Rural real estate guidance
This page is for licensees working in the rural sector. It includes guidance and information about listing rural properties.
Topics covered on this page
Your fiduciary duty versus duty of care
Fiduciary duty to your client is the highest duty in law - it’s a relationship of trust and good faith.
Your duty of care to a customer (purchaser) is less than the fiduciary obligation you owe to a client (vendor) because you are not contractually bound to the customer as you are with a client. However, you must not act in any way that is likely to cause the customer harm or fail to mention something that the customer should be made aware of.
Rule 6.4 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (Code of Conduct) [PDF, 208 KB] provides a benchmark that applies to both clients and customers:
A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.
Your client may be a vendor or lessor, and they will be paying the commission on the sale or lease along with any agreed marketing and advertising expenses. In other situations, your client will be a prospective purchaser or lessee, and they would pay your commission fee and any other agreed expenses.
Remember, you can’t represent two clients (vendor/lessor and purchaser/lessee) in the same transaction. This is covered by rule 9.14 of the Code of Conduct:
A licensee must not act in a capacity that would attract more than 1 commission in the same transaction.
Types of rural documents you may need to supply
Rural property sales are likely to involve a range of documents.
In the case of a farm, these may include details of:
- the property itself, including the number of paddocks, pasture management and fertiliser history
- water consents and water supply information
- inputs such as feed purchased
- the stock-carrying capacity
- effluent disposal systems
- the nutrient management plan (NMP)
- farm buildings and dwellings
- local amenities
- a health and safety farm map - ‘no-go zones’
- resource consents.
For dairy farms, you may also need to provide details of:
- share milking contracts
- dairy company supply contracts
- a milk supply contract or terms and conditions of supply
- dairy shed inspection report and consents.
These types of documents are usually made available to prospective purchasers in the form of a property information memorandum (PIM).
Mortgagee sale or receivership documents
In a mortgagee sale or receivership, it’s likely there will be certain documents and information that can’t be provided to the agency. For example, a receiver is unlikely to know whether the buildings have the correct code compliance certificates (CCCs).
Similarly, mortgagees may not be aware of the details of water consents or issues regarding effluent disposal. Such information may be critical to a prospective purchaser, so it is important to be clear if you do not have this information.
Legislative and council compliance you’ll need to be aware of
The farming sector is highly regulated with controls on many activities, including land use, roads and vehicle access, water quality and use, discharges, fertiliser and contamination. If you are working in the rural sector, you are expected to know about these and be able to alert prospective buyers to any related issues.
Site controls in rural zones
Site controls are used in rural areas to minimise nuisance to neighbours. The intensity of farming operations may be challenged, especially in areas that are on the boundary of lifestyle or residential zones.
There may be limits on the number of dwellings and other buildings that can be built, especially within a specified distance from any road. In some areas where the aesthetic value is very high, such as the Queenstown-Lakes area, properties may be subject to additional limitations, such as a specified building platform or restrictions on building on ridgelines.
Limited-access roads and vehicle access
If a road is declared by the New Zealand Transport Agency (NZTA) to be a limited-access road, existing crossings are authorised in writing and recorded on the property’s certificate of title. These crossings are identified in relation to the title boundaries and may also be shown on the planning maps of the relevant district plan.
Farms may have separate road access for residential use and use by commercial vehicles such as milk tankers, stock trucks, and so on. You should check that all road crossings to and from a property are compliant with NZTA and local authority requirements.
Learn more about limited access roads at Waka Kotahi NZTA(external link)
Issuing water consents and reporting requirements
Councils are responsible for issuing water consents, which grant the consent holder the right to take water at a specified maximum rate and carry strict water monitoring and reporting requirements.
Water consents are usually set for several years up to a maximum of 35 years. The most common term is 30 years, and if no period is specified, the consent term is five years.
You should obtain accurate details of water consent for any properties you market. Each consent has a specific number that will specify the full details of the volume of water that may be taken, the duration of the consent, and any restrictions that may apply in years of water shortage or drought.
Nitrogen leaching and discharge allowances
Redevelopment of pastoral land for intensive farming has an impact on the quality of groundwater and waterways.
Nitrogen leaching from manure and urine as well as high-nitrogen fertilisers is a problem, especially in areas where town water supplies are drawn from water resources that adjoin pastoral land.
Some regional councils allocate pollution rights to farmers. They gather data from farms to calculate specific nitrogen discharge allowances (NDAs). Farms that exceed their allocated NDA will be required to either alter their farming practices to reduce nitrogen pollution or reduce stock numbers.
Dairy effluent management
Regional councils control the management and dispersal of dairy effluent.
Dairy farms must have adequate storage facilities to enable irrigation using effluent to be carried out only when soil moisture levels are sufficiently low, thus minimising the risk of run-off into waterways. Councils impose resource consent requirements to minimise the risk of environmental damage. The specific issues vary from region to region, as they are affected by climatic conditions and soil types.
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Land title boundaries
Most land title boundaries are based on lines marking the division between adjoining pieces of land. Land is often bounded by the sea, a river, lake, road or railway rather than the artificial lines of a survey.
You are not expected to verify where the property boundaries are in every case. However, if you are aware of an issue, you should point it out, and if asked, you must either verify where the boundaries are or advise the purchaser to get professional surveying advice.
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Easements
An easement is a right to cross or otherwise use someone else's land for a specified purpose and is typically registered against the property’s title. For example, an easement may be put in place for power companies to gain access to pylons or power lines on a property.
Easements are normally registered and recorded on the certificates of title of the dominant tenement (the property that gains benefit from the easement) and the servient tenement (the property that provides the benefit).
You should obtain a copy of any registered easement documents as part of the pre-marketing data collection and review process. You should also alert any buyers to the presence of the easement and advise them to get legal advice.
When an easement isn’t recorded on the certificate of title
Some easements may have been created by statute or by non-registered agreements between neighbouring property owners to allow driveways, access ways or water rights to be shared. Because unregistered easements may represent an underlying defect in a property, it is important that you obtain clear information that can be passed on to prospective purchasers.
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Wāhi tapu
Section 6(e) of the Resource Management Act 1991(external link) provides for the relationship of Māori and their culture, traditions and relationship with the land and waterways.
Certain sites, known as wāhi tapu, are of spiritual and cultural significance to Māori, for example, the birthplace of a founding ancestor, a burial site (urupā), traditional canoe-building or landing sites, or the site of a historically significant event. Those that have been disclosed by tāngata whenua (the people of the land) are recorded on district planning maps and are subject to protection under the Resource Management Act 1991.
Development near a wāhi tapu may be limited or prohibited or require consultation with Māori leaders to gain their approval for any proposed work. Such sites may not be identified on individual certificates of title. A search of the district plan is the most reliable method of identifying these sites.
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Overseas Investment Act 2005 (OIA)
This Act controls the acquisition of certain types of property, known as sensitive assets, by overseas persons. Sensitive assets include, among other things, non-urban land exceeding 5 hectares in area.
An overseas person is defined as:
- an individual who is neither a New Zealand citizen nor ordinarily resident in New Zealand
- a company or body corporate incorporated outside New Zealand
- a company or body corporate or partnership incorporated within New Zealand where 25% or more of any class of shares is owned or controlled by an overseas person.
Consent for purchase of such land by overseas persons is regulated under the OIA. Consent will not be granted unless the subject property has been offered for sale on the open market (to New Zealand citizens and residents) for at least 20 working days.
This is a highly specialised area, and any prospective overseas investors should be encouraged to seek a suitably experienced legal adviser to guide them through the process. You can also contact the Overseas Investment Office at LINZ(external link) for guidance before you list rural land for sale.
Issuing and trading of shares among farmers
A complex problem that may arise when listing a dairy farm is the issuing of Fonterra or other co-operative dairy company shares. Under the Trading Among Farmers (TAF) scheme, these shares can be traded among individual farmers using the NZX trading entity.
The shares and units are financial products under the financial adviser regulations. As a financial product and a complicated category one product, the consequence is that only authorised financial advisers can advise on Fonterra shares and units. It’s important to advise vendors and purchasers that they may wish to seek expert or legal advice when looking at how to structure a sale and purchase agreement.
It's important for you to recognise and understand issues surrounding shares. However, you should not give advice on such matters. To do so may put you in breach of the Financial Advisers Act 2008.
Learn more about the Financial Advisers Act 2008(external link)
New Zealand Emissions Trading Scheme (ETS)
If you are asked to appraise or market a property that includes a forestry block, you need to be aware of the implications of the New Zealand Emissions Trading Scheme (ETS)(external link) in respect of carbon credits. You should ask the following questions:
- Is the property owner registered under the ETS?
- If registered, what is the current status of any carbon credits?
- Have the carbon credits been sold?
If there is any uncertainty, you should direct prospective purchasers to appropriate legal or other specialist advice.
Soil contamination
Soil or waterway contamination may be an issue in areas where hazardous substances have been used for agriculture, horticulture and other industries.
Local councils usually have a reasonably reliable record of areas that may be subject to contamination, and LIM and PIM reports may contain a reference to the Ministry for the Environment's Hazardous Activities and Industries List(external link).
A reference relating to a property does not necessarily mean that the property is contaminated, only that it is in an area where specific land use activities may have led to a level of contamination. The council should be able to provide more details about any likely or actual risk.
Protected areas
Areas that contribute to the natural environment and habitat of native birds and plants may be protected, for example, by a covenant or significant natural area (SNA) designation. The certificate of title will include any protected areas, and there will be restrictions around land use, for example, limited or no removal of vegetation. There may be a need for fencing or other proactive measures too.
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