What do I have to tell prospective buyers?


​Q: What do I have to tell prospective buyers (and my real estate agent) when it comes to selling my house?

A: It’s no secret that real estate advertisements are designed to portray a property in the best light. An advert might extoll the virtues of the sun-drenched location while neglecting to mention the busy road, for example, or focus on the spectacular views rather than the difficult access from the street. It’s no crime to gloss over a property’s quirks if they are likely to be spotted easily at an open home (or even by reading the marketing material more closely), but lying by omission or design about more serious matters is not allowed and may put you at risk of being sued by the purchaser.

When you’re ready to sell your property it’s a good idea to get legal advice about your obligations before you sign an agency agreement. Most of these agreements, which set out the terms and conditions of your contract with the real estate agent, require you to confirm that you are unaware of any undisclosed defects in the property and that you haven’t withheld any information about it. As a seller, you must also confirm that your property has all the necessary consents and code compliance certificates for any building work, and that you haven’t given consent to any works at a neighbour’s property. The correct approach is to disclose outstanding consents to the agent. 

This is important for several reasons. Licensed real estate agents have clear obligations when it comes to disclosure. They must not mislead a seller or a potential buyer, or withhold any information. While it’s not up to the agent to uncover any hidden defects in a property, they must tell any prospective buyers what they know. Under the Real Estate Agents Act 2008, if licensed real estate agents suspect that a property may have a defect then they are obliged to ask the seller about it, or advise potential buyers of any risks. For example, if a property is next door to a proposed new development, or if it’s in an area that’s been subject to flooding, the agent must tell prospective buyers rather than turning a blind eye. If your property may be prone to weathertightness issues thanks to its age or cladding, then the agent may have to disclose this potential risk to prospective buyers. If it doesn’t have any weathertightness problems, to make the sale process as efficient as possible it may be worth getting this confirmed in an expert report by a qualified building inspector who has professional indemnity insurance, understands the strict legal requirements of their role and carries out their work in accordance with the New Zealand Property Inspection Standard.

If you know there are issues with the property, whether it’​s something small like a garage door not working properly, or a bigger deal like an unconsented deck, it’s best to discuss them with the agent you are working with. They can help you decide how to manage the problem, whether that means fixing it, or disclosing it to potential buyers. However, a licensed real estate agent must not disclose any problems with your property to buyers without getting your consent first. If a seller doesn’t agree on a disclosure, the agent is required to stop working for them rather than disclose any defects without consent.

These rules offer more protection to buyers than the traditional attitude of ‘caveat emptor’ (buyer beware), which assumed that the seller would always know more than the buyer and any sale was at the buyer’s risk. However, buyers should always do their own research about a property before signing a sale and purchase agreement. Buyers should also ask the agent about anything they are concerned about, no matter how trivial it may seem. It’s far better to get an answer upfront than find out when it’s too late.

Kevin Lampen-Smith is the chief executive of the Real Estate Agents Authority (REAA), the independent government agency that regulates the New Zealand real estate industry. If you have a question about buying or selling property, send it to info@reaa.govt.nz