Essentials of an Agreement For Sale and Purchase

Property Conveyancing in New Zealand

Property Sale and Purchase Agreements Explained

The Agreement for Sale and Purchase whether by Private Treaty or prepared by a Real Estate Agent forms a binding Contractual obligation between a Vendor and Purchaser, it can be  confusing because there are 3 types of Agreements in the market.

They are:

• The Auckland District Law Society Eighth Edition 2006 (2).
• The plain English version recently written by the New Zealand Real Estate Institute of NZ.
• The CCH New Zealand Limited 2009.

The Purchaser will present the offer with conditions, and the Vendor may either accept the offer as is or counter offer the price, and terms of the Agreement.

Prior to final negotiations being completed and prior to signing you should have the Agreement checked by your Conveyancing Practitioner to ensure the Agreement reflects your requirements and you understand your obligations and those of the other party.

Ideally the following should be clearly defined in the Agreement,

*The more specific, the better the understanding between the parties.
*Full names of Vendors as described on the Title.
*Full names of Purchasers as per legal identification - such as a Driver’s License or Passport, or as per the entity in which the land is to be held such as a Trust or Company.
*Address of the property.
*Complete legal description as per the Title search. It is to your benefit to ensure a Title Search is completed and the correct legal description is noted on the Agreement. I am amazed at the number of Agreements which come into our office which do not have the correct legal description. Furthermore there have been cases where the incorrect property has been transferred.

Purchase price.

*Amount of deposit - how much is to be paid, when it is to be paid and who it is payable to. Did you know that where the deposit is paid to the Real Estate Agent is must be held for a Statutory 10 days and then it can be released to the Vendor? It would be in your best interest to have your Representative to check the Vendor has sufficient to repay their mortgage before it is released.
*GST - is it applicable? We suggest you obtain the Advice of your accountant around any GST requirements to a transaction.
*Rate of penalty interest for late settlement.
*Possession and settlement dates.
*Finance condition. This can be specific, such as who is the Lender, how much is required, by what date is the condition to be satisfied.
*Land Information Memorandum condition - if applicable.
*Tenancy - Is there a Tenant who is remaining in the property.
*Further terms of Sale as required.
*Chattels? What chattels are remaining with the property or what does the Vendor want to remove. Make it clear.

What types of further Terms can be inserted to the benefit of you as an Investor?

*Builders Reports. - This will provide details about the Structural integrity and state of the property, along with other information.
*Valuations. - This will provide true market value for the property, and in the current market it is also common for one to be required by your Lender.
*Inspection of the Local Council property file. This can be obtained by the Local Council. It is part of the homework. By also completing an inspection of the property file you can ensure the information matches what is in your Builders Report.
*Subject sale of another property. Is the property subject to the sale of another property? If so, is the possession and settlement date to be comtemporaneous? If so, you will need to ensure the Agreement states this, so there is no confusion. This could make the move much smoother.
*Approval of Title. What type of Title? Is it a Cross Lease, Fee Simple, Unit Title or Leasehold property? What are the encumbrances which affect the property? Do you know what they are? A Title Search is to your benefit and the cost is negligible. Did you know you have the right to Requisition a Title under the fine print in the Agreement for Sale and Purchase?
*Good working order - in relation to chattels, fixtures and fittings. Are they to be in good working order at settlement? This can be in relation to electrical, gas, plumbing fixtures and fittings.
*Security Alarm - the wording around this condition will depend if the alarm is monitored or not.

Due Diligence.

*Pool/Spa? What are the requirements by the Local Council, especially around safety, and approval? A lot of information can be found on the Local Council website, in the Builders Report, or on the property file.
*Out clause - this clause will be used by the Vendor which allows them to receive other offers whilst the property is under Contract.
*Any other conditions you may wish to be included.

These are but to name a few. Wording around conditions must be correct to ensure performance.

The key to wording of conditions is to ask the following questions:

*What needs to be done?
*Who’s going to do it?
*Who is going to pay for it?
*When does it need to be done by?
*What is going to happen if something is discovered?
*Who is going to pay to fix it?

Upon signing of the Agreement should any alterations or changes have been made, they must be initialled by all parties to Contact without exception.

Have you ever read the fine print contained within the Agreement to better inform yourself? If you have any questions regarding these conditions do not hesitate to ask. When you consider the investment you are undertaking Research and Professional advice is the key to ensure your interests are protected. For further information check our website.

Happy Investing.

Kim Matheson is Principal and Director of Property Conveyancing Services Ltd. She has also recently retired as Vice President of the NZ Society of Conveyancing Professionals. Property Conveyancing Services Ltd are established as leaders in Property Conveyancing within New Zealand. Property-Conveyancing-Services Ltd can be contacted via their website: http://PropertyConveyancingServices.com