Tip #1 – Who is the Vendor?

When preparing contracts it is very important that the parties to the contract are correctly described.  The Vendor will usually be the person or persons named as the registered proprietors of the property on the title.

We had a recent example where a property was owned by a company but the contract was prepared with the names of the shareholders in the company as the Vendors.  Unfortunately litigation arose from the contract and the Purchasers were able to sue the shareholders of the company even though the property was, in fact, owned by the company.

An up-to-date search of the title will ensure that the persons you are dealing with are the persons who actually own the property.

Tip#2 – Trusts

If either Purchaser or Vendor is a family trust the correct way to describe the relevant party is by the names of the Trustees as Trustees of the Trust, e.g. “John Smith, Mary Smith and (professional trustee) as Trustees of the Smith Family Trust”.  The trust is itself not a legal entity (unlike a company).  The Trustees enter into the contract, but in their capacity as Trustees of the Trust.

If the name of the Trust is left off, then there is a risk that the Trustees could be taken to have entered the contract in their personal capacities.  If only the name of the Trust is used (e.g. “Smith Family Trust”) then there is a risk that the contract is not binding.  This could have various consequences, including the agent losing their commission.

Tip #3 – Companies as Parties to a Contract

If a company is a party to a contract, the word “Limited” should always be used at the end of the company name e.g. “John & Mary Smith Limited”.  Again if the word “Limited” is left off, there is a risk that the contract is either unenforceable or enforceable against somebody other than the company.  If you are dealing with a company as Vendor or Purchaser, it is a good idea to get an up-to-date free company search from www.companies.govt.nz .

Tip #4 – Signing the Agreement … Watch for Simple Traps Affecting Contract Validity

In rare circumstances, someone other than the actual owner of the property can sign the Agreement on behalf of the owner.  Usually the owner or owners of the property sign the Agreement, but where that is not possible another person who has been specifically authorised by the owner to do so, may sign the Agreement.

There are specific methods of authorising another person to sign a contract on behalf of the owner.  When someone other than the owner is signing, check that they are actually authorised to do so, otherwise the contract may not be binding.  For example, obtain written evidence that the person is authorised to sign, or at the very least make a phone call to the owner to confirm the authority and make a file note of that authority.

Tip #5 – Date the Contract

It is very important that contracts are dated on the day they are signed.  If a contract is incorrectly dated (e.g. dated 10 September 2008 but in fact signed on 12 September 2008) the true date of the contract is the date that it was actually signed by the parties … not the date on its face.

Leaving a contract undated or inserting an incorrect date can put the contract at risk for both Vendor and Purchaser.  If a contract is undated or, even worse, incorrectly dated, the parties may incorrectly calculate the date for confirmation of special conditions, with the result that a date for confirmation of a special condition may be missed.

Tip #6 – LIM Report or Property Report … Beware of Timing Traps

We recently acted for a Purchaser of a townhouse where the Sale and Purchase Agreement was made conditional on the Purchaser obtaining a Property Report from the Wellington City Council within five days of the date of the Agreement.

A Property Report is a “short form” report that can be obtained from the Wellington City Council where a full LIM Report is deemed to be not necessary.  A Property Report can usually be obtained from the Council within three working days, whereas a LIM Report can take up to ten working days to obtain.

However, a Wellington City Council rule is that Property Reports cannot be obtained for properties where there are more than two dwellings on the allotment.  In our Purchaser’s case the property being purchased was a unit-titled townhouse in a development containing twelve units and it was therefore not possible to obtain a Property Report from the Council.

Fortunately the Vendor agreed to an extension to time for confirmation of the condition and that allowed our client to obtain a full LIM report.  It pays to be aware of your Council’s requirements when deciding on a LIM or Property Report.

Tip #7 – Get the Correct Deposit!

Getting the correct deposit from the Purchaser at the correct time is very important.  If the contract calls for the deposit to be paid on acceptance then that is what should be done.  You should bear in mind that under the standard contract a Vendor cannot cancel a contract for non-payment of the deposit without having first given the Purchaser three days notice in writing.  You should also be aware that if the deposit is not paid on the due date, the Vendor is entitled to charge interest for the late payment at the penalty rate specified in the contract.

Be careful that deposits are only released when it is in order to do so.

Typically, where a deposit is paid into a real estate agent’s trust account, the agent is required to retain the deposit for 10 working days before releasing it to the Vendor.  Where a contract is conditional and the conditions are confirmed, the deposit can then be released to the Vendor even if it has not been held by the agents for 10 working days.

Tip #8 – Agent Safety

An important issue for Real Estate Professionals is safety when you are “out in the field”!  This is highlighted by the recent attack on a Real Estate Professional on a remote property in the Wairarapa.  Accessibility to clients is a crucial part of professional success, but also poses a risk, particularly after hours or in remote areas.  We recommend the following precautions:

Where possible, check out background details of clients whom you do not know, e.g. ask for a work number or landline and call them back to confirm that it is legitimate.

Let others know your schedule!

Have a backup buddy with whom you keep in regular contact.  This could be a PA at your office.  Make a confirmatory “all okay” call/test to your backup buddy.  if you fail to do so, this should trigger your backup buddy to call you.  if you cannot be contacted, then your backup buddy should then alert Police.

If in doubt take someone with you or call off the meeting!

Your safety is important.  Common sense and these tips will hopefully help you to avoid danger.