The new 9th Edition 2012 form of Agreement for Sale and Purchase of Real Estate was released yesterday.
The main changes are:
1.The words “and/or nominee” have been added after the description of the purchaser, so that this doesn’t have to be added each time.
2.A standard building report condition has now been included (clause 9.3). You will now have to cross out “yes” or “no” in the conditions box on the front page of the agreement, depending on whether the purchaser wants to make the purchase conditional on obtaining a building report. The clause gives the purchaser 10 working days to obtain a report. The purchaser must act objectively in deciding whether to approve the report. If the condition is not satisfied, the purchaser must give the vendor a copy of the builders report. If a purchaser wants an absolute right to cancel without having to justify his or her reasons for not approving, the standard clause would need to be deleted and replaced with another clause. On the other hand, of the vendor wants the option to fix any problems raised in the report rather than having the agreement cancelled, the clause would need to be amended
3.It is now compulsory to complete settlement by electronic transfer of cleared funds, rather than by bank cheque (except in special circumstances).
4.If no interest rate for late settlement is included on the front page of the agreement, then the interest rate for late settlement will be equal to the interest rate charged by the IRD on unpaid tax, plus 5% per annum.
5.If a condition date is not a working day, then the condition date will be the last working day before the specified condition date.
6.If the property being sold is a unit title, then the deposit must be held by the stakeholder (usually the agent) until the purchaser’s rights of cancellation under the Unit Titles Act 2010 have been exhausted. This means that you cannot release the deposit until;
a.A pre-settlement disclosure statement (certified by the Body Corporate) has been provided to the purchaser within the prescribed time limit (or under any extended time limit notified by the purchaser); and
b.An additional disclosure statement (if requested by the purchaser within the prescribed time limit) has been provided to the purchaser by the vendor within the prescribed time limit (or under any extended time limit notified by the purchaser); or
c.Where the purchaser has the right to cancel, the purchaser has waived the right to cancel by giving notice to the vendor.
The release of deposit authorisation forms which you use should be modified to include a confirmation from the purchaser’ s lawyer that, in the case of a unit title property, the purchaser’s rights of cancellation under the Unit Titles Act 2010 have been exhausted.
7.There is no longer any distinction between the possession date and the settlement date – they are now the same. If the purchaser wants to take early possession (before settlement), an additional clause will have to be added.
8.The purchaser’s right to a pre-settlement inspection is now made subject to the rights of any tenants of the property. You will therefore have to check the terms of any lease or residential tenancy agreement to make sure that a pre-settlement inspection is permissible before you arrange it.
9.If the purchaser is late in completing settlement then, then before being able to charge interest for late settlement, the vendor must provide reasonable evidence of the vendor’s ability to complete settlement.
10.A new clause has been added to incorporate certain aspects of the Unit Titles Act.
11.Under the old agreement, if the property was damaged prior to settlement, then if the property was un-tenantable, the purchaser could either complete the purchase at the purchase price, less a sum equal to any insurance monies received by the vendor in respect of the damage (if the insurance company has not re-instated) or the purchaser could cancel.
12.If the property was not un-tenantable, then the purchaser was required to complete the purchase at the purchase price, less a sum equal to the amount of the “diminution in value” of the property. This has been altered to state that the “diminution in value” is the reasonable cost of reinstatement or repair. If the amount of the diminution in value is disputed, parties are to follow the dispute process set out in Clause 7.4 of the agreement. An interim amount, being a “reasonable sum in regard to all the circumstances”, is to be set aside until the dispute is resolved under that procedure. If the parties cannot agree on the interim amount, the interim amount is to be decided by an experienced property lawyer appointed by the parties.
13.Some of the vendor warranties have been changed:
a.Previously, the vendor warranted that the chattels would be delivered to the purchaser in their state of repair as at the date of the agreement (fair wear and tear excepted). Now, the vendor warrants that the chattels will be delivered to the purchaser “in reasonable working order, where applicable”, but in all other respects, in their state of repair as at the date of the agreement. This actually makes the agreement less clear – what do the words “where applicable” mean? And when do the chattels need to be in reasonable working order, and when do they have to be in a state of repair as at the date of the agreement? Given the new wording, if any of the chattels is not working, it is best to record this in the agreement in a separate clause.
b.Previously, the vendor warranted that when the vendor had arranged for any work to be done on the property, the works had been completed in compliance with all necessary building consents and permits (i.e. the vendor was liable even if the vendor did not know that the works had not been completed in accordance with the consents, for example, because a builder had carried out the works). This has been changed, so the vendor is only in breach of the warranty if the vendor knows that the works were not completed in accordance with the permits or consents.
c.Under the previous form of the agreement, the vendor warranted that if the property being sold required a compliance schedule, that the vendor had complied with the requirements of the compliance schedule, and that the building had a current building warrant of fitness, and if the vendor was unaware of any reason why the warrant of fitness would not be renewed at the next due date. If the property being sold includes only part of the building,, the vendor warrants that to the vendor’s knowledge, there has been full compliance with the compliance schedule, and that the vendor is not aware of any reason why the building warrant of fitness would not be removed at the next due date.
14.The agreement now makes it clear that on settlement, only contributions to the operating account of a Body Corporate will be apportioned, and contributions to any long term maintenance fund, contingency fund or capital improvement fund of the Body Corporate will not be apportioned.
