Sale and Purchase Agreements for Real Estate
An Agreement for Sale and Purchase whether by private treaty or prepared by a Real Estate Agent forms a legally binding contractual obligation between a vendor (seller) and purchaser of a piece of real estate.
If you are purchasing a piece of real estate through a licensed real estate agent they will usually prepare the agreement for you, in consultation with you. Sometimes negotiations can take place over several days – especially when a purchaser is offering to purchase at an amount lesser than that originally asked by the vendor.
If you are the purchaser you will present the offer conditions attached to it – the vendor may either accept the offer on your terms and conditions or counter offer any of your conditions. Counter-offers may be in reference to the purchase price or any other terms within the agreement (for example, the settlement date, whether certain chattels form part of the purchase or not).
It is imperative you fully understand all that you are agreeing to when signing an Agreement for Sale and Purchase and this is where your lawyer can play an important role in your purchase.
With no disrespect to real estate agents they are highly skilled at negotiating but not necessarily familiar with the ramifications of creating their own special clauses and how such a clause may be interpreted in law.
If you are including any special conditions (that is, conditions that are hand-written or typed into the generic sale and purchase document) any lawyer cannot stress strongly enough the importance of getting this checked by him/her first.
It is important you understand exactly what you are buying and the conditions attached to that.
Information a Sale and Purchase Agreement should contain:
Ideally the following should be clearly defined in your sale and purchase agreement -the more specific – the better the understanding between the parties.
- Full legal names of vendors as described on the Title.
- Full names of purchasers as per legal identification – such as a driver’s license or passport, or as per the entity in which the land is to be held.
- Full address of the property.
- Complete legal description as per the Title search.
- Purchase price.
- Amount of deposit – how much is to be paid, when it is to be paid and to whom it is payable.
- GST – is it applicable. We suggest you obtain the advice from your accountant in relation to any GST requirements to a transaction.
- Rate of penalty interest for late settlement.
- Possession and settlement dates.
- Finance condition.
- Land Information Memorandum condition – if applicable.
- Tenancy – if any – and occupancy thereafter.
- Further terms of sale as required.
What types of further conditions can be inserted?
- Builder’s Report.
- Inspection of the local council property file.
- Subject to the sale of another property.
- Approval of Title. What type of Title?
- Good working order – in relation to chattels, fixtures and fittings.
- Security Alarm – the wording around this condition will depend if the alarm is monitored or not.
- Due Diligence.
- Cash-Out clause – this clause will be used by the vendor which allows them to receive other offers whilst the property is still under contract to you.
- Chattels listed.
- Any other conditions applicable to the transaction.
- Identification of incidental matters which may need to be undertaken (eg, any repairs):
- What needs to be done?
- Who’s going to do it?
- Who is going to pay for it?
- When does it need to be done?
- What is going to happen if something is discovered?
- Who is going to pay to fix it?
All these extra conditions need to be initialled by all parties to the contract.
These are just a few common examples. Each contract is different. The wording must be precise and legally correct to ensure there are no misunderstandings which could result in disagreement further down the track.
The Ninth Edition of the Agreement for Sale and Purchase of Real Estate
The fine print in an Agreement for Sale and Purchase is complex. We highly recommend you familiarise yourself with one prior to signing. You can download a sample copy of the Ninth Edition of the Agreement for Sale and Purchase of Real Estate approved by the Real Estate Institute of New Zealand Incorporated and the Auckland District Law Society.
As you will notice, the highlighted clauses need particular attention paid to them.
IF you are the vendor in your particular agreement:
- If the property is a vacant residential lot that all boundary markers are present and will be in their correct position as at the possession date.
- That as at the date of the agreement you have not received any notice or demand and have no knowledge of any requisition or outstanding requirement in relation to the property.
- You have not given any consent or waiver which directly or indirectly affects the property and which has not been disclosed in writing to the buyer.
- That all the chattels will be delivered to the buyer in the same state as they were at the date of the agreement.
- That all electrical and other installations on the property are free of any charge.
- There will be no arrears of rates or water rates.
- If you have done or caused or permitted to be done on the property any works requiring a Resource Consent or Building Consent that Resource Consent or Building Consent was obtained, the works were completed in compliance with such consents, and where appropriate a Code Compliance Certificate was issued for those works.
- That between the date of the agreement and settlement, you have not given any consent or waiver which directly or indirectly affects the property and that any notice or demand received which directly or indirectly affects the property has been delivered forthwith by you to the buyer.
Unit Title & Cross Lease provisions
- You must provide a Certificate of Insurance not less than five working days before settlement);
- That there shall be no apportionment of contributions to any long-term maintenance fund, contingency fund or capital improvement fund.
- That as at settlement all contributions and other moneys payable by you to the body corporate have been paid in full.
- You need to confirm the address for service of each party’s lawyers;
- You need to provide any disclosure statements.
- There are further warranties and undertakings of a procedural nature that are included in the agreement, which will be dealt with as part of the sale process.
If you are the purchaser:
- If you have stipulated a Builder’s Report is required that you will do so at your expense and on or before the tenth working day after the date of the agreement;
- If you have not stipulated a specific settlement date then under law that shall be 65 working days from the date as detailed on the front page of the agreement.
- In Schedule 1 – ensure you identify all the chattels you want to see included as part of the purchase of the property.
Do you need an agreement prepared for you?
If you require the preparation of an Agreement for Sale and Purchase please send us an email to [email protected] with the following information:
- Vendor(s) name(s)
- Purchaser(s) name(s)
- Property address
- Certificate of Title (if known)
- Purchase price (whether this plus or inclusive of GST)
- Deposit amount and date payable
- Settlement date
- List of chattels
- Purchase conditions (we will word these in a legally binding way for you)
- Vendor’s solicitor (if known)