Home buyer beware: contracts change

O’Neill Devereaux partner Todd Whitcombe holds up an agreement to reinforce a point about less forgiving real estate sale dynamics. Photo: Gregor Richardson
O’Neill Devereaux partner Todd Whitcombe holds up an agreement to reinforce a point about less forgiving real estate sale dynamics. Photo: Gregor Richardson
Pleading poverty to get out of a property deal is likely to get harder as part of a tightening up of real estate sale and purchase agreements this week.

The latest iteration of the standard agreements, which agents will start using at the end of this week, comes with a raft of changes reflecting tighter home purchase dealings.

Published by the Real Estate Institute of NZ (REINZ) and Auckland District Law Society, the new template makes it tougher to use a finance clause to back out of a deal in the event a buyer getting of cold feet.

It will also take longer to get it signed by both parties, as it comes in at a hefty 19 pages, up from 13 for the prior edition.

REINZ chief executive Bindi Norwell said under the current interpretation, if a finance condition is inserted into a sale and purchase agreement and the purchaser can’t obtain finance, their word was generally enough for an individual to be able to pull out of a contract.

‘‘However, under the changes to the finance condition purchasers will now be required to provide evidence if they can’t raise finance.

“This is a significant change to the sale and purchase agreement and it’s imperative that consumers understand the implications as if they can’t provide evidence they can’t raise the finance, they could be forced to proceed with the purchase or face other legal action by the vendor.”

Bayleys Dunedin manager Mark Stevens said while the finance clause was positive, purchasers still had to be happy with the terms and conditions of finance, so realistically the clause still held sway.

‘‘There are a number of changes, however, mostly related to detail on the compensation process if the transaction goes wrong and agents will have to run through those with clients.’’

O’Neill Devereux partner Todd Whitcombe said purchasers and sellers also needed to be aware of other changes, including the legality of email communication, ‘‘whether the email is one-sided or even if it goes into junk mail, it could still be legally binding.’’

Ms Norwell said it was important people took legal advice and talked to their financial provider so that they understood exactly what they were signing.

The 10th edition of the sales and purchase agreement also includes a provision to include a toxicology report as a clause to cover all potential drug contamination, which can dramatically influence valuations.

Changes to the standard sale and purchase agreement template include. —

  • An optional toxicology report condition is included on the front page and in the general terms of the document.
  • A detailed process to resolve compensation disputes between vendors and purchasers.
  • ‘‘Fixtures’ and chattels’’ have been removed and replaced with new definitions and warranties.
  • GST clauses have been revised.
  • The timeframe in which deposits may be released has been clarified.
  • References to fax machines have been removed.
  • Tenancy documents have to be provided by the vendor on the settlement date.
  • Various other changes to language and formatting.

brent.melville@odt.co.nz

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