The SALE AND PURCHASE AGREEMENT is the crucial document to your house purchase. It is important to know the stages in the formation of a contract, and, even more, important that you get appropriate advice before signing one. The reason for getting advice on the form of the SALE AND PURCHASE AGREEMENT before signing it is that once a contract is formed it is extremely difficult to alter the terms and conditions of it, and this could create major problems for you as the Purchaser if you have not included appropriate CONDITIONS.
Along with getting the most favourable CONDITIONS in your agreement we also note that you should make careful consideration of what CHATTELS you are purchasing as part of the agreement. There is room for you to include the exact CHATTELS you wish to purchase in the SALE AND PURCHASE AGREEMENT. We suggest that you provide specific detail in the agreement if any of the CHATTELS you wish to purchase are specific in make or model, or if there are additional chattels you want to purchase that are not listed in the standard-form agreement. If you are clear in what CHATTELS you are purchasing in the SALE AND PURCHASE AGREEMENT, it will reduce the possibility of any arguments over chattels arising at settlement date.
THE CONTRACTING PROCESS – MAKING AN OFFER
The contracting process begins with you, the Purchaser, making an OFFER to purchase the property in question. This OFFER should be made with a finite response date so that the Vendors do not have an open-ended offer available to them. It is important to have all your CONDITIONS in the offer before it is presented.
If the Vendors agree to sell the property on the terms and conditions stated in your OFFER, then they will sign the SALE AND PURCHASE AGREEMENT, and it will then be a binding contract. It may still have conditions that need to be met by you as the Purchaser, but, at least, an agreement has been reached.
If the Vendor does not agree to the OFFER’S terms and conditions, they may make a COUNTER-OFFER. This is a new OFFER back to you as the Purchaser, which you can either accept or decline. If there is a COUNTER-OFFER made your original offer now becomes null and void.
If you agree to the terms and conditions of the COUNTER-OFFER then once you initial any changes, a binding agreement has been reached. As mentioned above, the agreement may still have conditions that need to be met by you as the Purchaser, but, at least, an agreement will have been formed.
If you do not accept the terms and conditions of the COUNTER-OFFER, then you can either make a further COUNTER-OFFER or cancel the negotiations.
As you can see, the process can take some time before an agreement is reached.
Once there is an agreement between both parties, the time for you as the Purchaser to meet the CONDITIONS in the contract starts to run. This is important to know when you are dealing with conditions such as FINANCE, LIM, BUILDER’S REPORT, and DUE DILIGENCE
At this stage, definite action now needs to be taken.
SALE AND PURCHASE AGREEMENT – TYPES
A SALE AND PURCHASE AGREEMENT for Real Estate may take various forms. The only major requirements are that it is in writing and that the normal requirements of Contract Law are met.
However, generally, a Purchaser will utilise a standard-form SALE AND PURCHASE AGREEMENT. At present, there are two mainly used precedents. These are the ADLS (Auckland District Law Society) precedent and the REINZ precedent. We strongly suggest that you utilise the ADLS precedent rather than the REINZ precedent.
Please CONTACT US if you have any questions relating to the form of any draft SALE AND PURCHASE AGREEMENT you are considering signing.