All was going well with Jane’s sale of her property and she was expecting to receive the proceeds of sale in a few days, which would be enough to clear her debt to the bank and leave just enough to comfortably pay for her move to Australia for work.

A few days before settlement there was a hiccup. Her lawyer contacted her as the purchaser had raised that there was a Personal Property Securities Register charge over the carpet in the house which she purchased a year prior with her Q Card, and there was still $2,000 to be paid to clear the debt.

Jane’s lawyer advised that this had to be paid off as part of the settlement process otherwise Q Card will not remove the charge they have over the carpet in the property.

A standard Vendor warranty in the ADLS agreement for sale and purchase commonly used in New Zealand is:

“All electrical and other installations on the property are free of any charge whatsoever, and all chattels included in the sale are the unencumbered property of the vendor.”

When you purchase items using hire purchase types of arrangement, the finance company will usually require that they create a PPSR charge over what you have purchased.  This could be a washing machine or carpet, and the idea is if you fail on your payment they can repossess what you purchased using the funds you borrowed.

There is also an insulation loan arrangement that can be made with some Councils where you slowly pay off the loan given to you to put insulation in your property along with your standard rates payments.

There is nothing wrong with purchasing items this way, but if you have agreed to sell that item with the property then, unless you have added a special term to the agreement, that item is included as part of the sale for no additional cost and free of charge, to ensure that the item becomes the purchaser’s owns unencumbered property.

Another way people can be caught out is if they include something in the sale that does not belong to them.

Sometimes this could be something in the property that actually belongs to another person. For example there may have been a new fridge in the property that was listed in the Agreement for Sale and Purchase, but it turns out that belonged to a tenant and they were taking it away with them.  As the vendor agreed to sell the purchaser a fridge, the vendor would have to source an equivalent fridge for the purchaser.

It could also be that it is a hire arrangement where you never become the owner of the property, for example some solar panel arrangements have you paying a certain amount each month for 30 years but at the end of the 30 years the company can choose to take back the solar panels. Unless there is a special term in the agreement, if you included those solar panels as part of the sale, you may have to pay a large sum to the company and/or the purchaser, as the purchaser is not liable to take over the payment agreement in the vendor’s place and the vendor agreed to sell the purchaser solar panels with the property.

The kind of special term that could be added to the agreement, if and only if the relevant finance company allows it and purchaser is agreeable, is a term whereby the purchaser agrees to take over the payment arrangement and to do all things necessary prior to settlement to have the arrangement assigned to themselves as part of the sale.

Alternatively, you as the vendor should be aware of any balance owing under any arrangement and factor that in when agreeing to the sale price and be prepared to pay off any funds owing prior to or on the settlement date.

When you are selling a property you should check who you still owe funds to for anything that you plan to sell with the property and check that you do indeed actually own what you are trying to sell.  Your lawyer can assist with searching the relevant Register and advising you on your obligations under the Agreement for Sale and Purchase.