When a LIM or Builder's Report Kills Your Finance

The two reports and what each does

A LIM — Land Information Memorandum — is issued by the territorial authority and sets out what the council knows about the property: building consents and code compliance certificates, hazards, drainage, zoning, rates, and any notices or requisitions. It is a record of the official position.

A builder's report is a private inspection of the physical condition of the building by a qualified inspector. It tells you what is actually there and what state it is in.

You want both, and you want them before your finance condition expires, because each can surface issues that affect lending. Order the LIM as soon as your offer is accepted — councils have statutory timeframes but they are not instant.

Unconsented work: the most common finance killer

This is the issue we see stop more deals than any other. Building work that required consent but never got one, or got a consent that was never signed off with a code compliance certificate, creates a gap between the house and its official record.

Why lenders care:

• Valuation. A valuer may exclude unconsented floor area from the valuation, or discount it. A house marketed as four bedrooms may be valued as three.
• Insurance. Insurers may exclude unconsented structures from cover, and a lender needs the security insured.
• Council enforcement risk. A council can require unconsented work to be consented retrospectively, altered, or removed. That liability transfers to you as the new owner.
• Resale. The lender is thinking about selling the property if it has to, and unconsented work narrows the future buyer pool for the same reasons it is narrowing yours.

What can be done about unconsented work

Which routes are open depends on what the work is and how significant it is. A small unconsented deck is a different conversation from a converted garage being used as a bedroom.

Weathertightness and monolithic cladding

A builder's report flagging weathertightness concerns, particularly on monolithic-clad homes from the mid-1990s to mid-2000s, is a significant lending issue. Lenders and insurers are both cautious, and some lenders will decline these outright.

If a report raises weathertightness, the usual next step is a specialist weathertightness assessment with invasive moisture testing rather than a visual inspection. That costs more and takes longer, but a visual report alone will rarely satisfy a cautious lender. Remediation costs on these properties can be very large — see our remediation finance case study.

What else on a LIM affects lending

• Natural hazards. Flood, erosion, landslip and inundation. These feed into insurability, which is usually the binding constraint — see flood risk and insurance.
• Contaminated land (HAIL). Former horticultural, industrial or spray shed use. Affects lending, insurance and future development.
• Drainage. Private drains crossing other properties, shared drains, or stormwater overland flow paths across the site.
• Notices and requisitions. Outstanding council requirements attach to the property, not the previous owner.
• Zoning and designations. A designation for a future road or public work materially affects value.
• Rates arrears. Usually resolved at settlement, but worth knowing about.

How to handle it without losing the deal

1. Make your offer conditional on a satisfactory LIM and builder's report, with enough working days to get both — see how long conditions really need.
2. Order the LIM the day your offer is accepted.
3. Send anything concerning to your broker immediately, not at the end of the condition period. Lender appetite on these issues varies, and knowing early gives you options.
4. Get the remediation priced before you negotiate. A specific figure is a much stronger negotiating position than a general worry.
5. Use your lawyer. Consent and enforcement questions are legal questions.

Most LIM and builder's report issues are negotiable rather than fatal. The deals that fail are usually the ones where the problem surfaced too late to do anything about it. Send us the report as soon as you have it.

Choosing and briefing a building inspector

Building inspection is not a licensed occupation in New Zealand in the way some trades are, so the quality of reports varies considerably. What to look for and how to brief them:

• Relevant qualifications and membership of a recognised industry body, and professional indemnity insurance.
• A written report with photographs, not a verbal summary or a tick-box sheet.
• Willingness to use moisture meters and, where warranted, recommend invasive testing.
• A clear scope statement setting out what was and was not inspected — most reports exclude areas that could not be accessed.
• Independence from the agent. Commission your own inspector rather than using one recommended by the selling agent.

Brief them on anything specific you are worried about: the cladding type, a suspected addition, moisture staining you noticed, or the subfloor. A general inspection may not look closely at something you have a particular concern about unless you raise it.

Reading the consent record on a LIM

The building consent section of a LIM is where unconsented work reveals itself, but it takes some interpretation. What you are comparing is the consent history against what physically exists.

1. List every consent on the LIM, with its description and date.
2. Check whether each has a code compliance certificate. A consent issued but never signed off is a problem in itself, separate from entirely unconsented work.
3. Walk the property against that list. Is there a deck, carport, sleepout, extension or woodburner with no corresponding consent?
4. Check the floor area. If the LIM or rating record shows a smaller area than the house appears to have, something has been added.
5. Note any notices, requisitions or outstanding council requirements.

Where you find a gap, get it priced and get advice before your conditions expire. A deck without consent might be resolved cheaply; a converted garage being used as a bedroom is a bigger piece of work with valuation consequences.

Using a report to renegotiate

A report that finds problems is not a failure — it is information, and information has negotiating value. How to use it well:

• Get the remediation priced by a tradesperson before you raise it. A quote is a negotiating position; a worry is not.
• Separate the serious from the cosmetic. Bundling minor maintenance with a genuine structural issue weakens your case on the thing that matters.
• Check with your broker first whether the lender will proceed at all. There is no point negotiating a discount on a property your lender will not accept as security.
• Decide your position before you open the conversation — a price reduction, vendor remediation before settlement, or cancellation.
• Keep it in writing through your lawyer, so any agreed variation is properly recorded.

Vendors who have already had one buyer walk away over a report are often more receptive than you expect. Equally, in a competitive market you may have little leverage — which is why knowing your lender's position first matters so much.

This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often — check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.