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Buying or selling a rural property in Waikato?

30 November 2017

If you’re looking to buy a rural property in the Waikato and Waipa catchments of the Waikato Regional Council you will need to consider the implications of the Council’s Healthy Rivers Plan Change 1. If you’re selling a rural property you will ease the sale process by making available information about the property which will satisfy the buyer’s due diligence investigations.

Due diligence – what to consider

A buyer will be taking into account of the cost of complying with the new rules. If stock aren’t already excluded from waterways, money will need to be spent on fencing.  For the majority of rural properties money will need to be spent on the preparation of a farm environment plan (FEP) and work done on establishing the property’s nitrogen reference point (NRP).

The FEP will identify contaminant losses and how they will be managed. It will be prepared by a certified professional and must be submitted to the Council on 1 July 2020, 2023 or 2026, depending on the location of the sub-catchment. It could cost between $2,000 and $10,000.

The NRP will provide information on the property’s nitrogen leaching losses. A buyer’s ability to use the property in future will depend on the NRP and this, in turn, will depend on how the property has been used in the past. A buyer will therefore want information showing past use of the property. This will include the seller’s records to verify the property’s NRP. If a buyer can’t verify the NRP the Council will hold the buyer to default values. This will typically give a conservative estimate of nitrogen losses which will mean future use of the property will be more restricted than if the buyer could verify the NRP. If the property is one of the top 25 per cent of nitrogen dischargers, the buyer will be required to reduce them. If it is one of the remaining 75% the discharges will have to be held at current levels.

What information will sellers be asked to provide?

Once the buyer has purchased the property, he or she should be able to put together most of the information required by Council to register, establish the property’s NRP and prepare a FEP. However, the buyer will also need some historical information from the seller.

  1. Registration

If the property is more than two hectares (and not urban) it will need to be registered with the Council between 1 September 2018 and 31 March 2019. The seller will need to provide a description of how the land was used as at 22 October 2016 (the date the plan change was publicly notified) so the buyer can complete registration.

  1. Nitrogen Reference Point (NRP)

If the property is more than 20 hectares, or if it produces commercial vegetables, by March 2019 Council will need to be provided with its NRP and associated data. The NRP will be calculated using OVERSEER or other method approved by the Council and will need to be approved by a certified farm nutrient advisor.

For properties of more than 20 hectares the NRP will be the highest annual leaching loss in either the 2014/15 or 2015/16 financial year. For commercial vegetable production properties the NRP will be the average Nitrogen leaching losses from 1 July 2006 to 30 June 2016. The buyer will want the OVERSEER files for these years and supporting documentation to verify the calculations.

Warranties to be included in the agreement for sale and purchase

Buyers would be well advised to ask for clauses to be included in the sale and purchase agreement stating that the seller has provided accurate information that the buyer can rely on. If these warranties are included the buyer will be able to seek compensation from the seller if the information provided turns out to be inaccurate and the buyer is unable to maximise use of the property as a result.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.

 

Barbara McDermott