Conditions are terms which are included in an Agreement for Sale and Purchase, which give the purchaser time to decide if that property is right for them, before they commit to the purchase. It is important to note that conditions are not ‘get out of jail free cards’ and that you must do your best to meet those conditions. It is equally as important to note that conditions should not be overlooked, as they often add valuable protection.

The ADLS Agreement for Sale and Purchase of Real Estate is the standard contract commonly used by lawyers, as it sets out the basic default rights and obligations of both parties. It also includes default conditions, which can be selected.

1. THE DEFAULT CONDITIONS – AKA GENERAL TERMS OF SALE

These are the conditions which are included in the Agreement by default [1], provided ‘yes’ is circled for each one of the front page.

• Title requisition
  • This allows parties to examine the documents registered on the title for the property for completeness. From covenants to easements, lawyers use this condition to make sure that the legal title you are being sold is complete, correct and doesn’t have any holes. The default time period is 10 working days, unless otherwise varied.

• Finance
  • This allows the purchaser to arrange finance with their bank and work through the further particulars of their lending. Even if you have ‘pre-approval’ from your Bank, a finance condition never goes astray. There is no default timeframe, however many clients align this with their other condition due dates.

• Land Information Memorandum
  • This ‘report’ can be obtained from your Local Council and includes all information the council currently holds on the land. From listing the building consents to noting the district plan rules that affect the property or possible contamination on the land, this is a valuable report which should not be overlooked. The default time period is 15 working days, unless otherwise varied.

• Building Report
  • This allows you to engage a building inspector to report on the condition of the building. It can identify possible issues which a lay person may not be able to identify. Where there are EQC claims on the property, this condition is especially important to act as a ‘double check’ to ensure the work has been completed. The default time period is 15 working days, unless otherwise varied.

• Toxicology Report
  • This is a new condition [2], which allows you to test the property for toxic substances (e.g. testing the property for drug use). The default time period is 15 working days, unless otherwise varied.
    

2. EXTRA CONDITIONS – AKA FURTHER TERMS OF SALE

As with any contract, the parties have the contractual freedom to insert any clauses they wish into a contract. They may also vary or exclude any of the default conditions included in the standard conditions. Extra conditions commonly inserted into the Agreement include:

• Insurance
  • It is important to note that insurance is not a ‘default’ condition and must be actively included. The condition can be worded in various ways, however, primarily ensures that insurance can be arranged for the dwelling. Your lawyer will be able to suggest a well-worded insurance clause to add into your contracts.

• Structural Inspection Report
  • Whilst a building report condition may touch on the ‘wear and tear’ of the building generally, it may be further desirable to inspect the structural integrity of the property. It is worth considering the inclusion of a structural inspection condition, particularly where the property has had considerable Earthquake damage or has been previously been sold on an “as is, where is” basis. A well-worded structural inspection clause may assist in identifying any outstanding structural issues or any in adequacies with the repairs.

• Sale
  • If you are a purchaser, relying on the funds from the sale of your existing property to assist with this purchase, a sale condition should be added into the contract to ensure you aren’t committed to purchase a new property, while your money is held up in your existing home. Your lawyer will be able to provide you with a well worded clause to include in your contract, to ensure you can access these funds when the time is right.

• Due Diligence
  • Think that the standard conditions don’t go far enough or want to consider every aspect under the sun? A due diligence clause might be for you. Often worded very broadly, it gives the purchaser the opportunity to consider all aspects of the property in assessing whether it is the one for them, although this widely worded clause often isn’t favoured by vendors.

• Form and Content
  • Also commonly termed a ‘solicitor’s approval condition’, this term allows the parties’ lawyers (whether purchaser’s lawyer, vendor’s lawyer or both) to examine the terms and conditions of the contract. It cannot be used to re-negotiate terms and is strictly limited to the commercial and conveyancing aspects of a transaction, however, can come in handy if there are any errors or omissions in the contract.

And the list can go on. There are a multitude of different conditions which arise in a contract. Every scenario is different and should be evaluated case by case. We therefore encourage clients to discuss their property requirements with their lawyer at the outset, to ensure the best level of protection is afforded and assist in making your sale or purchase transaction as smooth as possible.

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[1] These are the default conditions included in the ADLS Agreement for Sale and Purchase of Real Estate Tenth Edition, issued in late 2019. The default conditions included in earlier ADLS contracts may vary.

[2] While this condition may not be ‘new’ in its presence, it is a recent ‘default’ condition added to the ADLS Agreement for Sale and Purchase of Real Estate tenth edition.

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Article written by Tita Elliott.