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Understanding the sale and purchase agreement when buying

Source: Real Estate Agents Authority – Press Release/Statement:

Headline: Understanding the sale and purchase agreement when buying

Summary of important things to know

  • You must sign a written sale and purchase agreement when you buy a property.

  • Always check your sale and purchase agreement with a lawyer or conveyancer before signing. You need to read and understand the agreement before you sign it.

  • You should always get legal advice before you sign the agreement and throughout the buying process.

  • You can negotiate the conditions in a sale and purchase agreement.

  • A sale and purchase agreement becomes unconditional when all the conditions are met.

  • The agent helps you and the seller to include the conditions you both want. Even though the agent works for the seller, they also have to deal fairly and honestly with the buyer. They can’t withhold any information, and they must tell you about any known defects with the property.

  • The agent will probably use the agreement for sale and purchase approved by the Auckland District Law Society and the Real Estate Institute of New Zealand.

  • Before you sign a sale and purchase agreement, the agent must give you a copy of the REA New Zealand Residential Property Sale and Purchase Agreement Guide. They must also ask you to confirm in writing that you’ve received it.

Sale and purchase agreement

A sale and purchase agreement is a legally binding contract between you and the seller. It sets out all the details, terms and conditions of the sale. This includes things such as the price, any chattels being sold with the property, whether the buyer needs to sell another property first and the settlement date.

A sale and purchase agreement provides certainty to you and the seller about what will happen when.

The New Zealand Residential Property Sale and Purchase Agreement Guide

This guide tells you:

  • what a sale and purchase agreement is
  • what’s in a sale and purchase agreement
  • what happens after you sign the sale and purchase agreement
  • what happens if you have a problem
  • where to go for more information.

 

Download the residential property sale and purchase agreement guide [PDF, 2.7 MB] Download the sale and purchase agreement guide [PDF, 2.7 MB] .

Download the Chinese version of the residential property sale and purchase agreement guide [PDF, 2.9 MB] .

What’s in a sale and purchase agreement

Your sale and purchase agreement should include the following:

  • Your name(s) and the names of the seller(s).
  • The address of the property.
  • The type of title (for example, freehold or leasehold).
  • The price.
  • Any deposit you must pay.
  • Any chattels being sold with the property (for example, whiteware or curtains).
  • Any specific conditions you or the seller want fulfilled.
  • How many working days you have to fulfil your conditions  (if there are conditions).
  • The settlement date (the date you pay the rest of the amount for the property, which is usually also the day you can move in).
  • The rate of interest you must pay on any overdue payments. 

General obligations and conditions you have to comply with

The sale and purchase agreement includes general obligations and conditions that you will need to comply with. These may include the following:

  • Access Rights. What access you can have to inspect the property before settlement.
  • Insurance. To make sure the property remains insured until the settlement date and outline what will happen if any damage occurs.
  • Default by you. You may have to compensate the seller if you don’t settle on time, for example, with interest payments.
  • Default by the seller. The seller may have to compensate you if they don’t settle on time, for example, by paying accommodation costs.

Your lawyer or conveyancer will explain these clauses to you. 

Specific conditions you may include

You can present an unconditional offer, which means there are no specific conditions to be fulfilled, or you can include one or more conditions (that must be fulfilled by a specified date) in your offer. These are some common conditions:

  • Title search. This is done by your lawyer or conveyancer to check who the legal owner of the property is and to see if there are any other interests over the property such as caveats or easements.
  • Finance. This refers to you arranging payment, for example a mortgage or loan.
  • Valuation report. A bank may require you to obtain a valuation of the property (an estimate of the property’s worth on the current market) before they agree to a loan.
  • Land information memorandum (LIM). Provided by the local council, this report provides information about the property such as rates, building permits and consents, drainage, planning and other important information.
  • Building inspection report. To determine the condition of the building.
  • Engineer’s or surveyor’s report. Similar to the above but more focused on the entire section and the structure of the property.
  • Sale of another home. You may need to sell your existing home in order to buy another. 

What happens after you sign the sale and purchase agreement

Signing the sale and purchase agreement is not the end of the purchase process.

Both parties work through the conditions until the agreement is unconditional

A conditional agreement means the sale and purchase agreement has one or more conditions that must be met by a specified date.

You pay the deposit

Depending on what the agreement says, you may pay the deposit when you sign the agreement or when the agreement becomes unconditional.

An agreement for sale and purchase commits you to buy

When you’ve signed the sale and purchase agreement and any conditions set out in it have been met, you must complete the purchase of the property.

Payment of a commission

When the sale is complete, the seller pays the agent for their services. The agent or agency usually takes the commission from the deposit they’re holding in their trust account. The agent cannot ask you to pay for their services if they have been hired by the seller.

You pay the rest

You pay the remainder of the amount for the property on the day of settlement, usually through your lawyer or conveyancer.

Buying a tenanted property

The agreement for sale and purchase may contain a specific date for possession that may differ from the settlement date, for instance, where the property is tenanted. If the property is tenanted, the agreement for sale and purchase should specify this.

If you require the property to be sold with vacant possession, it is the seller’s responsibility to give the tenant notice to vacate, in accordance with the tenant’s legal rights.

We recommend you seek legal advice if you are buying a property that is currently tenanted.

Signing a sale and purchase agreement

Signing a sale and purchase agreement

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