REINZ/ADLS Agreement for Sale and Purchase – Update 2019
Banking on pulling out of purchasing a property? Evidence is now required to prove you cannot raise finance
The 10th Edition of the ADLS/REINZ Agreement for Sale and Purchase of Real Estate (“the Agreement”) was released on 27 November 2019, and introduces a number of changes for those involved in a property transaction.
The most significant change introduced to the Agreement relates to the condition of finance. In previous editions, a heading was provided to specify the name of lender and amount required, if an agreement was subject to a finance condition. However, a practice developed whereby the particulars were left blank or wide-meaning phrases were inserted by the purchaser.
Purchasers subsequently had the ability to withdraw from their sale and purchase agreements by notifying the vendor that they could not obtain finance. In most scenarios, the purchaser’s word was enough to avoid the agreement, and a vendor had no avenue to enforce the agreement on this basis.
The new changes to the finance condition will require a purchaser, who escapes the agreement for non-fulfillment of the finance condition, to provide a satisfactory explanation of the grounds relied upon with supporting evidence to the vendor immediately upon request.
The supporting evidence to be provided to the vendor may include confirmation from the purchaser’s lender that their loan application was declined, or that it was granted but on terms that were unsatisfactory for the purchaser.
It is important that anybody looking to purchase a property understands their obligations under the Agreement. If they cannot provide sufficient evidence to show that finance could not be obtained, they face potentially significant legal ramifications, including being forced to proceed with the purchase.
Other Changes to the Agreement
The other key changes to the Agreement can be summarised as:
- A new toxicology condition has been included along similar lines to the building report condition;
- Detailed changes to compensation clauses under the Agreement, outlining the procedure to be followed when resolving compensation disputes;
- Revision of the GST clauses;
- The removal of “fixtures” and “chattels” from the Agreement, replaced with “warranties” and “items”;
- Clarification regarding the building report condition; and
- Changes to agency provisions.
These changes have been made after considerable deliberation between legal, tax and real estate experts, and are consistent with the current legislation.
If you have any questions about the changes to the Agreement, how the changes may impact you when purchasing a property, or if you require assistance with your property matters, please contact Sarah, or Jono