The Auckland District Law Society and REINZ have created a new edition of the Agreement for Sale and Purchase which includes substantial changes. 

Here are some of the important changes:

Finance Condition – Clause 9.1

If the Purchaser has indicated on the front page that they require finance, the Agreement is conditional on the Purchaser obtaining finance from a lending institution of the Purchaser’s choice, on terms and conditions satisfactory to the Purchaser, by the finance date.  If no finance date is inserted there is no fall-back timeframe, so it is important to include a date in the space provided on the front page.

If the Purchaser cancels the Agreement under this clause, they must provide a “satisfactory explanation”, and supporting evidence, to the Vendor immediately if requested. 

This additional obligation has been inserted to tighten up on what Purchasers often viewed as ‘a get out of jail free card’.  They can now be called upon by the Vendor to prove that their finance was declined, or, that it was granted but on unsatisfactory terms and conditions.

Builder’s Report Condition – Clause 9.4

This clause is very similar to the previous builder’s report condition other than:

  • The period of time for this condition has been extended to 15 working days; and
  • The report must be in writing.  While this was inferred in the previous edition, this is now expressly stated. 

Toxicology Report Condition – Clause 9.5

This new clause is similar to the builder’s report condition.

If the Purchaser has indicated on the front page that they require a toxicology report, the Agreement is conditional upon the Purchaser obtaining such report within 15 working days.The inspection must be carried out by a suitably-qualified inspector using accepted principles and methods (and where the testing is in relation to methamphetamine, in accordance with the NZ Standards) and the report must be in writing.

If the Purchaser cancels the Agreement under this condition then they must provide a copy of the report to the Vendor (if requested).

Notices – Clause 1.4

All references to facsimile have been removed for service of notices, and a new provision has been made for serving notice by email. 

It is very important to ensure that an email address for service of notices is accurately inserted on the back page of the Agreement in the space provided.  If no email address for service is inserted and one cannot be confirmed in writing by the other side, the only way to serve notice that day is by personal delivery, which may not be practical.  

Deposit – Stakeholder – Clause 2.0

A new clause 2.5 has been added which clears up some earlier confusion about the timeframe of holding a deposit – if the deposit is paid to a real estate agent, the period for which the agent needs to hold the deposit as stakeholder is to run concurrently with the required period under the Real Estate Agents Act.  

A deposit cannot be released until the expiry of the title requisition period (clause 6) unless this is expressly waived in writing by the Purchaser, or additionally in the case of a unit title, when the pre-settlement disclosure statement has been received. 

Settlement – Clause 3.8

Clause 3.8 now formally provides that if a property is tenanted, the Vendor’s lawyer is required to provide to the Purchaser any leases held by the Vendor and a letter to each tenant advising them of the sale.  Settlement is not deemed to have been completed until the parties have fulfilled their obligations under clause 3.8.

Vendor’s Warranties – Clause 7.0

The Vendor now gives an additional warranty that at the date of the Agreement the Vendor has no knowledge, or has received no notice, of any fact which might result in legal proceedings beings issued in respect of the property.   We recommend that you ensure that your listing agreement is updated to reflect this additional warranty.  

Chattels are now separated into two categories:

  1. Chattels which do not have an operational function (Schedule 2).  These chattels come with a warranty that they shall be delivered to the Purchaser in their state of repair as at the date of the Agreement. 

  2. Chattels which do have an operational function (Schedule 3).  These chattels come with a warranty that they will be in reasonable working order. 

It is important that the chattels are inserted in the appropriate Schedule.  If all chattels are incorrectly inserted in only one of the Schedules, or in the wrong Schedule, this means that the appropriate warranty is not given to the Purchaser.  It could mean that the Purchaser would have a claim against you as the agent, rather than the Vendor. 

There is no longer a general warranty in relation to “all plant, equipment, systems or devices, which provide services or amenities to the property…”.  This means that if a Purchaser needs to rely on a warranty for any such chattels, these items need to be specifically listed in Schedule 3.   For example: under-floor heating or a heat pump.

Compensation – Clause 10

The procedure for a claim for compensation has had a massive overhaul.  It covers situations including if either party defaults on settlement, any issues raised as a result of pre-settlement inspections, any right to claim compensation for a breach under the Agreement, misrepresentation, or breach of the Fair Trading Act.

Essentially clause 10 is broken into two parts. 

The first provides a procedure if the Vendor disputes the Purchaser’s right to make a claim.   The Vendor must give notice to the Purchaser within 3 working days from receipt of the Purchaser’s notice. If the Vendor fails to give this notice, they are deemed to have accepted that the purchaser has a right to make that claim.

If the Vendor has given the appropriate notice in time then the matter will be determined by an experienced property lawyer or litigator appointed by the parties, or failing agreement, by the President of the New Zealand Law Society.

The second is if the Vendor disputes the amount of the Purchaser’s claim.  The process is similar to that set out above.

The timeframes and obligations that are included in this clause could mean that any claim for compensation may result in settlement being delayed. 

If you have any questions relating to the new edition please feel free to get in touch.

Laurie Pallett
Senior Registered Legal Executive