04 October 2022
Selling your property: Warranties you need to consider
When looking to sell your property, there are very specific warranties that you as the Seller provide to a Purchaser. These warranties are contained in clause 7 of the Eleventh Edition Auckland District Law Society Agreement for Sale and Purchase of Real Estate (“Agreement”). This article summarises some (but not all) of the key warranties that you need to consider prior to selling your property.
1. Clause 7.1: Notices, Demands, Consents and Waivers
You warrant that at the date of the Agreement, you have not received any notice or demand from the Council or the government under the Resource Management Act 1991 or any other party regarding the property. You also warrant that you have not given any undisclosed consent or waiver, which directly or indirectly affects the property.
In the Court of Appeal decision Western Park Village Limited v Baho  NZHC 2497 it was held that a letter from a solicitor which threatened litigation if the rockfall issue was not dealt with did not amount to notice, demand or requisition under this warranty. This is because the letter was not viewed as a formal requirement or demand that a specific action be taken.
In practice, we see issues arise where for example, you have granted your neighbour consent to carry out a specific activity (or business) on their property which may directly or indirectly have an effect on your property. Providing your neighbour with a consent such as this will need to be disclosed in writing to any purchaser prior to signing the Agreement.
2. Clause 7.2: Knowledge of Proceedings
You warrant that at the date of the Agreement, you have no knowledge or notice of any fact which might result in proceedings being instituted against yourself in respect of the property.
The term “proceedings” is widely defined and may have implications if you are selling your property that is subject to any outstanding legal matters. Any legal matters which affect your property must be disclosed in writing to any purchaser prior to signing the Agreement.
3. Clause 7.3: You provide the following warranties at the settlement date:
Clause 7.3(1) Warranty as to Chattels
The chattels included in the sale and all plant, equipment, system or devices which provide any services or amenities to the property must be delivered to the purchaser in “reasonable working order” but in all other respects, in their state of repair as at the date of the Agreement (with fair wear and tear excepted).
In the High Court decision of M & L Moore Limited & Anor v Beadle HC Auckland CP 482-96, damage was caused to the driveway after an agreement was entered into. There was a conflict of evidence about the damage to the driveway, whether the damage required patching and whether the patching had been carried out. The Court held that the driveway was in reasonable operational order on the possession date. The fact that the driveway did not meet the standards of the Purchaser did not mean the Vendor was in breach of their contractual warranty of reasonable operational order, having regard to the driveways age and condition. In addition to this, it was held that reasonable operational order did not imply that a fixture or chattel is free from any defect or has been constructed to an exemplary standard.
Clause 7.3(2) Electrical and Other Installations
All electrical and other installations at the property, and all chattels included in the sale, must be unencumbered (ie: free of any security charges at settlement).
An example of this is where you have purchased a chattel (such as a heat pump or an oven) on a hire purchase type of arrangement. The retailer or supplier may register a financing statement against your name as security for the hire purchase arrangements until full payment of the chattel is received.
It’s standard practice for the purchaser’s lawyer to search the Personal Property Securities Registrar prior to settlement to check whether any financing statement or charge is registered over any of the chattels being sold. All financing statements and charges which relate to the chattels, electrical and other installations at the property must be repaid and the charge will then be released.
Clause 7.3(5): Consent for Works
You warrant that where you have done or caused or permitted to be done on the property, any work that requires any permit, resource consent, or building consent, the work was carried out in accordance with the relevant consents, and code compliance certificates obtained.
We are seeing a significant number of properties being sold where building work has been completed without obtaining a building consent. Examples of this include (but are not limited to) tiling to a shower, new plumbing and drainage work where an additional sanitary fixture is installed and installing a wood burner or air conditioning unit.
Before undertaking any work to your property, written confirmation from your Local Authority should be obtained confirming that building consent is not required. If you have completed work that requires a building consent, this must be disclosed in writing to any purchaser. You should also discuss with your Local Authority the process of obtaining a Certificate of Acceptance for work completed that requires a building consent.
There are a number of warranties that you provide when selling your property that must be considered. Our property team at Saunders Robinson Brown are experienced in dealing with a wide range of matters with preparing an Agreement for Sale and Purchase and advising you of the warranties that you provide. Contact us today if you have any questions.
The above information is of a general nature only. The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to their specific circumstances.