YEAH RIGHT! SOME PROPERTY LAW MISCONCEPTIONS

The law is black and white
That’s the sort of thing a “closet lawyer” would say.
Granted, the legal answer may sometimes seem clear. But that doesn’t mean the other side will agree.
If they don’t, it doesn’t actually matter how black and white it is, either we have to negotiate something that both sides are happy with. Or you can trot off and have your day in court.
Which one do you want?
Clue: One is generally a lot quicker, cheaper, less stressful and more discrete than the other.
The agreement is a standard form
The standard form Agreement is by definition standard, that’s true.
But many times extra conditions are added, or some of the standard wording is crossed out or replaced. These can fundamentally change the deal.
There is some strategy involved here. As an experienced lawyer will know, there are many more negotiation points than just the Purchase Price.
Think about that – what if the settlement date on a million dollar sale was brought forward by two months. The cash effect of that change is worth about eight thousand dollars because that is roughly the extra interest the vendor will earn for getting the money sooner, and the cost to the buyer of paying the money sooner.
There’s no need for a LIM report
Your call. We would never say “don’t get one”.
I do understand that many times nothing of concern will show up on the LIM. I guess it’s a price you pay for a measure of comfort.
That’s not to say that there aren’t other things you should also check before deciding to buy the property, including making sure your finance is in place, getting a builder’s report, finding out if the price you’re offering is about right etc.
Keep it simple – buy it in your own name
There is a lot to be said for keeping it simple.
But sometimes, depending on what you plan to do with the property, there is good reason to use some other entity to complete the purchase, whether it be for tax reasons or to make sure the property is not exposed to some other risk, such as business failure, or relationship risk.
The good thing is that the standard form Agreement allows you to nominate some other entity to complete the purchase anyway if necessary.
You can build and sell one a year
I thought this one was dead and buried until I heard it from a builder just the other day.
It used to be common, particularly amongst tradies who were building spec homes to sell, that you could “do one a year” without having to worry about paying tax.
Not so.
In fact if you buy with the intention of building to sell for a profit I’d say that is exactly the sort of activity the IRD are interested in. The sort of thing that is going to render any profit you make taxable.
The other critical thing here, and this is a big point: Its not up to the IRD to prove to you that you should pay tax. They can simply make an assessment that tax is payable.
Its up to YOU to prove them wrong.
I can hear your tax adviser’s cash register ringing already. Ka-ching!
If you need help and know it, call Queenstown Law. If you need help and don’t actually know it, call us anyway. 03-4500000 or russell@mawhinney.co.nz