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Authors: Debra Dorrington
Published: 16 June 2017
Pages: 28

Introduction

The purpose of this presentation and paper is to examine the issues that arise when reviewing agreements for the sale and purchase of properties off the plans (ie when a purchaser agrees to buy a property that does not yet have a title). ¹ Sometimes agreements for sales off the plans are entered into years before the settlement date. With that significant delay comes risks for both parties – often associated with changes in the market and with cost escalation, but also particular to individual parties.

Typically these agreements are complex and attempt to weigh three different perspectives:

• The expectations of the purchaser to achieve certainty as to what they are purchasing;
• The requirements of the vendor to have flexibility in what they are creating; and
• The conditions precedent to the vendor's bank providing the development funding.

In the course of this presentation we will examine the expectations of each of these parties. We will also consider some underlying regulatory requirements. My hope is that by the end of the presentation you will be fully equipped to understand a typical pre-sale agreement, to recognise the reasons for many of the provisions and the extent to which they might be varied, and for that to be the case whether you are acting for the buyer or the seller. My hope is that the paper will better enable you to deliver valuable information to your clients and to be able to make your own judgements as to whether points are worthwhile pursuing or not.

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¹ I would like to thank Michael Langdon and Amanda Spratt each from MinterEllisonRuddWatts for their assistance. Each of them acts for major banks who are active in funding residential property and they were generous in helping me understand the up-to-date requirements of funders when considering the pre-sale agreements.

Content outline

• Requirements of the vendor
  • Identifying the buyer
  • Deposits
  • Purchaser's conditions
  • Disclosure requirements
  • Representations
  • Flexibility as to what is sold
  • Flexibility as to when works are done
  • Ongoing input from the purchaser
  • Conditional until close to settlement
  • The vendor’s obligations to the bank
• Requirements of the buyer
  • Identifying what is being bought
  • Timing
  • Disclosure
  • Form of the agreement
• Requirements of the banks
  • Certainty of settlement
  • Variation of area
• Additional regulatory requirements
  • Section 225 Resource Management Act 1991
  • Financial Markets Conduct Act 2013
  • Anti-money Laundering and Countering Financing of Terrorism Act 2009

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