10th edition contains significant changes for buyers and sellers
The Auckland District Law Society and the Real Estate Institute of New Zealand (ADLS & REINZ) are the authors of the most common template Agreement for Sale and Purchase that is used by the majority of lawyers and real estate agents throughout New Zealand. In November 2019, ADLS & REINZ released the 10th edition of the agreement with changes that impact and benefit both buyers and sellers.
The 10th edition makes a number of changes to the agreement that include:
• Simplifying the terminology so it is consistent with the wording in the Land Transfer Act 2017
• Clarifying the obligations of the parties when fulfilling conditions, and
• Setting a clear distinction between chattels that have an operational function and those that don’t.
Changes when fulfilling conditions
Finance condition wording: The finance condition no longer specifies with which lender the buyer needs to arrange finance, as long as the buyer takes all reasonable steps to obtain finance.
If you are unable to obtain finance and you want to cancel the agreement, you have an obligation to provide evidence of the steps you took to try and obtain that finance. You cannot use this condition to cancel if you simply change your mind about the purchase.
Toxicology report: There is now the option for a buyer to obtain a toxicology report as a standard condition in the agreement. If selected, the condition requires the buyer to hire a professional to test the property for drug contamination, primarily methamphetamine. The buyer has 15 working days to arrange the test to be done and to approve the written toxicology report.
Building report now must be in writing: The buyer now has 15 working days to arrange a builder to inspect the property and prepare a written report. If, for any reason, you don’t approve the report you must supply the seller with a copy of the report.
Time for fulfilment: The finance condition date must be specified on the front page of the agreement. If you are a first home buyer and want to use your KiwiSaver to apply for a KiwiSaver HomeStart grant, we recommend that you have a finance condition of at least 15–20 working days.
The standard dates for the other conditions in the agreement have been aligned at 15 working days. These dates can be changed before the agreement is signed if you think you will need additional time to fulfil the condition.
Duty to fulfill conditions: Issues may arise while the buyer is trying to fulfill the conditions and the buyer may want to cancel the agreement. Where there is a condition in place, the party who benefits from that condition has a duty to take all reasonable steps to satisfy it. For example, you cannot cancel the agreement under a builder’s report condition if you failed to obtain a builder’s report. Also, if a bank will not lend you the full amount to complete the
purchase, under the standard finance condition you could be required to exhaust all reasonable opportunities to obtain finance, that could include asking the seller for ‘vendor finance’.
Changes to chattels listings
The 10th edition now separates the warranties that a seller provides for the property’s chattels.
Schedule 2 lists the chattels with no operational function such as curtains or fixed floor coverings. Schedule 3 lists the chattels that have an operational function such as a heat pump or the oven.
The seller must ensure that all of the chattels listed in both Schedules 2 and 3 are in the same condition that they were when the agreement was signed, except for fair wear and tear. The seller, however, now has an additional obligation to ensure the chattels in Schedule 3 are in working condition.
It is very important that chattels are included in the correct schedule.
Agreement must be carefully drawn up
It is important for buyers and sellers to remember that the ADLS & REINZ agreement is a template and it can, and should, be completed to fit your specific circumstances.
Before you undertake one of the biggest purchases of your life, make sure we discuss the conditions before you sign the agreement.