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SEPTEMBER 2012

Why a Purchaser needs a LIM?

One question we often get asked by clients is “Do I really need a LIM report?”

A LIM is a Land Information Memorandum. It is issued by the Council. It contains information that the Council holds in relation to a particular property.  This includes (but is not limited to):

  • Rates owing on the land
  • Soil stability, erosion, subsidence, slippage, flooding
  • The location of any stormwater drains on the property
  • What permits and/or consents have been obtained for buildings/works on the land and whether those permits and/or consents have been finalised
  • Any outstanding requisitions that may be on the land
  • Any land use/zoning requirements

This information is useful for many reasons. If you had plans to renovate or build on the land this may be prohibited by land use requirements and zoning classifications; the dwelling and/or renovations may not have been signed off by Council and you could be called upon to do this at a later date when you come to sell the property; Council may have issued requisitions regarding outstanding requirements that a vendor may not have remedied; consents and rights that you may be expecting to run with the land and receive upon purchasing the property may not in fact be available. 

Often issues arise surrounding woodburners that do not have permits and/or consents. This may invalidate your house insurance policy. Or, if there is a swimming pool and the fencing does not comply. If there were a drowning due to non-compliant fencing you may find yourself in Court facing charges.

So, the question at the beginning “Do I really need a LIM report” should never be asked. It is as simple as circling “Yes” on the front page of the Agreement for Sale and Purchase and is a valuable pre-purchase check to protect probably the biggest investment you will ever make in your lifetime.

How do I obtain a LIM report?

With many Councils you can go onto their website, pay for the LIM using your credit card and in many cases, pay extra for an urgent LIM which can be sent to you within 4 hours via email. A Council is under an obligation to provide a LIM within 10 working days unless you pay an urgent fee.

Alternatively you could attend at the Council offices to order the LIM.

Should I rely on a LIM provided by the Vendor?

It is becoming more popular for vendors to provide LIM reports to potential purchasers. You need to be aware however that if you are supplied with a LIM by a 3rd party and you have not been the one paying for it directly to Council, then there is no comeback for you if the Council omits any important information or makes an error in the LIM report which may have affected your decision to purchase the property in the first instance.

What if they get it wrong?

Recent legislation has shown that Councils do get it wrong and a Supreme Court decision has confirmed just that in Marlborough District Council v Altimarloch.

Marlborough District Council (“the Council”) is a unitary authority and as such was able to provide information regarding water rights in its LIM report. Not all Councils are able to do that. By way of explanation, a unitary authority is a single local government body that combines territorial and regional government functions within one geographical area.

Briefly, this case involved the purchase of a rural block in the Awatere Valley by Altimarloch in 2004. Altimarloch intended planting part of the property in grapevines where water rights were required. Information about the water rights available to the user of the land was included in the LIM report by the Council, however the information provided was incorrect. Not only that, but the water rights were also the subject of discussions between Altimarloch and the vendor’s agent however the information provided by the agent was also incorrect. Altimarloch did not receive on sale all of the water rights it was expecting to receive and as a result was required to spend approximately $1.056m to remedy the shortfall in water rights. The Court held that the shortfall of water rights available was a collective mistake by the real estate agent, the vendor’s solicitors and the Council.  This is a clear decision that the Council has a duty of care to the purchaser of a LIM report.

What is the best course of action when purchasing?

  • Have us check the Agreement for Sale and Purchase for you before you sign it so we can ensure the LIM section is circled “Yes” or at least we have the opportunity to discuss the LIM requirements with you;
  • If we do not peruse the Agreement for Sale and Purchase for you first, circle “Yes” and you order the LIM once the Agreement is signed;
  • Once obtained, have us check the LIM with you.