The team at Schnauer & Co's have put together a resource toolkit to highlight some of the common misconceptions that some first home buyers have and provide you with tips on how to avoid some easy mistakes when buying your first home. Our expert tips will be presented over six easy to read articles, and they are all designed to help you achieve your goal of homeownership in NZ.
In part one of the series, they covered the Solicitor's Approval as a condition of a Sale & Purchase Agreement.
This week they cover off some important changes to the sales and purchase agreement which impact on standard conditions, what this means for you and options you may have.
As always we recommend getting good independent legal advice.
Don't forget to take advantage of Schnauer & Co's First Home Buyer Member Offer for a free 60 minute consultation.
Important Changes to Auckland District Law Society (ADLS) Sale and Purchase Agreement
Under the current ADLS Agreement of Sale and Purchase of Real Estate (Eleventh Edition) 2022, there have been many changes. Buyers need to be aware of the conditions and the process that applies to the standard conditions on the front page of the agreement (further detail on these conditions is set out in clause 9.0 of the agreement).
Non-Satisfaction of Finance Condition
For finance, the purchaser needs to state the time-frame that they need to obtain an unconditional loan offer from their lender, but 9.1 of the general terms applies. This states that “if the purchaser avoids this agreement for failing to arrange finance in terms of clause 9.1(1), the purchaser must provide a satisfactory explanation of the grounds relied upon by the purchaser, together with supporting evidence, immediately on request by the vendor”.
LIM, Building and Toxicology Report Conditions
The LIM report (clause 9.3), Builder’s report (clause 9.4) and Toxicology report (clause 9.5) all provide for a 15 working day period for the condition to be dealt with (or in the case of the LIM report), if there is an issue then the purchaser needs to serve notice on the vendor on or before that date. This notice must specify why approval is withheld and, if those matters are capable of remedy, what the purchaser reasonably requires to be done by the vendor to remedy those matters before the agreement is cancelled).
Cancellation under standard conditions isn’t always easy!
As you have just read, cancellation under these standard conditions isn’t always that easy as you need to be prepared to provide satisfactory evidence as to the validity of that claim and you need to follow the process set out in the general terms of the agreement.
If you don’t like being restricted by these types of conditions, then we can insert our own conditions in the further terms of the agreement and these will supersede the general terms of the agreement, for example a clause that addresses all reports you want to obtain but with no obligation to provide a reason for backing out (called a due diligence condition).
The other matter to consider is that the general terms don’t allow for contractors to do invasive checks when conducting a building or toxicology report without the consent of the vendor. While this is understandable, if you have concerns about weather tightness, then the advice provided to you by the appropriate professional may be limited due to not being able to undertake invasive checks on the building.
The next part of this series will be on the “Bank of Mum and Dad” and the most common ways to document and protect the loan or gift from parents.
For more guidance on the Sale & Purchase Agreement, contact:
Kim Hunt
Senior Registered Legal Executive
phone: 09 892 0351
