Conducting real estate business during COVID-19 alert level 4
This page was updated on 22 April 2020.
What you can and can't do during alert level 4
Only essential services are exempt from the COVID-19 alert level 4 restrictions. Real estate is not an essential service.
The basic principle is that real estate business can only go ahead if it doesn’t involve people moving out of their lockdown address.
All licensees should remain in their own homes, and any real estate work must be conducted from there. You can only leave your property for the reasons listed here on the covid19.govt.nz website.
You can talk to clients and buyers by phone, video or email. You must not have any face-to-face visits with clients and customers.
You cannot visit properties for appraisals or conduct property viewings, open homes or pre-settlement inspections.
All agency offices must be closed as long as the lockdown lasts and we are advised by the government that offices can reopen.
The Ministry of Justice website also has guidance for residential property settlements here.
What to do about current listings at alert level 4
You can continue to work on current listings from your home. Call or email your vendor to agree what work you will do during the lockdown.
Things may change during the lockdown period; for example, many buyers will face financial uncertainty. In addition, buyers' due diligence will be difficult as will negotiation.
Review the marketing plan with your vendor.
Your obligations do not change in the current environment — buyers must be advised to seek legal support and be given the opportunity to do so.
Be aware both parties are unlikely to be able to meet conditions during the lockdown period. Have an early conversation with your client and the buyer about how they want to manage this, for example, by agreeing to extend the conditional period.
What to do about listings due to settle soon
REA recommends, in line with the New Zealand Law Society (NZLS), that you defer settlement until New Zealand is at alert level 3.
Everyone is likely to be in the same situation, and we hope that all parties will agree to defer settlement. This will rely on co-operation and compromise.
Property settlement can take place if there is no movement of people, for example, when a tenanted property is sold and the tenants are staying. Moving homes isn’t allowed at alert level 4.
REA recommends that pre-settlement inspections are delayed until alert level 3. If a pre-settlement inspection is offered by video or similar, both parties should seek legal advice about the risks of a video inspection. This type of inspection may not pick up issues you would see if you were physically inspecting the house.
We recommend you refer the vendor and buyer to their lawyers to seek legal advice early. In the current situation, both parties are unlikely to be able to meet their contractual obligations. Legal costs may be higher because the COVID-19 situation is complicated and may require more work than usual.
The NZLS has issued suggested wording for a clause about deferring settlement until New Zealand is at alert level 3. Note that, if everyone uses the recommended default 10-day deferral period, there may not be enough moving resource available to help settle all properties at one time. Consider recommending a more extended deferral period.
Here are examples of compromises that could allow settlement to take place during alert level 4:
- The vendor stays at the property on a rental basis.
- Both parties agree to share any late settlement interest penalty.
- The vendor leaves money in the sale for later payment.
There are practical issues listing a property during alert level 4, including difficulties completing your AML obligations, taking photos and arranging a property inspection.
DIA has guidance about AML during the COVID-19 lockdown here.
Conducting appraisals during alert level 4
Licensees are working in times of exceptional circumstances, and there may need to be workarounds to usual best practice. However, there is a risk that the workarounds may not be adequate to maintain the standards required despite the exceptional circumstance. Standards need to be maintained, and if they can’t be maintained for the benefit of consumers, the matter should not proceed.
The Martick case (2015) provides that for an appraisal to be sufficient, there should be a physical inspection. However, it also conceded that there may be situations when physical inspection cannot occur.
COVID 19 alert level 4 is a time of exceptional circumstance. Licensees may have to vary best practice because physical inspections for appraisals can not take place. If this is the case for any particular inspection, we recommend that the licensee ensures that every party knows that the licensee has not physically inspected the property. The licensee should get a comprehensive and full disclosure from their vendor client by asking detailed and specific questions about the condition of the property. The licensee needs to be satisfied that no consumer is adversely affected by the lack of physical inspection.
The licensee should conduct a physical appraisal as soon as the alert level allows this to take place and advise the vendor and any interested parties about any changes to the initial appraisal.
Buying a client’s property (section 134/135 and Form 2)
The intention of sections 134 and 135 of the Act is to ensure licensees act in the best interests of the vendor and that vendors are not disadvantaged. An independent valuation is key to ensuring the protection of the vendor’s interests. At alert level 4, it may not be possible for a valuation to be completed within 14 days of the vendor’s consent, or the valuation cannot be completed as would be expected in non-COVID-19 times. That is, a valuer cannot carry out an in-person inspection of the property.
If you, or a person related to you, has an interest in your client’s property, we suggest that you consider the following:
- Flag your interest with the listing agent/vendor
- Explore the possibility of having a valuation done remotely by a registered valuer (sometimes called a ‘desktop valuation’)
- Wait until there is a change to the COVID-19 alert level before making an offer when valuers may be more able to fully function.
If you are pursuing an online valuation you must ensure the vendor understands this, and understands the limitations of an online valuation. We strongly recommend that your conversations and their agreement to this are noted.