Ryan and Rebecca entered into an unconditional Agreement for Sale and Purchase to buy a vacant lot in a subdivision from a developer.  They did not review (or ask their lawyer to review) the title for the land prior to signing the agreement, but they had been told that they would receive a ‘clear title with no encumbrances or restrictions’. 

Once the agreement was signed they told their lawyer about the unconditional agreement they had entered into.  Their lawyer was concerned once they reviewed the title, noting that very restrictive covenants had been placed on the title by the developer. 

Ryan and Rebecca were very upset about the issues identified as they had not been told that these covenants could be placed on the title. They had not considered this risk when they signed their unconditional agreement. 

Luckily for Ryan and Rebecca, the Vendor and the agent had left the title requisition clause 6.2 in the general terms of the agreement (ADLS 9th edition). 

Their lawyer had ten (10) working days following the date the agreement was signed to put the Vendor on notice that the title was materially different from what had been contracted for because of the presence of restrictive covenants. 

Once the Vendor had been put on notice, they had two options:

  1. Either accept the requisition and remove the restrictive covenants prior to settlement; or
  2. Choose not to comply with the requisition and give the Purchaser the right to cancel the agreement. 

This is one of the ways the title requisition clause can be implemented.  This clause has a limited scope, but can be used by the Purchaser in situations where the title is materially different from the title the Vendor purported to sell. 

The usual requirements for misrepresentation created under the Contract and Commercial Law Act 2017 would also apply. 

Clause 6.2 is an important clause for agents to familiarise themselves with. 

If this term is crossed out in the agreement, it will effectively remove the opportunity for the Purchaser to identify an issue with the title and cancel the agreement.  

If the Vendor is adamant they want unconditional offers it is important to remove this clause from the agreement. 




Grace Sharp
Solicitor
Wellington


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