Changes to property sale agreements

The very great majority of agreements for sale and purchase of land in New Zealand are prepared using the form jointly created by the Auckland District Law Society and the Real Estate Institute of New Zealand.

Recently there have been some changes to the standard conditions inserted into all these agreements.

Most of the changes are of a minor nature to deal with administrative matters.

The most significant change is the insertion of a new clause relating to claims for compensation. This is as a result of a recent Supreme Court decision – Property Ventures Investments Limited v Regalwood Holdings Limited.

That case dealt with an agreement where the vendor was seriously in breach of its obligations under the agreement, but insisted that the purchaser should still make payment in full on settlement day. The Court held that the vendor was not entitled to do that and the purchaser was entitled to settle by paying a reduced settlement sum.

The new clause sets out a procedure for dealing with situations where the purchaser claims that the vendor is in breach of the vendor’s obligations under the agreement. In that case the purchaser can give notice claiming compensation and a procedure is set out for determining the amount of compensation and how it is to be dealt with.

In any such case there is likely to be a dispute about whether or not the vendor is in breach, and so whether these provisions apply. Decisions will need to be made about how serious the breach is and what the consequences should be. You should seek advice from your solicitor in any such situation as the possible ramifications may be very far reaching.