Buyers beware when relying on LIM reports

A recent High Court decision highlights how misconceptions over LIM reports can have costly consequences for purchasers.

In Henry v Auckland Council [2014] NZHC 435, purchasers of a property in Bucklands Beach relied on the Council’s LIM report to assure them of the safety of the land. This resulted in them losing their new home.

The LIM report noted ‘geotechnical issues’ and provided two geotechnical reports. However, the LIM report contained assurances that the geotechnical issues were resolved and presented only minimal risk. On this basis, the property was purchased.

Much to the purchasers’ surprise, 18 months later, their new house had to be demolished due to land slips. The purchasers brought claims against the Council alleging that the LIM report failed to sufficiently highlight the risks associated with the property.

The Court found that the LIM report was misleading and did not accurately point out the risks associated with the land. However, the Court also found that the Council was not liable for the damage suffered by the purchasers.

As Ellis J stated, the purpose of a LIM report is not to ‘warrant that the land is good or safe, but simply to provide information on the basis of which the recipient can decide for him or herself whether to make further inquiries, obtain expert advice, negotiate on price or simply walk away.’

This case serves as a timely reminder that purchasers must do their own investigations when purchasing a property, and not blindly rely on the LIM report – especially when that report raises red-flag issues.

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