A LIM report reveals that the property has an outstanding notice to fix building code violations. How does this typically affect the sale?
Correct Answer
C) The purchaser can negotiate who will remedy the issues, or a price change
Outstanding notices to fix are disclosed in the LIM report, and the parties can negotiate how to handle these issues. This might involve the vendor fixing them, adjusting the price, or the purchaser accepting responsibility for the work.
Why This Is the Correct Answer
An outstanding notice to fix shown in the LIM is something the parties negotiate: the vendor fixes it, the price changes, or the buyer takes it on. Under a standard LIM condition the buyer can also object by notice. If the vendor then agrees to remedy the matter, that becomes a requirement of settlement; if not, the buyer can end the agreement.
Why the Other Options Are Wrong
Option A: The agreement is automatically cancelled once the notice to fix is disclosed
Disclosure of a notice to fix does not cancel anything. The purchaser may have a right to cancel under a LIM condition, but must give notice.
Option B: The vendor is legally required to clear the notice to fix before settlement
No law requires the vendor to clear the notice before settlement. Who does the work is a matter for negotiation.
Option D: The council withdraws the LIM until the building work has been brought up to Code
A LIM reports the notice. The council does not withdraw the LIM because a notice is outstanding.
Deep Analysis of This Sale Purchase Question
This question tests understanding of how building code violations disclosed in LIM reports affect property transactions under New Zealand law. A LIM (Land Information Memorandum) is a crucial document that reveals council-held information about a property, including outstanding notices to fix. The key principle is that disclosure doesn't automatically void a contract or mandate specific remedial actions. Instead, it creates an opportunity for informed negotiation between parties. This reflects the broader legal framework where parties have contractual freedom to allocate risks and responsibilities, provided they do so with full disclosure. The question highlights the importance of due diligence in property transactions and demonstrates how the LIM process protects both buyers and sellers by ensuring transparency while maintaining flexibility in how issues are resolved.
Background Knowledge for Sale Purchase
A LIM (Land Information Memorandum) is issued by territorial authorities under the Local Government Official Information and Meetings Act 1987. It contains council-held information about a property including building consents, notices to fix, and other relevant matters. Outstanding notices to fix indicate building code violations that require remedial action. The Real Estate Agents Act 2008 requires agents to ensure clients are properly informed about material facts affecting property value or desirability. The principle of caveat emptor (buyer beware) is modified by disclosure requirements, creating a framework where informed negotiation can occur once issues are known.
Memory Technique
Remember 'NEGOTIATE' - when a LIM reveals issues, parties can Negotiate solutions rather than face automatic cancellation or mandatory vendor fixes. Think of it like finding a crack in a car you're buying - you don't have to walk away or demand the seller fix it; you can negotiate who pays for repairs or adjust the price accordingly.
When you see LIM report questions about building issues, remember NEGOTIATE. Look for answer options that involve discussion and agreement between parties rather than automatic legal consequences or rigid requirements.
Exam Tip for Sale Purchase
For LIM-related questions, remember that disclosure creates opportunity for negotiation, not automatic consequences. Look for answers emphasizing party flexibility and contractual freedom rather than mandatory actions or automatic cancellations.
Real World Application in Sale Purchase
A couple finds their dream home but the LIM reveals an outstanding notice to fix regarding unauthorized deck alterations. Rather than walking away, they negotiate with the vendors. Options discussed include: vendors fixing the deck before settlement, reducing the purchase price by the estimated repair cost, or the buyers taking responsibility post-settlement in exchange for a lower price. They ultimately agree on a $15,000 price reduction, allowing them to engage their preferred contractor after settlement. This demonstrates how LIM disclosures facilitate informed decision-making rather than transaction termination.
Common Mistakes to Avoid on Sale Purchase Questions
- •Assuming LIM issues automatically void contracts
- •Believing vendors must always fix disclosed problems
- •Thinking councils cancel LIMs due to violations
Related Topics & Key Terms
Key Terms:
More Sale Purchase Questions
A property is sold at auction for $850,000 with a 10% deposit required. The successful bidder has concerns about the LIM report after the auction. What is their legal position?
What is the primary purpose of a LIM (Land Information Memorandum) in the sale and purchase process?
What deposit is most commonly agreed in New Zealand residential sale and purchase agreements?
When does an Agreement for Sale and Purchase become unconditional?
In a property auction, when is the sale considered complete?
- → How is the settlement date set in a New Zealand residential sale and purchase?
- → What typically happens to the deposit when an unconditional sale and purchase agreement is signed?
- → During settlement, what document transfers legal ownership of the property from vendor to purchaser?
- → A property is passed in at auction for $800,000 with a reserve price of $850,000. The highest bidder approaches the vendor immediately after. Which statement is most accurate about the subsequent negotiation?
- → When does an Agreement for Sale and Purchase become unconditional if it contains a finance condition with a 10 working day timeframe?
- → What is the typical deposit amount required immediately after a successful auction bid in New Zealand?
- → Under the standard TLANZ/REINZ Agreement for Sale and Purchase, who is typically responsible for paying rates from the settlement date?
- → At an auction, the reserve is $800,000 but bidding stalls at $750,000. The vendor then negotiates with the highest bidder and they agree to sell at $780,000, signing on the auction terms with no conditions. What type of sale is this?
- → A purchaser has included a finance condition with a 10 working day deadline. On day 8, they receive loan pre-approval but final approval is pending. What should they do?
- → What happens if a purchaser fails to pay the deposit by the specified deadline in the Agreement for Sale and Purchase?
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