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Understanding the sale and purchase agreement when selling

A sale and purchase agreement is a legally binding contract between you and the buyer.

Summary of important things to know

  • You must sign a written sale and purchase agreement when you sell a property.
  • Always check your sale and purchase agreement with a lawyer or conveyancer before signing. You need to read and understand the agreement before you sign it.
  • You should always get legal advice before you sign the agreement and throughout the selling process.
  • You can negotiate the conditions in a sale and purchase agreement.
  • A sale and purchase agreement becomes unconditional when all the conditions are met.
  • The agent helps you and the buyer to include the conditions you both want. Even though the agent works for you, they also have to deal fairly and honestly with the buyer. They can’t withhold any information, and they must tell the buyer about any known defects with the property.
  • If your agent or anyone related to them wants to buy your property, they must get your written consent to do this. They must also give you an independent registered valuation of your property.
  • Before you sign a sale and purchase agreement, the agent must give you a copy of the REA’s New Zealand Residential Property Sale and Purchase Agreement Guide. They must also ask you to confirm in writing that you’ve received it.
  • You can download our New Zealand Residential Property Sale and Purchase Agreement Guide.

Sale and purchase agreement

A sale and purchase agreement is a legally binding contract between you and the buyer.

It sets out all the details, terms and conditions of the sale. This includes things such as the price, any chattels being sold with the property, whether the buyer needs to sell another property first and the settlement date.

A sale and purchase agreement provides certainty to you and the buyer about what will happen when.

There is no universal sale and purchase agreement — there are multiple agreements available and being used by various agencies, each with different clauses and conditions buyers and sellers should be aware of. The information on this page should give you a general idea of what is in a sale and purchase agreement but you should always get legal advice before you sign.

To obtain a sale and purchase agreement you’ll need to contact your lawyer or conveyancer or a licenced real estate professional. You can also purchase printed and digital sale and purchase agreement forms online.

The New Zealand Residential Property Sale and Purchase Agreement Guide

This guide tells you:

  • what a sale and purchase agreement is
  • what’s in a sale and purchase agreement
  • what happens after you sign the sale and purchase agreement
  • what happens if you have a problem
  • where to go for more information.

       

 

Download the residential property sale and purchase agreement guide

What’s in a sale and purchase agreement

  • Your name(s) and the name(s) of the buyer.
  • The address of the property.
  • The type of title (for example, freehold or leasehold).
  • The price.
  • Any deposit the buyer must pay.
  • Any chattels you are selling with the property (for example, whiteware or curtains).
  • Any specific conditions you or the buyer want to be fulfilled.
  • How many working days you have to fulfil your conditions (if there are conditions).
  • The settlement date (the date the buyer pays the rest of the amount for the property, which is usually also the day they can move in).
  • The rate of interest that the buyer must pay on any overdue payments.

General obligations and conditions you have to comply with

The sale and purchase agreement includes general obligations and conditions that you will need to comply with. These may include the following:

  • Access rights. What access the buyer can have to inspect the property before settlement.
  • Insurance. To make sure the property remains insured until the settlement date and outline what will happen if any damage occurs.
  • Default by the buyer. The buyer may have to compensate you if they don’t settle on time, for example, with interest payments.
  • Default by you, the seller. You may have to compensate the buyer if you don’t settle on time, for example, by paying accommodation costs.

 

Your lawyer or conveyancer will explain these clauses to you. 

Specific conditions a buyer may include

  • Some buyers will present an unconditional offer, which means there are no specific conditions to be fulfilled. Some buyers will include one or more conditions (that must be fulfilled by a specified date) in their offer. Ask your lawyer or conveyancer to review the sale and purchase agreement and any conditions you or your buyer include before you sign it. These are some common conditions:
This is done by the buyer’s lawyer or conveyancer to check who the legal owner of the property is and to see if there are any other interests over the property such as caveats or easements.

This refers to the buyer arranging payment, for example, a mortgage or a loan.

Some agreements may stipulate (for your benefit) that if the buyers are unable to secure financing and cannot to satisfy this condition, they will need to supply evidence from their bank confirming that their finance was declined. If they cannot supply supporting evidence, they may still be required to proceed with the sale.

 

The buyer may add a sunset clause to the sale and purchase agreement — this is the date and time their offer to you expires. Buyers add this clause so they can make offers on alternative properties if the seller takes time to respond to their offer.

A bank may require the buyer to obtain a valuation of the property (an estimate of the property’s worth on the current market) before they agree to a loan.A bank may require the buyer to obtain a valuation of the property (an estimate of the property’s worth on the current market) before they agree to a loan.

Provided by the local council, this report provides information about the property such as rates, building permits and consents, drainage, planning and other important information.

If this is a condition of the sale, buyers can use who they like to inspect the property, but we recommend they use a registered property inspector.

If the report isn’t satisfactory to you, and the buyers withdraw their offer on those grounds, you may ask to see a physical copy of the builder’s report.

Buyers can request a report to detect if a property has been contaminated by the preparation, manufacturing or use of drugs (including methamphetamine).

Unless there is strong suspicion or information from Police or forensic experts that a property has been the site of production or heavy use of methamphetamine it may not be necessary to commission a report. Buyers should discuss this with their lawyer or the real estate agent before making an offer and inserting this clause.

Similar to a property inspection report but more focused on the entire section and the structure of the property.

The buyer may need to sell their own home in order to buy another.

They may add in the condition that the contract is conditional upon securing an unconditional contract for the sale of their home first by a certain date.

Before you start receiving offers, consider whether you want to include a condition in your agreement to protect you against a sudden change in alert level, which may prevent you from being able to settle on settlement day. Prospective buyers may choose to make this a condition of their agreement too.

Adding and removing chattels and fixtures

When you list a property for sale, it is important to be clear about what you are selling. There is often confusion between buyers and sellers around the difference between fixtures and chattels.

Fixtures are permanently fixed or attached to the property (for example, garden shed, showers and electrical wiring) and are included with the land title. All other moveable items are chattels and are only included in the sale if they are specifically listed in the sale and purchase agreement.

Standard chattels include:

  • stove
  • fixed floor coverings (carpets, vinyl etc.)
  • blinds, curtains and drapes
  • light fixtures
  • dishwasher
  • heat pumps
  • heated towel rails.

Under the general conditions of the sale and purchase agreement, the chattels listed must be in working order. If you have chattels that don’t work, for example, a faulty spa pool or alarm system, it is best to explicitly note in the agreement that they are not in working order.

To avoid any confusion or disputes, you should list any items which are included or specifically excluded, in the chattels section of the sale and purchase agreement. Discuss this with your real estate agent or lawyer so everyone is clear about what is included and excluded in the sale.

What happens
after you sign the sale and purchase agreement

Signing the sale and purchase agreement is not the end of the sale process.

Both parties work through the conditions until the agreement is unconditional

A conditional agreement means the sale and purchase agreement has one or more conditions that must be met by a specified date.

The buyer pays the deposit. Depending on what the agreement says, the buyer may pay the deposit when they sign the agreement or when the agreement becomes unconditional. Usually the deposit is held in the agency’s trust account for 10 working days before it is released to the seller.

An agreement for sale and purchase commits you to sell

Once you’ve signed the sale and purchase agreement and any conditions set out in it have been met, you must complete the sale of the property.

Payment of a commission

Once the sale is complete, you pay the agent for their services. The agent or agency usually takes the commission from the deposit they’re holding in their trust account. You should make sure the deposit is enough to cover the commission. The agent cannot ask the buyer to pay for their services if they have been hired by you.

The buyer pays the rest

The buyer pays the remainder of the amount for the property on the day of settlement, usually through their lawyer or conveyancer.

Selling a tenanted property

The agreement for sale and purchase may contain a specific date for possession that may differ from the settlement date, for instance, where the property is tenanted. If the property is tenanted, the agreement for sale and purchase should specify this.

If the buyer requires the property to be sold with vacant possession it is your responsibility to give the tenant notice to vacate, in accordance with the tenant’s legal rights.

What to do if you have a problem

If you have a problem with a real estate agent that you can’t resolve directly with them, find out how the Real Estate Authority (REA) can help you on the REA website.

There are other steps you can take and organisations that can help you when you need it. Find out more about getting help if things go wrong here.

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Anthony Reid (Ants)

Kat Powell

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