Commercial property buyers hedging their bets when making an offer on real estate have had some of their "wriggle room" removed under changes to the standard legal sale and purchase agreement documentation they must sign.
Amendments to the templated sale and purchase document used in real estate transactions have been drafted up by a joint working party consisting of the Real Estate Institute of New Zealand and the Auckland District Law Society representing New Zealand’s wider legal fraternity, with additional input from real estate agencies.
The new sale and purchase paperwork comes into effect at the end of last year. National director for commercial real estate at Bayleys Real Estate, Ryan Johnson, said the two biggest changes to the documentation would make it harder for potential purchasers to back out of an offer on the grounds of either failing to acquire the necessary funding, or if a property received an unflattering building report.
“Clause 9.1 under the financial conditions section makes it more difficult for purchasers to use ‘conditional on finance being obtained’ as an option which can be called upon should they decide not to proceed with a purchase,” Mr Johnson said.
Start your property search
“Under the incoming documentation, a vendor may request the purchaser provides supporting evidence from a lender that the purchaser had attempted to obtain finance, and that the application was declined.
“Similarly, with purchasers citing a ‘subject to a builder’s report’ clause in their offer. Should a potential buyer withdraw their offer on those grounds, a vendor may ask to see a physical copy of the builder’s report. So, a verbal assessment will not hold up to judicial review.”
Mr Johnson said advances in technology were also embraced within the new the modern sale and purchase scenario.
“Faxes are no longer deemed to be acceptable methods of communication. Conversely, emails are now deemed to have been served by either party when they have been sent to the correct email address,” Mr Johnson said.
“The old excuse of ‘I didn’t check my emails’ is no longer valid.”
Other notable updates to the sale and purchase agreement include:
• The extension of building report compilation and delivery from 10 to 15 days
• Methamphetamine testing must now be undertaken in accordance with NZ Standard 8510:2017
• Unless a date is specified for obtaining consent from the Overseas Investment Office, the default period is now reduced from 95 to 65 days.
Mr Johnson said the changes should steer both purchasers and vendors to having more communication and direction from both their lawyers and the real estate salespeople involved in the process.
“Commercial and industrial real estate salespeople at the bigger agencies, such as Bayleys, have been fully briefed on the implication of these amendments, and therefore will be in a well-versed position to explain the potential ramifications to both buyers and sellers,” he said.
“However, for some salespeople working at smaller, more localised real estate firms, the changes may cause speedbumps for the sale and purchase process to progress smoothly. And in a worst-case scenario, a lack of understanding could lead to litigation.”
Dovetailing behind the introduction of the new sale and purchase agreement documentation updates are revamped version of auction and tender documents – which are expected to be implemented in coming months.
