Out On A LIM - What a prospective purchaser should know about LIM reports

What is a LIM and what does it tell you?

A LIM is a Land Information Memorandum, commonly referred to as a "LIM report". A LIM report is issued by the local council for the area in which the property is situated and contains information the Council holds in relation to the property.  The information which must be included is prescribed by Section 44A of the Local Government Official Information and Meetings Act 1987.

This information includes:

• Potential erosion, subsidence, slippage, inundation (flooding) or the likely presence of hazardous contaminants;
• the location of private and public stormwater drains on the property, if any;
• rates owing on the land;
• any consent, certificate, notice, order or requisition affecting the land or any building on the land;
• any certificate issued by a building certifier pursuant to the Building Act 1991;
• the use to which the land may be put and conditions attached to that use;
• information notified to the authority by any statutory organisation having the power to classify land or buildings for any purpose, eg designation by the New Zealand Historic Places Trust under the Historic Places Act 1993;
• information notified to the authority by any network utility operator such as the electricity supply authority, or gas or petroleum corporations, pursuant to the Building Act.

This information is very useful for a number of reasons. For example, a purchaser intending to build on the property or use the property for a purpose other than purely as a residential home, for example a farming property, would want to know if the soil on the property is at risk of erosion or flooding or if the soil contains the presence of hazardous contaminants.

As another example, the LIM might disclose that the New Zealand Historic Places Trust is about to classify a building on the property as an historic place. This might prevent extensive renovations or affect the uses permitted on the property.

The LIM report will also tell a purchaser the zoning classification given to the property by the local council. These zoning classifications set out the permitted uses for a property and would have a huge impact on a purchaser intending to operate a small business from the property such as a panel beaters in a strictly residential zone.

One of the main advantages of the LIM report is that it shows a purchaser all the building consents and certificates issued for that property by the local council. This is important because if the property has, for example, a log burner or a pool which is not mentioned in the LIM report as having a building consent or code compliance certificate issued, then this means the local council did not give permission to build it and has not approved it.

Often, a prospective purchaser may discover that no permit or consent has been issued for works on the property and/or that no code compliance certificate has been issued. If so, the purchaser can ask the vendor to have the local council acknowledge the work and verify it is safe and sanitary if no building consent has been issued, or obtain a code compliance certificate if a building consent has been issued for the work. The purchaser can also ask the vendor to complete any work required to obtain the required acknowledgement or code compliance certificate. The vendor can choose whether or not to comply with the purchaser's notice but risks cancellation of the agreement if they do not comply. The standard LIM clause in the sale and purchase agreement is detailed and complex. It covers all kinds of matters that arise from a LIM, not just consents or permits for building work or alterations. Legal advice should be sought before commencing procedures under that clause.

Other items which may not have shown up on the LIM report but a purchaser should be aware of, include gas bottles and septic tanks. Gas bottles over nine kilograms in weight require a producer statement to be issued and attached to the gas bottle. Generally these are issued by the person who installs the gas bottle and a record of this is kept in a central register in Wellington at the Plumbers, Gasfitters & Drainlayers Board. If there is a gas bottle over nine kilograms without a producer statement, the purchaser should raise this with the vendor as soon as possible.

As septic tanks are installed by private individuals and are not part of a council sewage system, there will be no information on the LIM about when the septic tank was last cleaned or checked, or whether there is a problem with the tank. The problem with septic tanks is that it is very difficult to know whether there is a problem until there is a very obvious and messy one. The best course is to ask the vendor as to when the tank was installed, when it was last cleaned and checked and whether they have had any problems. A purchaser should walk around the tank and dispersal area checking for odour or dampness, and enquiries can also be made with the regional council as to whether they are aware of any unauthorised discharges from the tank.

Water supply is also very important in rural areas and the LIM report will set out what water supply the property is connected to. This may be of interest to a purchaser who needs to maintain a constant water supply, for example irrigation, because in times of high demand there will usually be water restrictions put in place on the water supply. The purchaser may not wish to purchase a property connected to a water supply which is heavily used.

Depending on which council issues the LIM report, the report can also include any other information concerning the land that the council, in its discretion, considers relevant. For instance, the Christchurch City Council LIM reports include the resource consents issued for properties adjacent to the property which is the subject of a report, allowing a purchaser to know what activities are being carried on in the neighbourhood.

How to obtain a LIM report

A LIM report is available from the local council responsible for the area in which the particular property is situated. Anyone can make a request for a LIM, not only someone who is interested in purchasing the property or obtaining a security over the property. This is helpful to a prospective purchaser wishing to know more about a property without having to make a formal offer to the vendor.

Section 44A of the Local Government Official Information and Meetings Act states that a local council must provide a LIM report to the applicant within ten working days of receiving the application and the application fee. An application can be made by going directly to the local council offices and completing an application (helpful for prospective purchasers who have not made a formal offer yet) or through a purchaser's solicitor.

Each local council will have its own set application form and fee and in some cases there will be a different fee depending on whether or not the particular property is a residential property or a commercial property.

Under the Local Government and Meetings Act the Council has 10 working days to issue a LIM. The LIM will then need to be carefully considered by the purchaser and their solicitor. The standard agreement for sale and purchase allows 15 working days for obtaining and approving a LIM and this is a realistic time frame which allows time to deal with any possible issues that may arise.

The impact of the LIM report on the process of buying and selling a home

Having discussed the kind of information a LIM report contains, it is clear why LIM reports are useful and why most agreements for sale and purchase will usually be conditional on the purchaser's approval of the LIM report.

Before signing an agreement for sale and purchase of real estate, the purchaser who has not already seen a LIM for the property or does not know the property well should insist on the agreement being conditional upon the approval of a LIM and ensure that sufficient time is allowed for ordering and considering the LIM due to the obvious impact the information it contains can have on the purchaser's decision to purchase a property.

When selling a property it may be a worthwhile investment to obtain a LIM report and provide copies to prospective purchasers. The vendor should then decline to sign an agreement that is subject to approval of the LIM report. This can give more certainty to a sale and avoid delays inherent in the LIM approval procedure under the sale and purchase agreements.

Email alicec.@timpanywalton.co.nz

Website www.timpanywalton.co.nz

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