When you buy or sell a house, you will be signing a standard Auckland District Law Society/Real Estate Institute of NZ Agreement.

There are some recent changes to the Agreement, which it is important to be aware of.

Purchase Price Allocation

There is now a new section on the front page regarding purchase price allocation.  This is essentially where in certain transactions you have to separate out the value of the land versus chattels and other assets being sold.

Purchase Price Allocation will be relevant:

1.             For any residential property sales over the value of $7.5 million, or
2.             Any commercial property or business sales/purchases (or any other mixed asset sales) a purchase                  price of more than $1 million.

Claims for compensation

There are new clarifications around claims for compensation if something goes wrong and a party suffers a loss (eg: if there is damage to the property prior to settlement).

Settlement can now be delayed in the event of a dispute where the parties are waiting for a determination of the value of compensation.  This might involve a builder or engineer for example advising what the cost would be to bring the property back to the condition it was in when you signed the Agreement.

Decision makers for compensation claims are now able to make an order that one party must meet the reasonable legal costs of the other party.

Limitation of Liability

There are changes to this clause in light of the new Trusts Act 2019. Trustees who enter into this agreement and who are not beneficiaries of their trust will be regarded as “independent trustees”.

This clause now also records that independent trustees will be personally liable for any actions carried out by them in breach of Trust (up to the value of any indemnity that would have been provided by the trust – usually up to the value of the Trust’s assets).

New Covid-19 Pandemic Clause – Clause 20

There is a new pandemic clause which reflects the effects Covid-19 restrictions have had on buying and selling property in the event of regional or national restrictions on personal movement.

Dates for satisfaction of conditions yet to be satisfied or waived will be moved to the later of 10 working days after the lifting of personal movement restrictions or the date stated in the agreement.

Settlement dates will be moved to the later of 10 working days after all conditions are satisfied or waived,10 working days after the lifting of personal movement restrictions, or the settlement date stated in the agreement.

There will be no claims for compensation regarding deferral of condition and settlement dates under this Covid-19 clause.

We note however that this does not include a situation where a vendor or purchaser or any tenant or other person residing in the relevant household is in a self-isolation period at the settlement date (and therefore couldn’t move at that time).  We recommend vendors and purchasers liaise with their legal advisors to insert an appropriate clause to cover this scenario, if relevant.

Also, if the property is in a different region to the vendor or purchaser, a further clause may be needed to cover a scenario where there is a restriction on movement in the region the vendor or purchaser is located, rather than the region where the property is.  This will come down to the circumstances of both parties.

Summary

We recommend that vendors and purchasers have their agreements checked by their legal advisors before signing, especially given some of the above changes, and given the changing nature of the Covid-19 restrictions.

 

Author – Michelle Buckley