Purchasing a property can be a daunting but exciting process. What conditions should you include in your agreement?
For most of us, buying a property will be one of the most expensive transactions undertaken. Therefore, the Sale and Purchase Agreement is one of the most important documents that you will sign. It is important that you do not sign the Agreement before obtaining legal advice; otherwise, you may find you have signed a legally binding Agreement without the correct legal advice.
By adding conditions to your offer, you will still enter into a legally binding agreement, but the purchase will not be confirmed until you have satisfied all the conditions.
A list of the most common conditions which are recommended for residential property purchases are:
- Finance condition:
Even if you have a pre-approval from your bank, you still need to get an unconditional finance approval for the particular property you are purchasing. You may find the bank are not prepared to lend the amount of money that you require because of issues with the title, the location or value of the property. - Land Information Memorandum (LIM):
The LIM contains all the information Council hold on the property, such as the property valuation, information regarding building permits and consents, code compliance certificates, any resource consents issued in the immediate adjacent area, special land features including flooding, erosion, falling debris, slippages, and other land features. - Building Inspection Report
A building inspection attempts to identify any significant defects, overdue maintenance, future maintenance issues, gradual deterioration and inferior building work. The inspector will also carry out an moisture test which will identify any structural problems or a leaky building. Depending on what a building inspection finds, you may be able to use a report to help you negotiate with the vendor over price or repairs. Even if a report only finds minor issues, you can still use it as a road map for future maintenance.
If you are purchasing a house that is being built, or a subdivision that is not yet completed, a Sunset Clause may be appropriate. This would give you the option to get out of the Agreement should the work not be completed and settlement not have occurred within a specified time frame. If you are an overseas person wishing to purchase sensitive land in New Zealand, then an OIA consent condition would be required
Other common conditions that can be included in the Agreement is Registered Valuation, Solicitors Approval, the Sale of an existing property and Due Diligence.
It is essential that conditions are appropriately worded so that their meaning is clear and they are not disputed at a later date. Do not rely on verbal agreements with the vendor or agent. Please ensure all agreed terms are contained in writings in the Agreement.
