Sale and purchase agreement guidance

If you’re adding clauses to the sale and purchase agreement for either a vendor or buyer, make sure the clauses are clear and legible. If you are unsure how to write up a certain condition, refer the buyer or vendor to their lawyer, or seek advice from your manager or agency lawyer.

You should have clear instructions from the vendor about what is to be included in the list of chattels. If the vendor is planning to remove something that the buyer might consider a fixture (for example, the waste disposal unit or dishwasher), make sure this is clearly recorded in the sale and purchase agreement.

Section 132 of the Real Estate Agents Act 2008 requires you to make sure that when a party has signed the sale and purchase agreement, an accurate copy of the agreement is given to them as soon as practicable.

Making changes to the sale and purchase agreement 

If any party makes changes to the agreement, for example, a change to the settlement date, this must be recorded on the sale and purchase agreement and initialled by all parties.

Initialling any change on a sale and purchase agreement is considered best practice. It indicates that each party has noted the change and accepted it. 

It is important to make sure the agreement is signed by all the parties who need to sign it. If a party is a trust or company, make sure that all the trustees or directors of the company have signed the agreement, or they have the authority to sign on behalf of another.

You will need to have the relevant legal document of authority, for example, a power of attorney. If it is marital property, ensure all parties on the title have signed.

Under the AML/CFT Act 2009, you must make sure that the parties signing the agreement are in fact who they say they are. 

 Read more about AML at dia.govt.nz(external link)

Using electronic signatures

REA’s view is that it is acceptable for you to obtain a person’s signature to a contract and certain other documentation electronically as long as certain requirements are met. The legislation that governs the use of electronic signatures in New Zealand is the Contract and Commercial Law Act 2017 (CCLA).

Requirements

Section 226 of the CCLA says that a legal requirement for a signature, other than a witness signature, is met by means of an electronic signature.

Section 228 of the CCLA says that an electronic signature is presumed to be reliable if certain factors are present. These factors are specified in subsection 228(1):

a) the means of creating the electronic signature is linked to the signatory and to no other person;

b) the means of creating the electronic signature was under the control of the signatory and of no other person;

c) any alteration to the electronic signature made after the time of signing is detectable; and

d) where the purpose of the legal requirement for a signature is to provide assurance as to the integrity of the information to which it relates, any alteration made to that information after the time of signing is detectable.

The above list is not exhaustive, and a person can prove an electronic signature is reliable or otherwise on other grounds (section 228(2)).

It is your responsibility to have IT solutions in place to ensure that the reliability of the electronic signatures can be demonstrated. If these aren’t in place, any contracts signed electronically could be challenged. REA recommends your legal advisor reviews your IT solutions for compliance.

Contracts that are signed electronically must still meet all other relevant requirements. You must, for example, provide the approved guides as required and recommend that advice is taken before signing any contractual documents (and give the opportunity for that to occur), as required by the Real Estate Agents Act 2008 (the Act) and the Regulations and Rules made under the Act.

Section 123 of the Real Estate Agents Act requires all licensees who receive any money in respect of a transaction to hold that money for 10-working days after the day on which they receive it. This applies for all transactions, including the grant, renegotiation, or renewal of a commercial lease. It also applies if the sale falls over between the time the deposit is paid, and the 10-working days is up.

The only exceptions to holding money for this are if:

(1) there is a court order requiring the agent to pay the money before the 10-working days expires; or

(2) there is an authority signed by all the parties to the transaction requiring the agent to pay the money before the 10-working days expires

If a notice of requisition (where someone lays a claim on the property) or notice of objection to the title is made while you are holding the deposit, you must not pay the deposit to anyone, except in accordance with a court order or an authority signed by all the parties to the transaction.

The agreement being unconditional is just one element that must be satisfied before you can release the deposit. The requisition period must also have expired without a claim being made.

If the property is a unit title, the Unit Titles Act disclosure requirements must also have been met.

Read more about unit titles

Releasing the deposit early

If the parties are seeking the early release of a deposit for a transaction in accordance with section 123(2), you should recommend that the parties seek legal advice. They should be aware of the implications of releasing the deposit early if something goes wrong with later in the transaction.

REA receives a lot of enquiries, some of which become complaints about sale and purchase agreements. The areas most often misunderstood are:

• the meaning of the clauses and conditions in the sale and purchase agreement
• that the sale and purchase agreement is legally binding
• the chattels list (including what a chattel is)
• the right to seek legal advice before signing the sale and purchase agreement.

Most of the concerns we hear can be avoided if the parties seek legal advice before signing the agreement. Clear communication from you can help prevent problems.

One of the more serious issues we deal with is when a licensee fails to check the GST status of the buyer and/or seller is correctly recorded on the sale and purchase agreement and does not refer the parties to get independent expert advice about GST issues.

A lawyer’s approval condition gives very limited options for either party to get out of the sale and purchase agreement. Most parties think it is a way to cancel the agreement if they are not happy with it. Make sure the parties understand there may be limits on how their lawyer can use the clause and recommend they get legal advice before they sign the agreement.