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Cany you rely on the seller's or agent's LIM report when buying a property?

28 February 2020

Before you commit to buying a property it’s always wise to obtain a LIM report. You should also consider making your purchase agreement conditional on your approval of the LIM. A LIM report (Land Information Memorandum) is a report issued by the territorial authority (Council) containing information about a property.

About LIMs

Anyone can apply for a LIM report. The contents of the LIM vary between Councils. However, by law the Council must include certain information in the LIM, including the special features of the land (e.g. erosion and contamination), drains, water supply, rates, documents issued by the Council, building matters, use of the land, information notified to the Council under any Act or by a network utility operator, and other information the Council considers relevant (refer to the Local Government Official Information and Meetings Act 1987). Although the LIM might contain valuable information about a property, it will not contain all of the information the Council holds. You may need to look elsewhere for information that’s not included in the LIM but is important in your decision to buy the property.

Person obtaining a LIM can sue Council

The Act provides that the LIM is sufficient evidence of the correctness of the information in it. The courts have held that Council will be liable to the person who obtains the LIM if it provides incorrect information and the person suffers loss as a result.  In one case it was stated: “The information supplied in a LIM is likely to be crucial to those who seek it. They will obviously rely on the accuracy of the LIM when deciding how to proceed”.

Council may not be liable

The liability of the Council is not so clear if the LIM is relied on by a person who has not applied for and paid for it. For example, it is common for a seller or real estate agent to obtain a LIM and provide it to prospective purchasers. In one case the judge said he did not accept the Council owed a general duty of care in relation to the LIM to anyone other than the person who applied for it. This means a buyer won’t be able to sue the Council in respect of a LIM obtained by someone else if the LIM contains inaccurate information.

Purchasers should obtain their own LIMs

Until there is a definitive judicial ruling on this issue, purchasers should obtain their own LIMs and not rely on the seller’s or real estate agent’s LIM. Unfortunately this can mean hundreds of dollars spent on LIM reports by purchasers who are unsuccessful in buying properties. However, in light of the hundreds of thousands, if not millions, involved in property today, this might be a small price to pay.

Barbara McDermott is a Partner in the Private Client Team at Norris Ward McKinnon. You can contact Barbara at barbara.mcdermott@nwm.co.nz

Barbara McDermott