Purchasing property in New Zealand involves more than just checking the physical condition of the house or the appeal of the neighbourhood. If the land is affected by natural hazards, the property’s title may include a Section 74 notice—a formal warning that can seriously impact your ability to insure, finance, or settle the property.
In this article, we explain what a Section 74 notice is, how it can affect your insurance and borrowing options, and the practical steps you can take to manage the risks and protect your investment.
WHAT IS A SECTION 74 NOTICE?
A Section 74 notice is issued under the Building Act 2004. When a local council grants a building consent for land that is subject to a known natural hazard—such as flooding, landslip, or erosion—it must notify Land Information New Zealand (LINZ). LINZ then registers a notation on the property’s record of title.
This means that anyone checking the title can see that the land carries a specific hazard risk. While the building work itself may meet code requirements, the hazard remains and is legally flagged for transparency.
Common natural hazards that trigger a Section 74 notice include:
- Flooding or ponding
- Coastal erosion or inundation
- Landslip or instability
- Earthquake susceptibility (in some cases)
These notices are not just a formality—they serve as warnings to prospective buyers, insurers, and lenders about potential risk.
Note: Some older properties may carry a Section 36(2) notice under the now-repealed Building Act 1991. These operate in a similar way and also indicate natural hazard risk on the property title.
HOW A SECTION 74 NOTICE AFFECTS INSURANCE
In the wake of widespread flooding and extreme weather events in recent years, it’s more important than ever to make sure your insurance covers both the land and the building, especially when a Section 74 notice is involved. Insurers are tightening their risk profiles, especially when land hazards are involved. This makes it more important than ever to understand what is (and isn’t) covered.
- Natural Hazards Commission (NHC) Cover
Most residential insurance policies include natural disaster cover through the Natural Hazards Commission (NHC) (formerly the Earthquake Commission), up to $300,000 + GST.
However, when a property is subject to a Section 74 notice, the NHC may limit or exclude this cover depending on:
- The nature of the hazard; and
- Whether the specific event is included in its scope of cover.
Crucially, the NHC provides limited land cover—typically only for land directly under or within a certain distance of the home or essential access ways. If your property experiences land damage (e.g. erosion or subsidence), a Section 74 notice may impact how much—if anything—is paid out.
- Top-Up Insurance May Be Declined
Private insurers typically provide cover above the NHC cap—but if the NHC won’t accept a claim due to the hazard, the private insurer may also decline the claim, leaving you entirely uninsured.
For example: if a home identified as having a landslip risk is damaged in a slip, both the NHC and your insurer could refuse cover, resulting in a total loss.
HOW IT AFFECTS BANK LENDING
Lenders are becoming increasingly cautious about title-related risks.
- Stricter Lending Criteria
Most banks have strict lending criteria around title encumbrances. A Section 74 notice signals material risk, which may cause a lender to:
- Decline finance outright;
- Require a larger deposit (e.g. more than 20% loan-to-value ratio); or
- Impose extra conditions like a geotechnical report or evidence of full insurance.
Lenders are increasingly wary of properties that may not be fully insurable. If you cannot obtain comprehensive insurance due to a Section 74 notice, many banks will not proceed with lending at all.
- Impact on Property Valuations
Registered valuers are required to note the presence of a Section 74 notice in their valuation report. This may reduce the market value of the property, which in turn can limit how much a bank is willing to lend. It could also affect your ability to refinance or release equity in the future, as lenders may apply more conservative assessments to properties with title-level hazard notices.
- Delays in Settlement
If a finance condition is included in your sale and purchase agreement and the bank refuses to lend due to the Section 74 notice, you may need to withdraw from the agreement or seek an extension—both of which can jeopardise the deal or result in contractual risk.
