{mds} law > News & Publications > 2012 > Entering into a Sale & Purchase Agreement

Entering into a Sale & Purchase Agreement

By {mds} law, published on: 3/08/2012
All agreements for Sale and Purchase are contractually binding from the moment they are signed by both vendor and purchaser.  Once an Agreement is signed it is governed by the contract conditions, specified in the General Terms of Sale number from 1 to 17 and any additional clauses added by the vendor or purchaser.
 
Your lawyer is familiar with these clauses and this familiarity enables them to assist all vendors and purchasers PRIOR to signing a contract.  Notwithstanding pressure from an agent to sign the contracts, we recommend all vendors and purchasers ask to fax or email a copy of the contract through to their solicitor before signing.  This ordinarily should not take long and will not hold up the negotiating process.  Extra further terms of sale inserted can be misinterpreted and some clauses can give rise to contractual obligations you may not anticipate. Key things your lawyer can advise you on are:
 

Who will own the property

Apart from the contractual obligations it is also important to decide who the purchasing entity is to be.  If you are unsure who you wish the final purchaser to be, you should ensure you attach the words ‘or nominee’ to the purchasing entity so you can nominate another purchaser if necessary.  
 

Legal description

Unfamiliarity with legal descriptions of the property can be confusing.  We know the types of different titles that issue and can clarify, if that type of ownership is appropriate.  There are restrictions on what you can do with different types of title such as cross lease properties and unit title properties. Sometimes additional costs are associated with purchasing certain types of title.  We can give you a full explanation of the different types of legal title before you sign the agreement.
 

Taxation issues

GST is now an essential component of all agreements and you need to know if the purchase price includes GST or if there should be GST added to the purchase price.  A majority of residential purchase would not attract GST but there can be exceptions.  We have a specialist tax solicitor in our firm who can clarify any queries relating to GST and any other tax implications.
 

Purchase price and deposit

The purchase price and the amount of deposit should be discussed fully, and particularly the time when you must pay the deposit.  If you are unable to pay the full deposit amount shown in the contract you actually breach the contract and penalties can arise.   Discussions with your lawyer can alleviate problems in this respect.
 

Late settlement

Interest rate for late settlement and the possession date are critical and you may require advice on appropriate wording to make this more flexible.  Your lawyer can at times negotiate changes to these with the cooperation of the other party through their solicitors.
 

Chattels

The chattels listed are also important; under the contract a purchaser is entitled to a pre-settlement inspection to check not only whether the property has suffered any damage since you signed the contract, but also whether all chattels are in working order, and if indeed they haven’t been removed from the property for a vendor or tenant.  Prior to signing an Agreement it is important to double-check the chattels list to ensure you know what is staying with the property.
 

Special conditions

The drafting of special clauses relating to title, LIM, finance (and in our Canterbury situation), earthquake and insurance, need to be worded carefully to protect your best interests.  Generally, these are inserted for the benefit of the purchaser.  Other parties, apart from your lawyer, may not understand the full legal implications of the wording of clauses and accordingly, it is critical they are drafted correctly.
 

Approval of Finance

The fact that you have pre-approval of finance is not always a guarantee that you will get an approval for the particular property you wish to buy.   Your lender may not actually accept the property as security for the loan. There are several factors that could affect your lender’s final decision. For instance, there may be adverse information disclosed on a LIM or building report.  The LIM only shows the permits known by the Council, and does not always show soil types, or unauthorised works.  Your lawyer can prompt you to be aware of what is not contained in the LIM, and to point out all matters that may be of a concern to you.  Builder’s reports and/or engineer’s reports are a critical component with properties in Canterbury and you need the correct clauses in the Agreement to protect you, now, and in the future sale of the property.
 
Your lawyer is well versed in all matters pertaining to property and you should ensure that you get the full benefit of this knowledge before entering into any contract.  Our input will make a huge difference in the success of the contract, and an initial discussion before signing a contract will make things runs more smoothly for all parties.
 
Please contact us for advice or further information about our services.

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