Understanding a Sale & Purchase Agreement in NZ

A sale and purchase agreement is a legally binding contract between the person buying the house and the person selling the house.

These documents exist for two main reasons: to establish the terms and conditions of the sale and to provide a timeline of what will happen throughout the process.

Usually, it’s up to the seller’s lawyer, conveyancer or real estate agent to draw up a sale and purchase agreement that captures the specific details of that particular transaction. You’ll have your lawyer go through the agreement with you and make sure you are happy with the terms and conditions before signing.

Standard information you’ll find on most NZ sale and purchase agreements include:

• The names of both parties.
• The property address and type (e.g. leasehold).
• The sale price.
• Any conditions (for example, subject to building inspection report) and how long the relevant party has to meet them.
• What happens if conditions aren’t met.
• Chattels to be included in the sale.
• The date the agreement will go unconditional.
• A settlement date when the buyer will move in.
• The deposit the buyer needs to pay – depending on what the agreement says, the buyer will either pay when the agreement is signed, or when the offer goes unconditional.
• The interest rate on overdue payments.

Both the buyer and seller can include conditions in the sale and purchase agreement that must be met before the sale can proceed. It’s worth noting that you can negotiate on conditions before the agreement is finalised.

Common buyer conditions include the outcome of the builder’s reports or confirming finances, whereas sellers might include being able to rent back the property until they find somewhere new.

Generally, the seller’s agent or lawyer will help both parties add any conditions they might want to the agreement. Even though they work for the seller, they’re obliged to work with the buyer fairly, and not withhold important details or information.

 The agent or lawyer must provide a copy of the REA New Zealand Residential Property Sale and Purchase Agreement Guide to the buyer, and confirm in writing that it’s been received.

The sale and purchase agreement should include details of what happens if either side can’t meet the finalised conditions.

If this happens to you, the best thing to do is talk to your lawyer as soon as possible. In some cases, you might be subject to penalties such as paying compensation to the other party.