Understanding Sale and Purchase Agreements

A Sale and Purchase Agreement is one of the most important legal documents in a New Zealand property transaction.

Whether you're buying or selling, the agreement doesn't simply record the price. It sets out the legal terms of the transaction - including what each party has agreed to do, what conditions apply and when important steps must happen.

Once an agreement becomes binding, changing your mind may not be straightforward.

That is why understanding the agreement before you sign it can be so important.

Why does a Sale and Purchase Agreement matter so much?

It can be easy to think of a Sale and Purchase Agreement as just another piece of paperwork in the property process.

It isn't.

The agreement is a legally binding contract between the buyer and seller. Its wording can determine matters such as whether the purchase is conditional, when conditions must be satisfied, what happens if something goes wrong and when settlement will occur.

Even where a standard form of agreement is used, the particular terms inserted into it can make a significant difference.

Should a lawyer review the agreement before you sign?

This is one of the most important questions for a property buyer or seller.

A lawyer can review the proposed agreement and explain its legal effect in the context of the particular transaction.

The timing matters because reviewing an agreement before it becomes binding can be very different from seeking advice after it has already been signed.

For buyers preparing an offer - particularly where there are questions about finance, title, a LIM, building inspections or additional conditions - finding a property lawyer early can be valuable.

What does "conditional" actually mean?

A conditional agreement contains one or more conditions that need to be dealt with in accordance with the contract. Common examples can relate to:

• •Finance
• •Building inspections
• •LIM reports
• •Title
• •Due diligence
• •Sale of another property
• •Other conditions negotiated for the particular transaction

The existence of a condition doesn't simply mean that a buyer can automatically change their mind.

The wording of the condition, the timeframe and what the agreement requires can all matter.

When does an agreement become unconditional?

An agreement generally becomes unconditional once there are no outstanding conditions of the relevant kind preventing the transaction from proceeding.

Once that happens, buyer and seller are committed to completing the transaction according to the contract.

For someone buying a property, understanding when that point occurs can be particularly important.

Does a finance condition mean you're completely protected?

A finance condition can be important where a purchase depends on obtaining suitable finance.

But the fact that an agreement contains the word "finance" doesn't by itself explain exactly how the condition operates.

Its wording, timeframe and the obligations contained in the particular agreement can matter.

A property lawyer can explain what a particular finance clause means rather than relying on assumptions about what a "finance condition" normally does.

What if the building inspection finds a problem?

A building inspection may identify anything from relatively minor maintenance issues to potentially significant defects.

What happens next from a contractual perspective can depend on the building inspection condition contained in the Sale and Purchase Agreement.

The building inspector and property lawyer also perform different roles.

The inspector assesses the physical condition of the property, while the lawyer can explain the legal implications of the agreement and the options that may arise under its terms.

Do you need both a LIM and a building inspection?

They provide different types of information.

A Land Information Memorandum (LIM) contains information held by the local council about a property, while a building inspection generally focuses on its physical condition.

A title review serves another purpose again.

This is why one property check doesn't necessarily tell a buyer everything that another type of investigation might reveal.

What can the property title reveal?

A property's Record of Title can contain or refer to important legal interests affecting the land. Depending on the property, these may include:

• •Easements
• •Rights of way
• •Covenants
• •Consent notices
• •Other registered interests

These aren't necessarily visible when you walk around the property.

A beautiful house can still have legal rights or restrictions attached to its land that a buyer may want to understand before becoming committed.

Can you change your mind after signing a Sale and Purchase Agreement?

Signing an agreement isn't the same as placing a property in an online shopping basket.

Once the agreement is legally binding, simply deciding that you no longer want to proceed doesn't necessarily mean you can walk away.

The legal position depends on the agreement, including any applicable conditions and the circumstances.

Anyone facing this situation may need advice about the particular contract rather than relying on general assumptions.

Can the settlement date be changed?

The settlement date is part of the agreement.

It isn't necessarily something either party can simply change unilaterally after signing.

Buyer and seller may be able to agree to a different settlement date, but changes need to be dealt with appropriately as part of the transaction.

This can be particularly important where someone is selling one home and buying another at the same time.

What happens if the buyer or seller can't settle?

Failure to complete settlement as required can have significant contractual consequences.

The Sale and Purchase Agreement contains provisions dealing with settlement and default, and the legal position depends on the particular agreement and circumstances.

When a settlement problem arises, getting advice quickly can become particularly important because contractual deadlines and substantial amounts of money may be involved.

Buying at auction - can you add conditions afterwards?

Auction purchases are different from ordinary conditional offers.

A successful auction purchase will generally be unconditional when the hammer falls.

That means buyers commonly arrange matters such as legal review, finance and property investigations before bidding, rather than expecting to add conditions afterwards.

This makes the period before auction day particularly important for someone considering a property seriously.

Why does finding the right property lawyer matter?

A Sale and Purchase Agreement may involve one of the largest financial transactions you'll ever enter into.

But not every property transaction requires exactly the same legal experience.

A first-home purchase, auction, apartment, lifestyle property, investment purchase or complicated title can each raise different questions.

The right property lawyer should be able to explain the agreement clearly, understand the type of transaction you're undertaking and identify the legal issues relevant to it.

And importantly, they need to be available before the decision or deadline that matters, not simply after it has passed.