The terms and conditions of most residential property sales transacted in New Zealand are consummated by the parties executing a standard Agreement for Sale and Purchase form. This document has, for many years, been constructed from the combined input of the Real Estate Institute of New Zealand Inc. and the Auckland District Law Society Inc. Currently, the 9th edition of the document is in use. The fact that this document has been formulated and approved by these bodies gives confidence to home buyers and sellers. Nevertheless, care and a clear understanding of the document and its implications are recommended for both parties when entering into a property transaction.
Preparatory Work is Important!
Tommy’s advice to home buyers and sellers is that they should familiarise themselves with the standard Sale and Purchase Agreement as part of the initial process of buying or selling. Don’t wait until negotiations commence; study the agreement form at your leisure, ask questions of your agent and at an appropriate time, seek legal advice. This preparatory work is important and can assist negotiations when the time is sometimes at a premium particularly in a competitive market. The website of the Real Estate Authority (settled.govt.nz) offers comprehensive guidance on this subject also; Tommy’s recommends that buyers and sellers visit the REA site in their quest for further information.
If you are a buyer on today’s competitive market, you will likely be encouraged by your agent to make your offer as competitive as possible. This can be achieved by submitting the best price you are willing and able to pay and also by eliminating as many contract conditions as you can safely do. It is important to note though, that once you have signed an Agreement for Sale and Purchase, you are locked into a binding contract and you have a legal obligation to make every endeavour to satisfy any conditions in that contract.
Adding Special Conditions
Whilst an Agreement for Sale and Purchase has a host of standard conditions, there is also provision for adding any special conditions that buyers deem appropriate. This may relate to the buyer requiring time to confirm finance, to sell another property or to obtain a specialist report (from a building inspector or an engineer, perhaps) if there are any doubts about the integrity of the house, the land or any improvements involved in the sale. A registered valuer’s report may also be required to support any borrowing arrangements.
Certificate of Title and LIM Report
Often, home sellers will provide potential buyers with a copy of the property’s Certificate of Title and a Land Information Memorandum (LIM) report. Solicitor’s advice should be taken around these documents and in particular, the Certificate of Title, to the property. While most titles are straightforward, there can be instances where a lay person will not fully understand the implications of some of the legal jargon. The LIM report will provide a summary of Council records pertaining to the property including details of any permitted works that have been carried out and any other consents, notices, orders or requisitions affecting the land and buildings.
Yes! Home Sellers – You Should Familiarise With This Document Too!
Becoming familiar with a standard Sale and Purchase Agreement is as important for home sellers as it is for buyers. Sellers will want to be sure that not only is the offered price up to expectations but that the settlement date is compatible with their future plans and that there is sufficient time between the agreement becoming unconditional and the date for the giving and taking of possession. A home seller should also check that the agreement provides for an adequate deposit, provision for a late settlement penalty and that the chattels passing with the sale are correctly documented.
Of most significance to the seller though, is section 7.0 of the standard agreement which is captioned “Vendor’s warranties and undertakings”. This section is comprehensive and contains undertakings and warranties from the vendor in regard to a number of matters which could influence the buying decision of prospective home buyers.
The Agreement for Sale and Purchase is a tried and true document that protects the interests of both parties. Seasoned home buyers and sellers will be familiar with the document but, particularly for first home buyers, we suggest that guidance from an experienced agent or from a solicitor is essential before committing to a legal and binding contract.
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So what is the liability where a seller has not disclosed critical information about a property and that missing information significantly affects the reason a buyer purchased the property?
Who is culpable the seller whom didn’t disclose or the real estate agent whom didn’t get the information disclosed and what are the consequences if this happens? How does a purchaser pursue compensation in a situation like this and particularly where an opportunity is lost because information has not been disclosed?