Selling property – What should the vendor know about the sale and purchase agreement?

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Selling your house lawyerProperty purchasers are encouraged to conduct due diligence and get a lawyer to check the agreement for sale and purchase before they sign, but what about the vendor or person selling property?  What do you need to know about the agreement for sale and purchase before they sign it?

Vendor warranties
Vendors should read the vendor warranties very carefully to ensure that there are no outstanding issues that they are aware of, especially where they might have done work to the property.  If there are any issues, a special condition can be included that will put the purchaser on notice and shift the burden.  An example of this is a “as is, where is” clause which might relate to, say, an unpermitted garage.

LIM report clause
It is also good practice to obtain a Land Information Memorandum report on your property before you list it on the market.  This gives you a chance to identify any outstanding issues and rectify them before the purchaser is even aware of them.  You will then be able to produce a copy of the LIM report for potential purchasers before they put in an offer and so preclude the need for the contract to be conditional on the LIM report.

Building report clause
The current standard agreement for sale and purchase has a space on the front page to indicate that a building report is required, previously it was inserted as a special condition.  The purchaser then has 10 working days to obtain a report from a suitably qualified building inspector.  Vendors should be aware that relying on this standard clause does not give the vendor the option to remedy the problems before cancellation of the contract.  However, if the purchaser pulls out of the agreement on the basis of the report the vendor may request a copy of it, this can help ensure the reasons for cancelling the contract are genuine.

Cross lease/Unit titles
If the title to your property is a cross lease or a unit title there are a number of extra issues to consider and you should talk to your lawyer regarding your obligations.

Cash Out clause
The situation often arises where a vendor is locked into a conditional agreement and while awaiting satisfaction of the conditions, the vendor misses out on a sale to another party.  However, the inclusion of a ‘cash out’ clause in the special conditions allows the vendor to accept a second offer.  The vendor then gives notice to the purchaser under the first agreement that they must declare the contract unconditional, within a certain time, or the first agreement comes to an end.  A cash out clause is not a standard condition and you will need to ask to your lawyer to draft this prior to signing the agreement.  

After the agreement is signed it is too late to include any special clauses or conditions.  So, the key with selling your house is careful consideration of the agreement before you sign it, so that extra clauses can be added or amendments made.

If you wish to obtain legal advice on the sale of your property, or for conveyancing services, please contact experienced property lawyer by phone on 09 837 6891 or email carolyn.ranson@smithpartners.co.nz.