Conditions to a Contract

By Polina Boyarchenko | Property Law

A sale and purchase agreement for residential property may include various conditions, depending on the purchaser’s circumstances and negotiations with their vendor, and may vary depending on the property. Some of the most popular conditions include:

Finance condition to ensure that the purchaser can finance the purchase on settlement and, if need be, arrange for Kiwisaver withdrawal and lender’s approval etc.

Building inspection report is an inspection of the property by the purchaser to inspect the physical property (with a qualified building inspector).  The inspection is not intrusive. However, it should inform the purchaser of any structural, leaky or other such maintenance issues, that, if not a dealbreaker, they can seek their vendor to attend to prior to settlement or negotiate purchase price reduction to attend to themselves after settlement. In legal speak, this could result in raising a compensation claim and something a qualified and experienced lawyer or a Legal Executive should be assisting with.  The purchaser would need to provide a copy of the building inspection report to their vendor (if requested).

LIM Report involves obtaining a LIM report from Council and having their solicitor review the same. As with the building inspection report condition, any issues or inconsistencies should be raised with the vendor, clarifications obtained, and any issues attended to or fixed by settlement date.  As with the building report, a copy of the LIM report may need to be provided to the vendor. 

Due diligence is a very broad condition, favoured by purchasers, but less so by vendors.  It is “broad” because, unless narrowed down in the wording, it will encompass all and every investigation thought by the purchaser. The scope depends entirely on the purchaser and the property but can include physical inspection of the property (with or without a qualified/certified builder), LIM report, finance condition, toxicology report, information on the vendor (if, say, a developer selling a newbuild), etc. Common sense and purchaser’s imagination are the only two things limiting the scope of this condition.  Similarly to the building inspection and LIM conditions, any issues with, say, property are to be raised with the vendor by way of a claim to seek rectification. 

Sale of purchaser’s or vendor’s property is not an uncommon condition and is usually of a long duration to allow either party, seeking this condition inserted in the agreement, time to market the property and obtain an unconditional agreement to sell.  This becomes a common occurrence when lending is hard to obtain, and we are in a trough in the economic cycle, or when it is a “purchaser’s market”.   

Solicitor approval is a very narrow condition, limited to purchaser’s or vendor’s (or both) solicitors approving the form and content of the sale and purchase agreement.  This is different from a due diligence condition that allows for a full review of the property and agreement.

The above list is not exhaustive, and very much dependent on the property and purchasers/vendors’ circumstances. Conditions should not be confused with warranties. It is important that both parties carefully review the terms and conditions of a contract before entering into one to ensure the parties understand and can perform their obligations.  

Please do not hesitate to talk to us if you have any questions or need legal advice.

We have taken care to ensure that the information given is accurate, however it is intended for general guidance only and it should not be relied upon in individual cases. Professional advice should always be sought before any decision or action is taken.