Concerning news articles have recently surfaced of real estate agents pressuring buyers to avoid making sale and purchase agreements conditional.

This comes at a time when demand for housing is at a record high and many buyers may feel their offer will be more appealing to a vendor with fewer conditions. Passing up on such conditions, however, could be akin to shooting oneself in the foot.

Let’s take a look at some of the conditions in sale and purchase agreements and when you should consider including them:

Building report

This condition is particularly important for homes built from 1980 onwards, with the primary focus being on issues of weathertightness. The standard sale and purchase agreement gives the purchaser 15 working days from signing the agreement to obtain a building report. Building reports should also identify any building work undertaken to poor or non-complying local authority standard. We suggest obtaining a building report for any purchase of residential or commercial property.

Land Information Memorandum (LIM) report

A LIM report provides crucial insight into the history of the property (such as building and resource consents) and restrictions on the land (such as zoning restrictions). Banks may also require a LIM report, since they identify flood risks, which may impact on the insurability of the property. We suggest obtaining a LIM report for residential and rural property. Ideally, a LIM report should be addressed to the buyer, rather than obtained from the agent.

Toxicology report

Although the risk nowadays of purchasing a house where methamphetamine has been smoked or produced in large quantities in New Zealand is relatively low, a toxicology report may be useful where meth contamination is a concern. In many cases there may be nothing visible to indicate whether meth contamination has occurred. We suggest making enquiries with the real estate agent about previous tenants and meth testing undertaken on the property.  (See this report for additional information on methamphetamine risks)

Due diligence report

Often, an all-encompassing due diligence clause will be the best option for buyers. Such clauses, usually with a 10-working day timeframe, will allow the buyer to make enquiries into any of the above matters as they (or their solicitors) feel is necessary. A well drafted due diligence clause will allow the buyer to cancel without providing a reason, unlike LIM, building, and toxicology report conditions which require a copy to be provided to the vendor if the agreement is cancelled because of them. We suggest requesting a due diligence clause be inserted in the further terms of all agreements for sale and purchase, wherever possible.

Purchasing property is a significant investment and buyers should be given adequate time to ensure they are comfortable proceeding. It always pays to remember that real estate agents ultimately work for the vendor.

If you are looking to purchase a property, get in touch with one of our property law experts to ensure that your sale and purchase agreement is tailored to you and has your best interest in mind.  

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