Buying and selling property during lockdown

The lockdown has made property dealings tricky. With New Zealand in two different lockdown levels, it would be a good idea to review what you can and cannot do at each level when you buy or sell property.

Below is a very simple table that lists what people can and cannot do during levels 4 and 3. However, as there is more to the restrictions we would highly recommend reading the whole article.

 Pre-settlement inspectionsOpen homesAbility to fulfil conditionsAbility to move
Level 4NoNoPossibly (limited)No
Level 3YesYesYesYes

Level 4

Auckland is currently at level 4 and faces the strictest lockdown restrictions. The closure of most businesses and services, and the inability to leave the home except for essentials, means that property dealings are especially challenging. While some organisations like Land Information New Zealand (LINZ), banks, law firms, and the like can work remotely, this will likely cause some delays.

During level 4, sellers cannot move out of the property nor can buyers move into the property after the sale is complete. Because of this, the Real Estate Authority (REA) recommends that settlement should be deferred until at least alert level 3.  However, legal obligations will be dictated by the contractual terms in the agreement.

Things for sellers to consider during level 4

Due to movement restrictions, buyers cannot conduct pre-settlement inspections which a buyer will be contractually entitled to. If the property is tenanted, and subject to tenancy then settlement may proceed.  However, if it is sold vacant possession, then there will be arguments on whether the purchaser can fulfil its entitlement.  Having a Covid clause in your agreement will fix this argument, but if not, you may end up in a difficult fight unless parties agree to be reasonable and insert a Covid clause.

Similarly, you also cannot host an open home for your property. You can try a virtual open home but you should first talk to your real estate agent and discuss whether it is worth keeping your property on the market. If you have any advertising in place, you may want to stop that until level 3.

If you have a conditional offer from a buyer, you should bear in mind that the buyer will likely struggle to fulfil conditions that may have otherwise been straightforward. For example, LIM reports may not be available due to level 4 lockdown restrictions or only be released outside of the stipulated deadlines. It is also important to keep in mind that this is a two-way street so you may struggle to meet the buyer’s conditions as well. It is important for both sides to compromise and understand what impact the lockdown has on everyone.

Ultimately, it would be best to wait for the reduction in alert levels before trying to conclude a sale. If you were in the middle of a transaction before lockdown, talk with the other party and see if you can defer until a later date. An easy starting point is 10 days after level 3 begins, to give each side time to fulfil their conditions.  You should always seek legal advice.

Things for buyers to consider during level 4

Similar to the above, we would recommend trying to defer buying a property until at least level 3, unless the agreement had appropriate Covid clauses to protect you. This will enable you to inspect the property in person and have inspectors come in to assess the property for any faults or issues. You can try to ask for a video inspection of the property, but we would recommend that you seek professional advice about what your rights are should a fault be discovered after you purchased the property.

Service providers like banks, lawyers, conveyancers, and LINZ will be working remotely so you may face delays when asking for their services. In addition, other service providers like building inspectors or valuers will not be available at all during level 4 because they will not be able to physically inspect the house. You will need to consider if you can meet any conditions of the agreement carefully, and if not you may need to ask for an extension until after the alert level is dropped.  Buyers must bear in mind that often a bank may require a registered valuation, and while this may have been simple pre-lockdown, this will undoubtedly be delayed during Level 4.

If you are not in the middle of a transaction and you are looking for a property to buy, please be aware that open homes and private viewings are not allowed under Level 4. Real estate agents cannot inspect or appraise properties either, so you may not have any disclosure about potential faults or issues the property may have. This also extends to property inspectors and valuers. Again, we would recommend waiting for level 3 before trying to buy a property.

Things for sellers to consider during level 3

At level 3, while there are still restrictions in place the strictest conditions will be lifted.

Service providers like valuers and property inspectors can provide their services, which means that some conditions under your agreement will be able to be satisfied. However service providers may still need to work in a limited capacity to comply with lockdown conditions, so you should expect some delays with their work.

You can now invite prospective buyers to inspect the property themselves. However, you can only have a total of 2 visits per day to avoid causing a cluster. This visit restriction also includes any service providers you have working on your property, so you will need to plan ahead carefully.

Please keep in mind that prospective buyers should only be visiting to inspect your property if they are from the same region, to avoid cross-region clusters from forming. If this is an issue, you may need to consider waiting for level 2 for more relaxed restrictions.

To avoid the number of people in close proximity to each other, you should not be there at the viewing. Your agent however is allowed to remain. Your agent will need to open all of the doors to avoid people from touching the door handles, as well as checking on everyone’s health to make sure they are at low risk.

However, please keep in mind that this is not the same as hosting an open home. You cannot have open homes at level 3, as this would cause too many people to be in close proximity to each other. Therefore, you will need to either wait for a lower alert level or consider a virtual open home.

As with level 4, please keep in mind that it may be difficult to meet conditions under the agreement. While service providers can work, they may only be working in a limited capacity. Similarly, please also keep in mind that the buyer will be facing the same issues.

Property prices may fluctuate during level 3, as service providers like inspectors and valuers can do their work. You should keep this in mind as the price of the property may suddenly fall based on their reports.

If you are selling the property but don’t have any buyers yet, we would recommend discussing how to proceed with your agent and lawyer. Similarly, you may decide to take your property off the market and/or stop advertising until a lower alert level.

There are still some services that are limited or not available to you during level 3, especially if you have not started selling your property yet. Real estate agents should be creating online appraisals at level 3, and then update these appraisals once they visit the property at level 2, for example. You also cannot visit a real estate office during level 3, so you will need to use REA’s public register or find them online and organise their services from there.

Things for buyers to consider during level 3

At alert level 3, some service providers will now be operating. However, this may be in a limited capacity so you will need to be aware that there may be delays with their services. They will also need to comply with level 3 restrictions, such as social distancing, so this may also cause issues. You should carefully consider whether you can meet any conditions in your agreement.

The seller may face similar issues with their conditions too. If possible, the two of you should agree to extend the deadlines until the alert levels are lowered.

During alert level 3, it is possible to visit properties in person yourself. However there are heavy restrictions around this and you cannot simply turn up and expect to be able to walk in. You will need to organise viewings with the seller in advance, so that the seller can prepare necessary safety precautions. In addition, there are limits to how many people the seller can have at the property per day and this might make visiting difficult for you. If you cannot do a physical viewing, you may need to ask for a virtual viewing instead.

Please be aware that open homes are not available during level 3, as it would cause too many people to be in close proximity to each other.

Property prices may fluctuate during level 3, as service providers like inspectors and valuers can do their work. You should keep this in mind as the price of the property may suddenly rise based on their reports.

You can settle and move into properties during level 3, however as previously mentioned service providers may be working in a limited capacity. This will include moving companies, which may mean moving into your property might be delayed.

In addition, travel in and out an alert level 3 region is restricted. The police will be enforcing travel checkpoints, so you will need to provide evidence of your purpose of travel and what your destination is.

Before you take any steps that create legal obligations, we highly recommend you take legal advice. Buying or selling properties will most likely involve the biggest asset you own and it is highly important you get this process right.