The property market is like any other market, there are risks attached to it. As with any other investment, you should do your homework before investing. You should consider the risks and the returns associated with that investment. The more homework you do, the better equipped you will be to make a sound investment decision. There are more risks involved with some types of property than with others. In answering your question we will try to identify some of the risks and the ways to minimise them. In dealing with the risks, you will need to discover whether the property you are looking at complies with the various laws and regulations which affect it. Most buyers will need assistance from professionals in obtaining reports on the property they are buying.

The first risk to eliminate is the danger of a badly drawn Agreement for Sale & Purchase. Before signing any Agreement, you should ask your solicitor to check its contents to ensure that it meets with your requirements. Although much of the Agreement is standard, the Vendor’s real estate agent will often insert additional, non-standard clauses. The standard provisions will allow you to raise objections against the title if your lawyer considers the title to be defective. If you make it subject to a LIM report then that will give you time to obtain a LIM report from the Council and to raise any objection arising from it. You should insert provisions to the standard form relating to a building inspector’s report and if it is an apartment, the checking of any Body Corporate Minutes and records.

These reports are of course rather expensive, as are lawyers, and you should be prepared to pay a considerable sum in making sure the property is suitable for you. As we said before, you should do your homework in advance. It is possible to reduce some of the potential risks and costs by asking the Vendor or the Vendor’s agent to provide some of the information for you to check before signing the Agreement. You should ask whether the agent has a copy of a recent LIM report and a copy of the title for you to look at. The agent often provides you with a copy of the LIM report in advance. That is a good sign as it usually means that they are providing a clean report or will deal with any problem in the Agreement.

Often the LIM report will come with some plans attached. If not, you should try to get a copy of the house plans from the local authority. With those plans you can check to see whether there has been any work done on the property which does not appear on the plans. You should check the LIM report to see whether the work has a building consent and a Code Compliance Certificate.

Certain types of title can also deserve your close inspection. If it is a cross-lease or Unit Title, the title will have a diagram of the building or the dwelling on the title. When inspecting the building you should check the shape of the building against the title. Often there has been an extension to the dwelling or a new garage erected on the land and usually this should be shown on the title. If there are difficulties with the title, this will involve you in a greater expense with your lawyer in dealing with the property. With an apartment you should also inspect in advance the Body Corporate Minutes to see whether the meetings of the Body Corporate have had any costly issues to deal with. Usually these relate to what are often called “leaky homes” but there can be other issues. In one development we dealt with on the North Shore, one of the walls of the Units actually encroached onto the Northern Motorway. Sometimes the owner of a Unit, especially in a high rise development may have made interior alterations which affect the fire rating of the Unit and may lead to the Body Corporate taking legal action against the unit owner.

There are some types of construction which are simply more risky than others and you should know these in advance. Monolithic cladding is a classic example of this. Prior to the changes in the building code in 2004 that type of construction was allowed and signed off by Councils. The LIM reports to these dwellings may be clean but they will be a more risky type of dwelling in which to invest. You could spend a lot of money getting a report on the building after you have signed a contract for it but you may, as an investor, decide to avoid those types of buildings and simply go for a good old-fashioned weather-board house or a brick and tile.

So there is a lot of homework and preparation you can do before you decide to invest and sign a contract. This homework will reduce your chances of spending a lot of money on professional costs and reports only to find that the property has compliance risks and is one that you should not purchase. Even so, it is worth spending the money up front with trusted professional advisors to check the property you are buying in order to make sure that your investment is not just another sour tasting lemon.