Buying a Property with a Natural Hazard Notice

Purchasing property in New Zealand always requires careful due diligence—but when a property is subject to a known natural hazard, that due diligence becomes essential. A natural hazard notice on the record of title can significantly affect your insurance cover, finance, and property value.

What is a Natural Hazard Notice?
 

A Natural Hazard Notice – commonly known as a Building Act Notice or sections 71, 72, 73, and 74 notice — is added to a property’s title when a council issues a building consent for land that has a known natural hazard, provided the proposed work does not accelerate, worsen, or cause that hazard.

The notice alerts buyers to known risks and protects local councils from legal liability if the specific hazard registered on the title damages the building, regardless of whether the building work itself complies with building standards.

Natural Hazards are defined under the Building Act as:

• Erosion (including coastal erosion, bank erosion, and sheet erosion).
• Falling debris (including soil, rock, snow, and ice).
• Subsidence.
• Inundation (including flooding, overland flow, storm surge, tidal effects, and ponding).
• Slippage.

If any of these risks affect the land, a Natural Hazard Notice may be registered. This information forms part of the public record for the property which will be noticed by potential purchasers, insurers and banks.

The Insurance problem: You May Not Be Covered
 

This is where many purchasers get caught out. Even if you can obtain home insurance for a property with a Natural Hazard Notice, you may effectively be uninsured for damage caused by the specific hazard recorded on the title.

Natural Hazards Commission (NHC) Cover

All New Zealand home insurance includes Natural Hazards Commission (Toka Tū Ake) cover up to $300,000 + GST.

The NHC can fully or partly decline a claim under section 77 of the Natural Hazards Insurance Act 2023 if:

• The record of title contains a Natural Hazard Notice;
• The notice relates to a natural hazard covered by the Building Act; and
• The claim relates to damage that is a direct result of that same type of hazard.

For example, if your property has a Natural Hazard Notice identifying flood risk and your home is subsequently damaged by flooding, the NHC can decline your claim—in whole or in part.

Private Insurance Cover

Private insurers generally rely on the NHC’s decision. If the NHC declines the claim, your private insurer may also decline the portion of the claim above the NHC cap. This can leave you effectively uninsured for the most likely hazard despite paying insurance premiums.

Your Duty to Disclose

If there is a Natural Hazard Notice on the title, you must tell your insurer. If you don’t disclose it, the insurer may later decline your claim – even for damage unrelated to the hazard. Insurers may also ask for an engineer’s report before confirming cover.

Impact on Bank Lending
 

Banks treat Natural Hazard Notices seriously. They may:

• Decline lending altogether,
• Require a higher deposit or reduce loan-to-value ratio
• Impose special conditions

Most mortgage agreements require the borrower to maintain adequate insurance—and a property that cannot be fully insured does not meet that requirement. Many banks will not proceed with lending at all.

Can a Natural Hazard Notice Be Removed?
 

It is possible to have a Natural Hazard Notice removed, but only if the council is satisfied that the hazard has been eliminated or sufficiently mitigated through property works or local infrastructure changes. This process can be costly and time-consuming, with no guarantee of success.

Importantly, the notice cannot be removed simply for insurance purposes or to facilitate a sale. The underlying hazard must actually be addressed.

Key Takeaways
 

• A Natural Hazard Notice means the land has a known natural hazard.
• Even with insurance in place, you may not be covered for damage from that hazard.
• Banks will be unwilling to lend due to insurance issues.
• Removing a Natural Hazard Notice is difficult and often expensive.

If you're looking at a property with a Natural Hazard Notice and want to understand what it means for your insurance, financing, or contract, our Property team can help you make an informed decision about whether you are prepared to accept that risk. 

We can also assist off‑the‑plans purchasers, ensuring that buyers are protected from Natural Hazard Notices being registered on the title between signing the agreement and settlement.

This article is intended as general information only and does not constitute legal advice. Please contact Saunders & Co for advice specific to your situation.