Buying a property can be both exhilarating and frightening at the same time, yet it’s a time you need to be attentive to the small print – in the Sale and Purchase agreement.
We have recently been working with several purchasers and their lawyers who are fighting to withdraw from the sale and purchase agreement because of the small print, so we thought it worth drawing it to your attention.
Purchasers often believe they can simply withdraw from a purchase if not satisfied with the building report, however the small print can leave their reasonableness for withdrawing or findings of their report challenged resulting in a lot of stress and legal bills.
Such is the common place of building reports, the latest addition of the Sale and Purchase agreement now has a building clause written in it. If you tick the building clause box on the front of the agreement, you are agreeing to clause 9.3 of the general conditions. This clause sets out the ground rules for the building clause; however it does have a hook you need to be aware of and it’s the hooks in the clauses you might want to look at.
A common addition to the builder’s clause requires you provide the vendor your report if you don’t proceed. This is the last sentence in clause 9.3 of the sales and purchase agreement and according to the Auckland District Law Society was put in to challenge the purchaser’s reasonableness for withdrawing and provide the vendor with a list of works to be addressed. “Satisfactory to you in all respects” – perhaps not. may not wish to be challenged so providing your report to the vendor may not be something you will want to do.
Where a builders clause is added as a further term of sale, in replacement of using clause 9.3, another common addition to the builders clause is the vendors right to remedy. If you are not satisfied with the findings within the report, rather than being able to withdraw, you have to advise the vendor what you want addressed. Many people would through their lawyers negotiate findings from a building report as part of their due diligence. However, with this clause, even if you wanted to withdraw you can’t, and the vendor is now in the position of deciding whether you have to proceed or not. “Satisfactory to you in all respects” – definitely not. This clause can sometimes require some pretty clever wording or even a retention ($$$) be held back to ensure the work is done – well.
It states on your sale and purchase agreement if you have concerns, discuss the agreement with your solicitor before signing. Many of our clients caught up in these clauses and every solicitor we work with would recommend you have your solicitor review your agreement, explain the clauses, and be clear about your intentions before you sign it. Once you sign the sale and purchase agreement it is a legally binding contract so understand the small print.
We note we are building surveyors not lawyers; whenever you have a legal matter we always recommend you check with your lawyer.