Edmonds Judd

Tourism Risk Management

Vacant possession

What does it mean?

If you are buying a property and intending to live in it, one of the first things that you should ensure is that the property is being sold with vacant possession.

Vacant possession means that you receive the property without the previous owners or tenants still occupying the property. This is an important feature of every property transaction; it is difficult to move in if someone else is still living in your new home. As a purchaser you might also include a clause requiring all rubbish and chattels to be removed by settlement date too, with the property to be left in a clean and tidy state.

Timing for vacant possession

The usual position is that vacant possession needs to be given to the buyer no later than 4:00pm on the settlement date. Best practice if you are selling is to have moved out as soon as possible, ideally before the settlement date so that there are no unnecessary delays on the actual day. This isn’t always possible if you are settling on the property you’re moving to on the same day. In this instance, it is important that you let us know not to settle until you can provide vacant possession. You must have all of your belongings moved, and any rubbish cleared from the property so your buyers can move in straightaway.

At the same time, it is prudent that the property that you are moving into is also vacant.

Clear communication with us regarding timing and/or pre-planning or storing items ahead of your settlement can help alleviate this kind of pressure on the settlement date. The times for performance of your settlement day obligations are all recorded in clause 3 of the standard sale and purchase agreement of real estate, along with the remedies available to buyers where vacant possession cannot be provided.

Tenanted properties

The circumstances where a property might not be sold with vacant possession would usually include a tenanted property being bought for an investment purpose where the buyer wants to retain the current tenant for rental income. Due to this being a relatively unusual occurrence, sellers looking to make their sale as attractive as possible should consider selling with vacant possession so their potential sales market is not limited.

If you are selling a property that is tenanted and want to provide vacant possession, you should ensure that you give your tenants the requisite notice under the Residential Tenancies Act 1986 that they need to move out in the required time period. Failing to do so could result in delays to the settlement of your sale that could potentially cause penalty interest to be payable to the purchaser.

Unable to provide vacant possession?

If you cannot provide vacant possession for your buyer on the settlement date, there are some actions that may be taken by the buyer set out in clause 3.13 of the agreement.

Refusal to settle: If you cannot move out and are still occupying the property or if your tenant has not moved out due to not being given the requisite notice or some other dispute, the buyer may refuse to settle. This can be a serious problem where you are relying on funds from your sale to complete a purchase; it may result in a chain of defaults for which you (as the originating defaulting party) may be liable. The cost for delaying settlement is generally prescribed by the penalty interest rate that is recorded on the front page of the agreement.

Withholding funds: If you have moved out but left belongings at the property, the buyer may seek to withhold a portion of the purchase price on settlement until this is removed. If you do not remove these items within an agreed time period, the buyer may retain those withheld funds. Again, if you require every penny from your sale proceeds, this could also trigger a chain of defaults.

Compensation claim: In some instances the buyer may claim compensation from you under the compensation process in clause 10 of the agreement. This will be a claim for the cost of removing any items left behind that the buyer has had to dispose of or any other costs that the buyer has incurred as a result of you failing to provide vacant possession. A disputed claim for compensation could result in a delay to settlement while the dispute is resolved.

Get organised

Due to the severity of the consequences of not providing vacant possession and the potential cost associated with failing to do so, it is crucial that you discuss with us your transaction timeline to ensure that your settlement proceeds smoothly rather than turning into an expensive nightmare.

DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Business briefs

Misleading and deceptive conduct

The Commerce Commission has filed criminal charges against HelloFresh New Zealand, alleging that the meal-kit delivery company misled former customers when reactivating cancelled subscriptions.

 

The charges relate to conduct where customers were allegedly offered discount vouchers via cold calls without being clearly informed that accepting the voucher would reactivate their subscriptions and result in charges to their account.

 

Commerce Commission Deputy Chair, Anne Callinan, stated that the alleged conduct may have breached the Fair Trading Act 1986, which prohibits misleading and deceptive practices. Given the prevalent use of subscription-based services, the Commerce Commission is focused on tackling ‘subscription traps,’ where consumers may be unwittingly signed up for ongoing service contracts.

 

While the allegations have yet to be tested in court, the case serves as a reminder for businesses to ensure their sales practices are clear and transparent, and for consumers to remain vigilant.

 

Misleading or deceptive conduct, even if unintentional, can result in significant penalties and reputational damage. The Commerce Commission has signalled that enforcing fair trading laws in the online subscription space is a priority.

 

Whakaari Management Limited conviction overturned

In previous editions of Commercial eSpeaking, we have reported on the conviction and sentencing of Whakaari Management Limited (WML). The District Court convicted WML under section 37 of the Health and Safety at Work Act 2015 for failing to ensure the safety of tourists visiting Whakaari/White Island following its December 2019 eruption that killed 22 people and severely injured 25 more.

 

Section 37 imposes a duty on those who manage or control a workplace to ensure, so far as is reasonably practicable, that their workplace is without risks to the health and safety of any person.

 

The High Court has since overturned WML’s conviction.[1] Central to this decision was the interpretation of ‘management or control of the workplace.’ WML’s role was limited to granting access to Whakaari – it did not actively direct or oversee activities on the island. This lack of operational control meant WML did not manage or control the workplace in the sense contemplated by section 37.

 

The High Court found that the risk of people being on Whakaari during an eruption stemmed from the work activity controlled by the tour operators, not WML’s business operations. WML had imposed health and safety obligations on the tour operators and relied on regulatory guidance in respect of the risk. As a result, the High Court was satisfied that, even if section 37 had been triggered, WML had taken all reasonable steps to discharge such a duty.

 

Although this decision may be a relief to many business owners, we urge continued caution. Neglecting to exercise power or control does not exempt a business from its duty under section 37. A practical and fact-specific exercise should be undertaken to assess whether the business can actively control or manage the workplace. Businesses must continue to identify circumstances where a duty may be owed and ensure appropriate steps are taken to discharge this.

 

The Resource Management Act 1991 to be replaced with two new acts

The government recently announced that the Resource Management Act 1991 (RMA) will be replaced by two new acts: the Planning Act and the Natural Environment Act. This is the final stage of the government’s three-phase resource management reform. It follows the repeal of the Labour government’s RMA replacement legislation, amendments to the RMA and implementation of the Fast-Track Approvals Act 2024.

 

The dual act approach aims to minimise duplication between laws and regulations, and to provide a more concise framework for managing the effects on the natural environment. The Planning Act will focus on land-use planning and regulation, while the Natural Environment Act will address the use, protection and enhancement of the natural environment.

 

Key proposed changes include:

  • Nationally standardised land use zones: the new resource management system will have one combined plan per region. Each plan will include environmental, spatial planning and planning chapters
  • Resource consent: resource consents will still be required. However, with the new nationally standardised land use zones, there will be more permitted activities, leading to fewer resource consents being required, and
  • Compliance and enforcement: a national compliance and enforcement regulator will be established to ensure consistency and reduce variability in compliance and enforcement activities. This will be done in a separate legislative process.

 

The government has indicated that it intends to introduce the new legislation to Parliament by the end of 2025, put it before the select committee in 2026, and pass it into law before the general election at the end of 2026.

[1]  Whakaari Management Ltd v WorkSafe New Zealand [2025] NZHC 288.

DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650