There are a few traps for the unwary when selling a property. Here are five things you need to be aware of to avoid a costly mistake.
1. Seller’s warranty
When signing a Sale and Purchase Agreement you’re confirming that you:
- Have not received any notice or demand and have no knowledge of any requisition or outstanding requirement.
- Have not signed any consent or waiver that you have not passed onto the buyer; and
- Have no knowledge or notice of any fact which might result in proceedings being instituted by or against you or the buyer
- Have obtained permits or consents for work you have done on the property and had the work signed off by the Council.
If any of these points above relate to the property you are selling, you should advise your solicitor in the first instance.
2. Chattels warranty
You also confirm that on settlement:
- You will deliver the chattels listed in the Agreement and all plant, equipment, systems and devices serving the property (such as security systems and air conditioning) in reasonable working order but in all other respects in their state as at the date of the Agreement (fair wear and tear excepted).
- The chattels and electrical and other installations are free of any charges (eg. free of hire purchase, Q Card or other finance company debt).
If chattels are not in reasonable working order or free of charges then the purchaser may ask for a reduction in the purchase price by way of compensation, or a retention of settlement funds until you can provide satisfactory chattels.
3. Tenants
When you sell a tenanted property you must:
- Give any tenant at least 42 days’ written notice to vacate the property (45 days’ notice usually plays it safe).
- Give notice as soon as all conditions in the Agreement have been satisfied.
- Allow enough time between giving notice and the settlement date so you can give vacant possession on settlement.
You have an obligation under the Tenancies Act 2019 to provide the correct notice to the tenant and to provide a vacant property, if required by the Sale and Purchase Agreement.
4. Tax
- If you bought the property on or after 29 March 2018, you’re selling it within 5 years, and it isn’t your main home, then you may be liable to pay tax on any gain you make on the sale.
- Your lawyer may be legally required to hold back money from the sale to pay the tax if you’re an “overseas person”.
- If the property is a rental and you have claimed depreciation you could be liable for tax.
Tax on the sale of property can be complex. There are many ways you can be liable to pay tax when you sell a property – talk to your lawyer, legal executive, accountant or a tax advisor before you sign an Agreement.
5. GST
If you are registered for GST and the property is included in your taxable activity:
- You must state on the front page of the Agreement you are registered for GST
- You must fully and accurately complete the GST information in Schedule 1 of the Agreement
