The next time you pick up an agreement for sale and purchase of real estate, chances are it will be the latest version (eighth edition 2006(3)) jointly released by the REINZ and the Auckland District Law Society last week.
The new agreement introduces a process to be followed before a purchaser is entitled to compensation (or an equitable set-off) resulting from an error, omission or misdescription of the property or the title. This change has been brought about as a result of the Supreme Court decision in Property Ventures Investments Limited v Regalwood Holdings Limited. (To see our blog on this case, click here). Under clause 7.0, where a purchaser claims a right to compensation the purchaser must serve notice of the claim on the vendor before settlement, including a genuine pre-estimate of the loss suffered by the purchaser, particularised and quantified to the extent reasonably possible.
If the amount of compensation is agreed, it can then be deducted by the purchaser on settlement. Failing agreement, a dispute resolution process is provided.
A right to compensation for a purchaser is therefore not automatic. If there are issues arising immediately before settlement, the practical solution may well be negotiation of a retention as we have all done in the past.
The agreement now also includes a clause allowing for execution by counterparts, by fax or e-mail. So special conditions do not need to be added to deal with this.
The changes to the LIM condition (clause 9.2) mean that the purchaser now has to have reasonable grounds for not approving the LIM. Previously, the purchaser simply had to give notice that they did not approve the LIM, and state what needed to be done if it could be remedied. However the new agreement introduces the element of reasonableness.