise.
When you have been advised of the confirmed settlement date, you will need to arrange for the remaining balance (usually 90% of the purchase price) to be paid. The solicitor will arrange to draw down the mortgage funds from the bank and you will need to pay any further sums, if for example, your loan is for 50% of the property price.
In the many countries favoured by offshore investors (such as the UK and Australia), Stamp Duty is often the most significant additional cost due at settlement. However, in New Zealand, no Stamp Duty (or an equivalent) is due.
Purchase Process – Step 11 – Settlement
On the day of settlement, your solicitor will transfer the remaining balance to the Vendor’s solicitor and complete the final procedures. There is no requirement for either the Vendor or you to be present at settlement.
Settlements must usually be completed no later by 3.30pm on the Settlement Date. If Settlement is completed after this time, you may pay interest on the amount required to settle, until such time that Settlement occurs.
Purchase Process – Step 12 – Post-completion
Most investors will appoint a letting management company to find a tenant and manage the property and many developers will have a recommended letting and management agent who can advise you. Fees may vary depending on the location of the property.
Investing in off the plan property is a well trodden path and providing you buy from a reputable developer, should be a smooth process, the key is to do your research and know what to expect. If you have any questions, do let us know. We are happy to help.
We hope you found this blog useful. If you’re at the start of your overseas investment journey, you may also want to read up on the purchase procedures in Australia or the United Kingdom in our online guides.
Important notice: Proptech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect. You use the information at your own risk and accept no liability if you rely on this information. Proptech Pioneer is not a tax advisor, conveyance, lawyer or financial advisor. You should seek independent advice from independent professionals before making any investment decision.