The New REINZ Agreement for Sale and Purchase Form – Process for Approval of Conditions
By Sarah SheppardAgreements for the sale and purchase of property are frequently subject to conditions relating to finance, builder's report, LIM report or inspection of council records.
The Real Estate Institute of New Zealand has recently released a new form of Agreement for Sale and Purchase (ASP). This new ASP provides a different process for approving conditions to that contained in the most commonly used current form of Agreement for Sale and Purchase.
Under the current form of Agreement for Sale and Purchase, the party for whom the condition has been inserted (usually the Purchaser), generally has a free right to cancel the Agreement if, for example, the builder's report or LIM report are, in their opinion, unsatisfactory.
Under the new ASP, a different approval regime has been introduced in respect to title, builder's report, LIM report and tenancy conditions. Under this new regime, approval cannot be ‘unreasonably' withheld. The relevant party (usually the Purchaser) must give reasons for not confirming, or ‘approving', the conditions and the other party (usually the Vendor), must be given an opportunity to rectify the problems identified, before steps can be taken to cancel the contract.
This new regime may create difficulties in terms of whether approval has been ‘unreasonably' withheld, or whether a Vendor's proposals to rectify any problems are adequate to the Purchaser. If the parties cannot agree, then compulsory mediation will be required to resolve these issues.
In some situations, a Purchaser may wish to have the absolute right of approval in respect of such conditions. It is possible for the new ASP to be amended so that this new approval regime does not apply. Replacement clauses can be inserted into the ASP, so that approval of conditions is entirely at the Purchaser's discretion.
Any such amendments need to be made prior to signing of the ASP by the Vendor and Purchaser. If you are unsure, then you should check with your lawyer, before you sign.
