New Condition in Standard Sale and Purchase Agreement

Posted on Thursday, September 6 2012

The Ninth Edition 2012 REINZ/ADLS agreement for sale and purchase has now been released.

There are a number of changes, but the one causing confusion is the addition of an optional condition making the sale conditional on the buyer getting a satisfactory building report.
The buyer will have 10 working days to get the report. The buyer must act objectively (i.e. reasonably) in deciding whether or not to approve the report. If the buyer is not happy with the report and cancels, a copy of the report must be given to the seller.
If a buyer wants a right to cancel for any reason, without having to justify the cancellation, the standard clause in the agreement will have to be changed.
On the other hand, if the seller wants to have the right to fix any problems raised in the report, to avoid the contract being cancelled, the clause also needs changing.
The clause requires the report to be carried out by a “suitably qualified person”, but that is not defined.

The Law Society has commented on what this means as follows:
1. There are no rules about minimum qualifications, past experience, or a requirement to be a member of any organisation;
2. The inspector must have relevant qualifications, experience, and expertise appropriate for the type of property being inspected;
3. The report must be prepared in accordance with the principles and methods accepted generally in the building inspection industry.
Therefore, the inspector must have qualifications and experience relevant to the type of property being inspected. A person who is experienced in inspecting residential buildings may not be qualified to inspect high rise apartments, commercial, or industrial buildings. A person inspecting a plaster clad home will probably need to be experienced in leaky homes. If a special purpose building is involved, the inspector needs specialist knoweldge in that type of building.
Concerns have been raised that an ordinary builder will not be able to carry out an inspection. The Law Society thinks that it is possible for an ordinary builder to be a qualified inspector, even if the builder’s core business is not inspecting properties, as long as the builder has experience in building or inspecting that particular type of property, and is a “licensed building practitioner” for that particular work, and the builder is familiar with the “accepted rules and methods” for inspecting that type of building.
It is important that the report be written and not verbal, as if the agreement is cancelled, a copy of the report must be given to the seller.


Mike Toepfer – Aspiring Law


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Expert's Bio

Mike Toepfer

Aspiring Law is a general practice firm, offering the best in legal services and advice to our local Upper Clutha community, as well as our national and international clients. We recently launched our new firm, after taking over AWS Legal’s Wanaka office. We’ve carefully tailored our firm’s services and culture to meet the needs of our business, and wider, community. Clients from further afield also draw on our specialist expertise, particularly advice and support around property, including large-scale developments, and agribusiness. As our clients have come to expect, the cornerstone of our new practice remains excellent, timely advice, underpinned by personalised, genuine service and support. Further to that, we’re really excited about building further on our community-based initiatives to educate and inform people on legal issues, and do our part in finding meaningful, innovative ways to support our area. Before that I was at large Auckland firm Hesketh Henry for 17 years - over 13 years as a partner and 10 years on the firm's board of management and as property team leader. I have specialised in all types of property transactions for the last 27 years.

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