There have been some recent changes to the Auckland District Law Society/REINZ Agreement for Sale and Purchase of Real Estate (ASP) that you need be aware of, particularly if you are selling apartments.

We spell out below the key changes to the ASP:

Conditions

The conditions on the first page of the ASP for Finance, LIM report, Building report, Toxicology report, Overseas Investment Act form and Land Act now provide space to add a date for the condition to be confirmed.

If no date is provided, a default date will apply:

  • The Finance date will be 10 working days after the date of the ASP;
  • The Building report date will be 15 working days after the date of the ASP;
  • The LIM report date will be 15 working days after the date of the ASP (working days for this date exclude the period 24 December to 15 January inclusive, rather than 24 December to 5 January for other conditions);
  • The Toxicology report date will be 15 working days after the date of the ASP; and
  • The Land Act date and OIA (Overseas Investment Act) date will be determined in accordance with clause 9.8 which says that the date will be the sooner of the settlement date or 65 working days after the date of the ASP or, if the land is sensitive residential land, the date will be the sooner of the settlement date or 20 working days after the date of the ASP.

Note that these dates apply to those conditions circled on the front page. You can still insert Further Terms of Sale to override these clauses if required.

Definition Changes

The definition of ‘working day’ has changed to further exclude ‘any other day that the Government of New Zealand declares to be a public holiday’.

Deposit Retention

The rules around deposit retention have been revised to align with the recent amendments to unit title legislation. Where the property concerned is a unit title, the deposit will not be released to the vendor until the later of:

  • A Pre-Contract Disclosure Statement and a Pre-Settlement disclosure Statement being provided to the purchaser within the applicable timeframes;
  • All rights of delay or cancellation under the Unit Titles Act being waived or expired without being exercised; or
  • The agreement being cancelled.

Note that the ability to cancel a contract or delay settlement based on a Pre-Contract Disclosure Statement, as above, is a new addition to the legislation. You can read more about the recent changes to the Unit Titles Act here.

These changes may give vendors greater incentive to complete their Pre-Contract and Pre-Settlement disclosure statements early.

Settlement Statement

The general settlement statement provision now includes details about unit title settlement statements. This has been moved from elsewhere in the Agreement, so the content itself is not new, but is a good reminder.

For unit titles, only periodic contributions to the operating account that have been struck prior to the settlement date (whether or not they are payable before or after the settlement date) must be shown on the settlement statement, and apportioned accordingly. There shall be no apportionment of contributions to any long-term maintenance fund, contingency fund, or capital improvement fund.

This is a good reminder that vendors and purchasers of unit titled apartments may need to consider factoring into the sale price the vendor’s contribution to the long term maintenance fund, contingency fund and capital improvement fund, particularly if these have been substantial, as the vendor does not get these contributions back on settlement.

Unit Titles

As mentioned above, the new changes to the ASP are designed to align with the update to the unit titles legislation.

In relation to unit titles, a statement has been added at the start of the warranties as follows ‘except to the extent the vendor has disclosed otherwise to the purchaser in writing prior to the parties entering into an agreement.’

Vendors will therefore need to keep a record of what they have disclosed to the purchaser prior to signing the Agreement.

Vendors are, as previously, required to provide both a Pre-Contract Disclosure Statement and a Pre-Settlement Disclosure Statement including the required information under the unit title legislation. As was the case previously, vendors cannot contract out of their obligations under unit title legislation in the ASP.

The Pre-Settlement Disclosure statement must be certified by the body corporate and provided to the purchaser alongside a certificate of insurance no less than 5 working days before the settlement date.

The provisions for the purchaser’s rights to delay settlement or cancel the ASP under unit title legislation have been amended in the agreement to clarify that if the vendor does not provide the Pre-Settlement Disclosure Statement and certificate of insurance on time, the purchaser can either:

  • Postpone the settlement date to the fifth working day after the Pre-Settlement Disclosure Statement and certificate of insurance are provided; or
  • Elect that settlement is to go ahead on the settlement date; this election being a waiver of any other rights to delay or cancel settlement under unit title legislation.

OIA Consent

If the purchaser has indicated that OIA consent is required, then this condition cannot be waived by either the vendor or the purchaser. However, the vendor is not required to do anything to ensure this condition is satisfied.

Claims for Compensation

The new ASP requires that purchasers act reasonably when claiming a right to compensation. However, the vendor’s belief that the purchaser is acting unreasonably does not affect the purchaser’s ability or right to make a claim.

Additionally, where the appropriate decision maker is making a determination for compensation, that person can take into account the reasonableness of the conduct of the vendor and purchaser.

As agents, it is vital to be aware of the changes to the ASP, so you can ensure you can appropriately guide your vendors and purchasers.