With the success of the New Zealand property market, comes the opportunity to make substantial gains from “doing up” properties and trading them. Property renovations have become a leading pastime for Kiwis given our inherent DIY mind-set.
Property traders are given that name because they purchase “do up” properties with the intention to renovate and re-sell them in a relatively short period of time. The name that is given to people that hold investment property over a relatively long period of time is commonly referred to as a property investor.
It is not uncommon for a property trader or a property investor to nominate their agreement to another party to complete the purchase of a property. This could occur for a number of reasons and in most situations the purchaser would nominate a newly formed trust or company. However, Sale and Purchase Agreements are frequently nominated to friends, family, or a member within a similar business network.
The Real Estate Agent’s Authority has expressed concerns over the use of nominations by property traders and investors, because of the similarities between their actions and the work usually performed by Real Estate Agents, who are regulated and licenced under the Real Estates Agents Act 2008.
The Wellington High Court determined that situations involving a person without a licence or an exemption earning a “finder’s fee” when bringing about the sale of land could contravene the Real Estate Agents Act.
Although the nomination of an Agreement is a contractual right, a person does not have an inherent right to bring about the sale or purchase of land on behalf of another person without a Real Estate Agent’s licence or an exception. A breach of the Real Estates Agents Act could potentially result in significant penalties and fines.
People involved with Property trading, investing, or finding properties should assess whether their activities amount to an offence under the Real Estate Agents Act. If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Steven Lee
slee@farry.co.nz
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.