Completing a Sale & Purchase Agreement in New Zealand
Completing an agreement for sale and purchase of real estate (ASP) may be the most important commercial contract you ever sign. It will usually involve hundreds of thousands of dollars. So having a good understanding of the agreement is key to getting it right.
This article is designed to give you an overview of what is in an ASP so you it is familiar to you when you come to fill one out.
Remember to always take good commercial legal advice on all agreements you complete.
Agreements for Sale and Purchase of Real Estate are approved by the Real Estate Institute and the Law Society. We are currently up to the eighth edition, version 2.
The first page has property is where the main details about the agreement are filled in.
Party and Date Information
The date, while being the first item on the contract is usually the last thing to be entered. This is because the date of the contract is deemed to be the date at which there is a conditional contract, price and all terms have been agreed.
The vendor is the person or name of the entity selling the property.
The name of the person buying the property. By entering “and/or nominee” after your name (see above) it means that if you decide you want to settle the property in to another entity rather than you own names, you can easily do so.
This is the physical address of the property – e.g. 1 Smith Street, Timbuktu, Africa
This refers to the type of land holding. For our clients this is usually fee simple or crosslease.
Is exactly that – something your solicitor will check by looking at the certificate of title.
Payment of Purchase Price
This is the price you will buy the property at. To the right of this field is the opportunity to specify whether the price is including or excluding GST. Be careful of this, especially at auctions. Sometimes the fine print can specify that the transaction is excluding GST.
10% of the purchase price is normal. Always specify that the deposit is payable at the time the contract becomes unconditional, not at the date of the contract. You don’t want deposits going out for properties you may not buy – it’s a hassle getting them back.
If you don’t pay the deposit at the specified date then the vendor’s solicitor must issue you a notice demanding payment. You must then make payment within 3 working days. If you don’t the vendor can cancel the contract.
Balance of Purchase Price
Usually payable at settlement date – and which is usually specified as possession date (possession date specified separately). If you don’t settle you can be charged penalty interest – see below.
Interest rate for Late Settlement
This is the rate of interest charged on the balance outstanding if either party does not settle on the agreed date. Life is never certain, so always ensure the interest rate is not exhorbitant – you just never know what can happen.
Under the standard terms and conditions (section 9), if one party does not settle, then the other party can issue a settlement notice. Under a settlement notice, you have to give the other party 12 working days in which to settle. If they don’t settle by the expiry of 12 working days, you can either cancel and keep the deposit, or sue to enforce the contract.
This is the date at which you take possession of the property and is either expressed as a specific date or x number of days from the date of the contract or the date the contract becomes unconditional. We prefer to make it the date the contract becomes unconditional so that the number of days between unconditional date and settlement always remains the same.
Here you can specify standard conditions. You are not limited to these conditions
Here you can specify your finance conditions. Don’t ever write ‘any lender’ as your lender. If this is your only condition and you can’t get finance from your bank then the vendor might tell you he/she will give you finance and you would probably be obliged to take it.
Finance date is the date by which you have to get your finance approved. Like settlement date this can be a specific date or expressed as x number of days from the date of the contract. We generally don’t use this condition as a) we promote having finance pre-approved and b) our agreements usually include a due diligence period, where this period can also be used to arrange finance.
LIM – Land Information Memorandums are reports issued by the council. They provide varied information on the respective dwelling, land and surrounding area, and importantly whether there are any requisitions on the property that need to be addressed.
Councils are obligated to issue a LIM within 10 working days. The general terms of sale specify that purchaser has 5 working days to order the LIM from council. You should always get your solicitor to review.
Refer our separate article on LIMs
You’ll probably never use this, but it stands for Overseas Investment Act. An overseas person (i.e. does not have a NZ passport) wanting to buy property that meets a certain criteria must have Overseas Investment Office consent.
If there is a tenant in place you specify the details here. If you don’t want the tenant, or the property is vacant then write ”vacant possession”. If you need the tenant to vacate they need to be given 42 days notice and that means settlement can’t take place before that date.
General Terms of Sale
This is the fine print that details how the contract will work, for example what happened if the deposit isn’t paid, what happens if settlement is late.
Further Terms of Sale
This comes after the General terms of Sale. It’s a big blank box.
Here you can specify anything you want, even that you’ll have the shirt off his back as part of the deal. The vendor might not agree to it, but you can try! Generally though you will use this to specify other conditions – ie: due diligence period, or condition of sale of another property first.
Schedule 1: Located below the further terms of sale, the included and excluded chattels are specified here.
This is the last page and must be filled in so that each party knows who the other party is and who is acting for them.
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Published on Monday, October 18th, 2010, under Finance, Law, Insurance