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Why Should Clients Obtain a Land Information Memorandum (LIM) From their Local Council Before Purchasing a Property? - Mon, 24 April 2017
We are often asked the question why clients should obtain a LIM and in particular one addressed to them (as distinct from one obtained by the Vendor's agent) before purchasing property. In short, there are many reasons, some of which we address for you below.
Under section 44A of the Local Government Official Information and Meetings Act 1987 (the Act) a Council is legally obliged and undertakes to give you relevant information and records held in their possession about the property held by Council when a LIM report is purchased from them.
A LIM will provide details including the zoning of the property, what Resource or Building Consents specific to the property, what outstanding issues there are in respect of such consents such as outstanding final inspections, maps of where services are provided to lots, whether the Council has any details of any contamination of the soil comprising the property and whether there are any natural hazards relating to these issues.
A recent example in many areas of Central Otago is the discovery of higher than normal levels of arsenic in the soil following the imposition of new rules relating to testing soils for contaminated substances required for some resource consents. If such testing has been conducted on or in the close proximity of the property you are looking at (and known to the Council) this should be recorded on the LIM report.
In the event, you choose to rely on a personal searches of Council records and online databases such as Edocs you are not acquiring the information in a legally binding form that you would if you pay for a LIM and cannot rely on it down the track to the same degree. The same problem exists if the LIM is not addressed to you or you have acquired it after the date you purchased the property. In such cases you simply cannot rely on it if it is subsequently found to contain errors or omissions. Further, the Courts have routinely held that in leaky homes, building defect claims and cases involving natural hazard damage that if you have not obtained a LIM then you have contributed to your own loss often resulting on awards of damages being reduced significantly.
There are often examples of documents missing from the Council’s online records such as final building inspections or missing consent documentation. If you purchase a LIM from Council that doesn’t disclose such information and you later find this out you have a direct claim against the Council as any prudent purchaser is entitled to rely on a LIM as it a core Council function to be an accurate record holder and you have essentially paid for this service. Quite simply you can sue the Council for any loss caused by their mistake, an avenue of redress that is not available if you undertake to do the research on Council’s file yourself.
There may well be very little if any change in information obtained from your own search and a Council LIM but for the cost of a couple of hundred dollars on what is generally a 6, 7 or 8 figure transaction is arguably the cheapest form of insurance you can acquire. Section 44A of the act requires the LIM to be prepared within 10 working days but you can order an “urgent” LIM which is usually prepared in 3 working days. A QLDC an ordinary LIM currently costs $200 and an urgent one is $315.
If you require any further information about prudent due diligence and in particular LIMs then please feel free to consult with the Property and Local Government Law experts at TODD & WALKER LAW.
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