Understanding the Implications of Insulation Retrofit Loans When Buying or Selling Real Estate

Over the years, a myriad of homeowners used to be able to get retrofit loans for property insulation from some Councils, including Auckland Council. They are no longer available. What happens when such a property changes hands before the loan is squared off?

Repayment of Retrofit Loans Retrofit loans were paid back via a special rate levied by the Council on 1 July each year.

A Real-Life Cautionary Tale Jane, an enthusiastic first-time homebuyer, fell in love with a quaint bungalow in Auckland. After the usual builder’s report inspection, she went ahead with the purchase, unknowingly inheriting an unpaid Retrofit loan. Months later, when she received a Retrofit loan bill from the Council in her rates demand, she was taken aback. She approached her lawyers, who contacted sellers’ lawyers, only to find out they had relocated overseas permanently. Jane, with no recourse available, found herself bearing the financial brunt of the unpaid loan, a cost she hadn’t factored into her home purchase budget. Her dream home came with unexpected financial strings attached.

Clearing the Retrofit Loans If a residential property is being sold, and still has unsettled retrofit loan, the ADLS Sale and Purchase agreement contains a warranty that the Sellers will repay the loan.

Sellers, or their lawyers must obtain details from Council of the amount required to repay the Retrofit loan and repay it on settlement of the sale. Purchaser’s lawyers must check whether there is a Retrofit loan outstanding.

How to Identify if a Property has a Retrofit loan: If the Purchaser obtains a LIM report it will show if there is a Retrofit loan. The Council rates statement that lawyers order to obtain details of Council rates and rates arrears should have advice that there is a Retrofit loan. To find out the precise loan balance, you have to contact the Council.

At Ross Holmes Virtual Lawyers Limited, we specialise in facilitating seamless property sales and purchases for our clients. Reach out to us today, and let us guide you through the intricacies, ensuring your best interests are always front and center.

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