4 mins to read
By CCH New Zealand
Recent buyers or sellers of land may have noticed that the standard agreement for sale and purchase used by most real estate agents and lawyers has changed.
Use of the new standard agreement, the seventh edition, began in mid-September. Many of the changes from the sixth edition are merely matters of style, removing old-fashioned language and turning long sentences into numbered lists. Some changes, though, will have a significant impact on the obligations of the buyer or the seller.
Buyers should not leave settlement to the last minute on a Friday.
"Last minute" really means "last hour" because settlement between 4 pm and 5 pm is considered to be a "last minute settlement". The new agreement requires buyers who delay settling until after 4 pm to pay interest on the amount paid on settlement.
Interest is set at double the 90-day bank bill buy rate (unless the parties have agreed on a different rate) and must be paid for every day until the next working day.
If a last minute settlement occurs on a Thursday the buyer will have to pay only one day's interest. However, for a last minute settlement on a Friday, three days interest will be paid. (Interest must also be paid for any public holidays between a last minute settlement and the next working day.)
It is common for a buyer to make an agreement conditional on receiving a satisfactory land information memorandum (LIM) from the local authority. The new standard agreement allows the buyer only three working days in which to request the LIM. So, a buyer signing up on a Saturday (and circling the "yes" on the front page to say a LIM is required) must request the LIM on or before the following Wednesday.
A buyer cannot use non-approval of the LIM as an excuse to get out of the contract. The buyer must tell the seller the particular matters of which the buyer does not approve and what the buyer wants the seller to do about them. The seller then has the choice whether to agree to comply with the buyer's requirements, do nothing or state that he or she will not comply.
If either of the last two choices are made, then either the buyer or the seller may choose to terminate the agreement.
Under the new standard agreement there is greater encouragement to buyers and sellers to settle on the agreed date. Late settlement has always had significant repercussions. However, there is now a harder line on the meaning of "default". A party is in default if the party does not do what it contracted to do to enable settlement to occur, regardless of the cause of such failure.
Buyers are advised to investigate the property's status under the district plan, to investigate whether all the necessary permits were obtained for any alterations made by any previous owners, and to take some extra steps if the property is a cross lease or unit title.
Sellers are advised to ensure that the warranties they promise in the agreement have been complied with or, if not, have been deleted from the agreement and appropriate disclosure made to the buyer. If the property is sold as a "going concern", the seller is advised to include the words "plus GST (if any)" with the purchase price.
Both parties are advised to ensure that the list of chattels included in the sale is accurate. They are also advised to seek legal advice if there is any doubt about the position of the boundaries, if the property is vacant land in the process of being subdivided or if a new cross lease or unit title is to be issued.
Above all, buyers and sellers are advised to seek legal advice before signing and they are reminded that the agreement, once signed, is a binding contract. The standard agreement for sale and purchase of real estate is copyright to the Auckland District Law Society and the Real Estate Institute.
* Auckland-based CCH New Zealand Ltd is a publisher in tax, health and safety and business law. For further information, telephone 0800 500 224 or visit the web site at www.cch.co.nz.
