Thinking of Selling? What Every Vendor Needs to Know to Avoid a Leaky-Home Claim
Selling your home should be an exciting next step — not the start of a legal nightmare. Yet many New Zealanders find themselves facing unexpected claims months after settlement, often involving allegations of hidden leaks, rot, or unconsented building work.
The good news is that honest sellers who disclose what they know are well protected under New Zealand law. But to avoid risk, it’s essential to understand your obligations — and the situations in which vendors can be held liable.
This guide will help you protect yourself before signing anything.
1. When Vendors Can Be Liable for a Leaky Home
Vendors are only liable when they:
Know of a significant defect (leaks, rot, framing failure, past weathertightness issues), and
Fail to disclose it to the purchaser,
Or engage in active concealment, such as covering rot with new gib, repainting over water damage, or drying the home artificially before open homes.
This behaviour led to a major High Court judgment in Bhargav v First Trust Ltd [2024] NZHC 2128. In that case:
The vendor knowingly concealed extensive rot.
New gib was installed to hide framing decay.
Dehumidifiers were run before open homes to hide dampness.
The Court described the behaviour as “quite literally a cover-up.”
Damages exceeded $861,000, and the director was held to be personally liable.
This is the type of conduct courts punish — not honest mistakes.
2. You Are Not Liable for Issues You Genuinely Did Not Know About
Most homeowners fall into this category.
You are not responsible for:
hidden rot you never saw
moisture behind linings you never removed
issues no builder reported to you
problems a purchaser’s inspector failed to identify
normal maintenance issues typical of monolithic cladding
leaks or damage that develop after settlement
The law protects honest vendors.
3. Understanding Your Obligations Under Clause 7.2 of the ADLS Agreement
Every standard ADLS Agreement includes vendor warranties.
One of the most important is:
New Zealand Law Association clause 7.2 — Vendor’s Warranty as to Knowledge
“The vendor warrants that the vendor has no knowledge or notice of any fact which might result in proceedings being instituted by or against the vendor in respect of the property.”
This means:
You must disclose what you actually know, which might result in proceedings being instituted by or against you in respect of the property.
You do not need to disclose hidden issues you had no knowledge of.
You do not need to speculate about hypothetical risks.
You do not need to carry out invasive testing.
If you have genuinely experienced no leaks, rot, dampness, or framing issues, you are not breaching clause 7.2.
4. Understanding the Building Consent Requirements
You must confirm that:
You obtained consents (if required) for any building work you carried out;
All consents were closed out with Code Compliance Certificates (CCC), where required.
If uncertain — tell us. We will advise what must be disclosed.
✔ Council Notices or Requisitions
You must confirm whether you have:
received any Council notices, or
been issued with requisitions.
If any exist, they must be disclosed accurately.
We can protect vendors by ensuring each warranty is correct before signing — reducing the risk of a later claim.
Buyers frequently allege that work was “unconsented.”
But some repairs and maintenance tasks do not require consent.
The official MBIE guidance confirms:
“A building consent is not required to replace or alter a dwelling’s internal linings and wall, ceiling and floor finishes.”
Source:
MBIE – Exempt Building Work – Internal Linings
https://www.building.govt.nz/projects-and-consents/planning-a-successful-build/scope-and-design/check-if-you-need-consents/building-work-that-doesnt-need-a-building-consent/technical-requirements-for-exempt-building-work/3-windows-doors-and-walls/3-4-internal-linings-finishes-existing-dwelling
If your work involved:
replacing internal gib,
removing linings to repair internal areas,
reinstalling internal finishes, or
carrying out minor maintenance inside the building,
then this is exempt work, and no building consent is required.
This is often misunderstood by purchasers and their legal advisors.
5. Ensuring Your Vendor Warranties Are Accurate (Clause 9.0 ADLS)
Before signing the Agreement for Sale and Purchase, your lawyer should confirm whether the following warranties in clause 9.0 are true:
✔ Clause 9.3(1): Chattels and systems are in reasonable working order
This includes heat pumps, security systems, rangehoods, and appliances. If any item is not working properly, the agreement must state that.
✔ Building Consents and Code Compliance Certificates
6. Why You Should Never Let an Agent Finalise the Agreement Without Us
Real estate agents typically use the default New Zealand Law Association Agreement without tailoring it to your circumstances.
As your lawyers we ensure the agreement includes special conditions designed to:
minimise legal risks
prevent allegations of misrepresentation
clarify vendor and purchaser responsibilities
ensure the purchaser carries out full due diligence
protect you from later claims about leaks, rot, or unconsented work
reinforce that the purchaser accepts the property after completing their investigations
We strongly recommend that no agreement is signed until we have reviewed it.
A single missing clause can mean the difference between a smooth settlement and a six-figure dispute.
7. Recommended Resource for Sellers
Before listing your home, we recommend reading:
Selling Your Property – Say Goodbye to the Headaches!
https://rossholmeslawyers.com/selling-your-property
This page explains:
pre-sale disclosure
preparing your property safely
legal pitfalls to avoid
protecting yourself from purchaser claims
and what RHL can do to support you throughout the process
8. Selling Your Home? We Can Protect You.
We assist vendors with:
pre-sale disclosure advice
reviewing and drafting agreements
verifying warranties
preparing special conditions
identifying risks before listing
Before you sign anything — even an agent’s listing agreement — contact us: email: reception@rossholmes.co.nz | Tel: +64 9 4150099.
Early advice prevents future problems.
Ross Holmes Virtual Lawyers Limited: www.rossholmeslawyers.com
