A LIM or Land Information Memorandum is an important part of any due diligence during the sale or purchase of a property.

For buyers, it can save you from purchasing a home that’s risky or not compliant, but for vendors a LIM report could be the difference between a sale or deal going out the window. So when the time comes to buy or sell what should you be looking out for on a LIM?.

WHAT IS A LIM?

A LIM report is prepared by the local council at your request. It provides a summary of the current property information held by the different departments at council on the day the LIM was produced.

A LIM will typically include info about:

• Permits, building consents or requisitions, and other certificates previously issued by the local council or building consent authority
• Special land features such as erosion or flooding
• Zoning – how the land may be used and any conditions that apply
• Any notices to the council by any statutory organisation that has the power to classify land or buildings for any purpose
• Any rates owing on the land
• Stormwater or sewage drains
• Any notices to the council given by any network utility operator under the Building Act
• Any Heritage New Zealand protection
• Any other information that the council thinks is relevant.

Be aware that LIMs don’t provide all information on the property. This could include things like recent survey measurements, information on the building’s structural integrity, or issues around contamination or weather tightness.

WHY DO I NEED ONE?

Difficulties can arise when work has been completed without council consent, or when people have failed to obtain a final code of compliance certificate. Councils may not be able to grant retrospective consent for unconsented works, and a LIM means you can check whether any has been completed on a property.

If the LIM shows there was no consent granted for some work done, you can either try to negotiate with the seller to see if they will fix the problem, or you can back out of the agreement.

Likewise, it gives you an out if the report uncovers any potential issues such as flooding and instability, and other natural hazards.

WHAT CAN A LIM INFLUENCE?

Issues on the LIM can weigh heavily on your ability to secure finance for a purchase, and Vega CEO Harry Ferreira says it pays to be vigilant.

“Any issues on the land or the title could result in the lender looking at it and applying greater risk factors to it.”

“This means that they will decide whether they're going to lend to the property or pull out.”

He says it’s a document with a huge amount of influence.

“It can dictate how a lender assesses the risk that comes with that property, and more often than not if there are defects that can’t be mitigated, they just won’t lend.”

There are a number of issues that a lender may view as a red flag, but some of the most common include issues with boundaries and water.

“It could be your proximity to water, it could be water damage to the property. So, the water piece is quite pronounced.”

“Boundaries are also looked at closely. Are they the boundaries that you think they are? Or are they the boundaries as the council thinks it is.”

Ferreira says unconsented dwellings or structures on a property can also throw up a lot of issues too.

“This could be decking, or something like a sleepout.”

WHAT SHOULD I DO WITH A TROUBLESOME LIM?

It’s easy to look past a property’s flaws when you fall in love with it, but Ferreira says not having your LIM sorted can really complicate things, and seeking advice is vital.

“Always where possible get somebody like a lawyer or property expert, or property inspector to read the LIM, assess it and make sure that what you’re buying is good to buy.”

Ferreira says there are workarounds to getting a troublesome LIM across the line, but typically lenders like any issue fixed before getting finance.

“There could be a discount to the purchase price under certain circumstances to rectify the problem.”

“I had that in a property in Castor Bay. We needed a stormwater drain put in, and I paid for it with the money that was discounted from the purchase price.”

Ferreira says at times like this it’s important to lean on the support from your agent.

“You're going to be able to negotiate with your agent. Then you obviously also need to make sure you can fund that, and the bank would be happy with it.”

“Also never sign anything unless you're happy that the banks have already given written approval of your lending and understand the issues with regard to the property.”

WHAT IF I DON’T HAVE AN AGENT?

Ferreira says if you don’t have an agent to lean on, that talking to a broker is another great option.

“Most decent brokers own their own home and have gone through this before.”

“This is their bread and butter, and if they don’t know the ins and outs, they typically would know an agent who could work with the buyer, and they could do it together.”

But if something minor on your LIM turns out to be a major, what now?

“There has to be some kind of recourse through the industry body REINZ.”

“If it's minor you may just choose to take it on the chin and move forward with it. If it's a bit more major there are organisations that can act on your behalf.”

For more information about how your LIM could affect you lending visit https://vegalend.co.nz/