Hello and welcome along to the property Academy podcast. I'm your host Ed McKnight and today on the show. We're going to talk about the standard Clauses that you should be aware of when you're about to sign the standard Real Estate Institute of New Zealand and Auckland law District Society contract. And of course, we're G again joined by Shelley Finnell from Henderson Reeves lawyers now on.Last episode we talked about the changes that had come into the rinds and ALDS contract which is the standard contract tool that is used for purchasing property in New Zealand. But let's talk more generally about the Clauses then in there if you've never seen one before or even if you have perhaps there you might not have seen it for a couple of years. We might not have read it properly when it says is some cases so there are a number of Clauses and here we're going to talk about the really really most important ones. So let's start with a standard one Shelly like solicitors. Evil talk to us about what this is and when it can be invoked. So there's not a standard solicitor approval condition and the agreement you would add one if you wanted there's a lot of case law out there about the limited circumstances in which a solicitor approval solicitor could choose to withhold their approval. So if there's a clause that says the solicitor can only withhold approval on the basis of the form and the content of the agreement that basically means unless it is Something wrong with the agreement like an era in the agreement. That's the only basis on which we can withhold approval. So a lot of people think as I've got a solicitors approval clause in there. They can just pull out for any reason they can just say to their solicitor. Please don't approve that agreement that is not the case so we can draft them wider so that we can withhold approval on the basis of other aspects of the agreement. So that's preferable and again gone talk to your solicitor before before you sign the agreement and make sure you you can have a wide one and would somebody only use a solicitor's approval Clause if the if they are signing a contract before they've shown it to their solicitor. I think say aye most people wouldn't put it in a standard a standard agreement because they if they have selected learn I've selected Finance they've selected building inspection. There's a title condition contained in the agreement. So if there's any issues with the title, the lawyer can raise those so Ordinarily and a straightforward agreement. You might not have that solicitor approval. It's generally only if it's it's more complicated and they haven't had the chance to talk with their lawyer most often. I think it's better if you're putting a solicitor approval condition and then you probably need a due diligence as well because it shows that it's probably a bit complicated interesting and hey, there are just two things. I want to pick up on before we move on to the next Clause the and and the takeaway or the my point is this, you know, if you're sitting at home listening to this this don't draft conditions or Clauses yourself. I've talked to a couple of lawyers and they say that I've got the worst thing has when somebody tries to draft their own their own Clauses and their contract because they think it's a good idea. It's just never a good idea and this comes back to something that Shelly and I were actually discussing just before we hit record for the podcast, which is that generally the average person in New Zealand, you know, unless you're doing property investment full-time might only by fop five properties in their lifetime, but Shelly how many properties would you would you? Say in a week, probably a dozen if not more. So so she'll he's going to look at going to look at, you know, more than twice of the number of contracts in a week than most people will look at in their lifetimes when it comes to sell and purchase agreements for property. And so a good lawyer will do everything they can to to give you as much protection as possible and give you as much flexibility as possible. So don't don't don't try and rafter and closes as well because it's and not necessarily rely on the air. Agent as well to pop a Clauson what we often see is there's a copy and paste from another another agreement with some incorrect references. So, yeah, not good. So we have talked about the solicitors approval Clause. Let's talk about the building inspections Clause. So Building Inspections of if someone's buying an existing property, we always obviously recommend you go and get a building inspection under the previous standard agreement. You had 10 working days to get that done. They've extended it to 15 working days, which I actually think is correct because often we do have to delay especially when Builders are really busy doing inspections all over the place that gives you 15 working days to get that Builder throw and then you get a report if you've got some issues whether it can give you time to negotiate the price if that's what you want to do. If you want to reduce the price and your lawyer helps can help you do that and then obviously you can confirm or not satisfy the condition. If you do pull out for a building inspection report, it's always been the case that the vendor can come back to you and they say I'd like a copy of that report and you're obliged to send it to them. They're often trips people up. They especially if they've had a building inspector through the property and they haven't actually given them a written report. It might be amazed. It might be a brother or someone that is a builder and they've come through and inspected it, but the don't actually have a written report. Now these suit and the only certain cases where a building inspection report could trigger a purchaser to pull out of it. It doesn't happen. It doesn't happen that often but there's really no gauge for what you can pull out on either. So it doesn't have to be a major issue. You might just you might just think you didn't really like the tiles on the roof or whatever or there were some problems with it that needed to be Repaired so I don't know how major that issue has to be but it's normally pretty major before people will pull out there's a lot of people pull out a lot for roofs because obviously the consequences of having to replace a reef could be really really is exactly extremely expensive. Let's talk about limb now. So there's that there's a limb clause in there and you had an interesting point there. I wasn't aware of before that before we hit record. What was that so often purchases think that the solicitor order The lamb from the council so we don't it's up to the purchase at a do that you need to pay for it with the council and also as a purchaser you want that limb address to you as the purchaser of the property and basically that's almost like an insurance policy because if it turns out there's something wrong with the limb later in the council's put and Career Information, then you're going to want to go back to the council with your report and your name and say you've reached your duty of care to me and I relied on it. It so we you actually want to be able to order it. We don't have any capacity for ordering it either but we do review them. So soon as you get the limb report you flick it to you as solicitor. We're not Town planners, so we can't necessarily comment on the town planning but things like unconsented works or we'll look at that interesting and and limb just for everybody at home is that land information memorandum you order it from the council and that's basically all of all of the documents that counsel has on. That property for you to review now if counsel does you know say it was that use case that you just talked about before we want it to be addressed to you so that if there was incorrect information on it, you can go back to council and say they've breached their duty of care what would happen in that situation. I have court case. But yeah, it's not something I've tested. I know in Tauranga. They've had that issue with Bella Vista where they've gone back because the council gave them incorrect information. So it really is just a little Litigation process you'd go back to the council and ask for some compensation for damages and then just see where you get to but you're going to be in a stronger position if you've got that limb addressed to you. Yes. Yes. Yes and I think with a lot of these agreements as well and Clauses that were talking about it's it's everything you can do to protect yourself. So that in the event that something did go majorly wrong. This is your insurance policy. This is your protection so that so that you're not in a position. Where you would be severely strained because it is such a big major financial decision. And we also always recommend that you go and get the property file. So you can order that online from the council as well. And that will give you all the information to do with the property that's on on file there. So we definitely recommend you do that as well. Now the next one that we were going to look at was is not necessarily a clause but a tip from Shelly about making sure that the parties names are correct on the agreement. I was so surprised Shelly doesn't actually happen but it does happen as fish. She happens with trust as well or just people don't know you sometimes whose name their property is registered. And if you've got a good Agent, then they're going to get a copy of the title and they're going to make sure that's right. And I guess the other thing about names is making sure that when you put a purchaser name, there's a there's a possibility that you can have and or nominee which means that you can sign an agreement as one person and then you can nominate it to you and your husband for when you can buy it to give us so it's always best if that's not crossed out and I think this is particularly important for property investors where you may you may sign the contract as yourself, so I might sign it as it McKnight, but you may structure it and a trust or you may structure it in a look through company or however you want to do that and this will give you the flexibility to then talk to your solicitor or your tax accountant and figure out well, what is the the most beneficial structure for me to hold this property and but I've still got it into under contract. So let's talk now about the deposits because it's interesting because obviously a developer especially if you're buying a it off planes or will want you to to give your deposit on signing, but obviously you want to generally the purchaser would want it on unconditional. So talk to us about this this Clause Shelly. Yeah, so there's no default and ordinary sale and purchase agreement. So it really well then there is a deposit. An agreement that it's upon signing, but we would always say to our purchases put wording in the front of the pay and the on the front page that the deposit is payable once you've satisfied your conditions and then two last ones were going to talk about let's talk about the due diligence Clause because this is the one that most people will be really interested in. It's the one that's probably when I when I look at the stats of what people are searching for online. It's the one most people are looking for talk to us about out what goes into a really good due diligence Clause. So I really good due diligence Clause is drafted correctly and it's wide and it basically gives the purchaser in their sole discretion the ability to cancel the agreement we can obviously give a clause very we have that standard wide conditions so we can provide that before signing agents will put it in. Sometimes it's good. Sometimes it's not so I always think that is something you go to your go to your Get a wide to diligence condition the Auckland District Law Society in REI and Ziad. They published standard Clauses that you can put into the agreement and they've got a really good why due diligence condition but weirdly agents don't always use it interesting. Well, what will do as well is that will go track that closed down and put that in the show notes as well. So if you guys at home listening want to see that will swipe over the cover art you'll be able to see that there but sometimes it's even simple things like saying that this this causes for the complete benefit of the purchaser and what that means and we were discussing this before we have record as well that if if you have that wording with in there, then the vendor can't come and then cancel the contract base based on that cause I've got that right? Yeah, that's right. And also the picture purchaser can choose to way that condition if they if they don't want to end and the agreement anymore. And is there a minimum a minimum period of DD that that a purchaser? Should expect to have within their well, I think 10 working days at least most of the conditions the default conditions. Well, generally they were 10 working days because the building inspection and the title gave us 10 working days to look at the title. So that's about two weeks. It's a pretty pretty good amount of time to do your investigation now that the building inspection and the Lamar 15 working days if you don't want to be running around and putting pressure on your solicitor or just the fact that You you are going to want to look at the property file from the council and that might take some time. Ideally. I love 15 working days. And the whole reason that were talking about due diligence in these Clauses as well is that if you put a property under contract, then you're able to go through these processes, you know paying for an ordering the limb and paying for a building inspection, but you don't necessarily want to go through all of that cost and time and effort if you don't have a contract on the property And you don't have the right to purchase it which is you know, just just for people who are kind of new to buying and selling property. That's a reason why contracts the kind of structured in this way before you go unconditional and and the past over the last sort of five years. They were a lot of auctions. I obviously auctions were really popular for a long period of time and when you buy auction, it's unconditional you cannot even if it turns out the title. It's got stuff on it that you don't like like a covenant that you can't have pets for example you You cannot pull out of it. And so in that case you are having to do your building inspection your due diligence and order your Lum before you go to auction. So you have a number of purchases doing that. Whereas now we're getting a lot more agreements by negotiation and you can put those conditions and obviously you don't have to spend money until you know, that that price has actually been accepted by the vendor and I think that is fantastic news for purchases as well. Now the last Clause we're going to talk about is around. Kiwisaver to use for your deposit and this isn't necessarily a separate Clause, but I guess a clarification talk to us about this. Okay. So over the last six months a lot a lot of people using kiwisaver to be able to purchase a house with a home state Grant especially when that's off the plans they get a bigger Grant. So that's great. The one thing that can be really problematic is that when people want to use their kiwisaver for a deposit it takes time to witness the Declaration for us to see The application of and then the kiwisaver provider pays within 10 working days. So you really need 15 working days from the date of signing to the payment of the deposit. And the other thing is that we cannot pay that kiwisaver funds to a vendor solicitor unless they give us an undertaking that they're going to hold that till settlement. So in that case, it won't be released to the vendor and the vendor can't use it as a deposit for an on sale. So ideally we put their undertaking in the agreement up. And so that means we don't have to negotiate with the solicitor during the conditional period it's just easier for everyone and then you can definitely use your kiwisaver as a deposit and we can definitely pay it over great. Now, let's wipe it up there. But please don't forget to rate review And subscribe to this podcast. It really does help us get the message out to more people and if you want to learn more about property with Andrew, and I didn't check out our if it kinds of property investment in New Zealand. All you have to do is Google property investment with a second or third thing that comes up click on there and it's Is a 16,000 word completely free guide don't even have to put in your email address where you can you know, read more about this and learn more about property. Thanks for listening to the property Academy podcast. I'm your host Ed McKnight. And we going to be back again tomorrow with even more daily strategies tactics and insight to help you get the most out of the New Zealand property Market until next time.
In this episode, we discuss the key clauses you can use in a sale and purchase agreement when buying property in New Zealand. This is important for NZ property investors because DD clauses can be used to put a property on hold to investigate the property before making it go unconditional. This means that you can agree the properties price in principle (and have the right to purchase the property) while you ensure that it is fit for purpose. We mentioned in the show that we would include a Due Diligence clause you can use: This agreement is entirely conditional upon the Purchaser in its sole discretion being satisfied that the property is suitable for the Purchaser’s intended uses following the Purchaser carrying out due diligence investigations on the overall viability of the property and including but not limited to searching any and all easements, and of any requirements of the local authority or financier, this clause is for the sole benefit of the Purchaser and the Purchaser shall have until 4pm on 10th working day from the date of this contract to give to the Vendor’s solicitor notice that this clause is satisfied failing which the contract shall be at an end. This clause may be waived by the purchaser prior to the prescribed time at the sole discretion of the purchaser. 