Key Clauses in the TLANZ/REINZ (formerly ADLS/REINZ) Agreement for Sale & Purchase of Real Estate

Many residential transactions use a TLANZ/REINZ agreement form, and auction sales may use a separate auction version. If you are attending an auction, review the auction agreement, title, LIM and other due diligence material with your lawyer before you bid.

What is a Sale and Purchase Agreement?

A sale and purchase agreement is a legally binding agreement between you and the vendor (seller). It sets out all the details, terms and conditions of this offer/agreement, including the price, any chattels to be included or excluded, GST status (whether inclusive of GST or plus GST), interest rate for late settlement, settlement date, and any seller or purchaser conditions such as the agreement being conditional on the vendor's own purchase going unconditional.

Important Things to Know

Whether you purchase by negotiation, deadline/private treaty or auction, make sure the written agreement matches the transaction and the current form being used. All parties need to sign and date the agreement once all terms have been agreed. A property agreement can still be binding even when a particular standard form is not used, so get legal advice before signing.

Get legal advice before you sign the agreement and throughout the buying process. Conditions can often be negotiated, and the agreement becomes unconditional when the relevant conditions have been met or waived. Before you sign through a licensed real estate professional, they must give you a copy of the REA Residential Property Sale and Purchase Agreement Guide. If it is a private sale and you are unsure how negotiation works, speak to your legal adviser.

Changes to the Front Page

If the agreement uses condition dates, record clear deadline dates and consider weekends, public holidays and the Christmas/New Year non-working-day period. Ask your mortgage adviser or lender how much time is realistically needed for finance approval rather than assuming a fixed number of working days.

There is now the option for a toxicology report to be included as a condition and clause 9.5 applies to the operation of that condition.

Key Clauses Explained

Clause 1: Definitions of Wording

This clause is essentially definitions and explains the basic wording used in the agreement. For example item (4) clarifies what a working day is and includes clarification about the excluded days during the Christmas period when law firms close.

Clause 2: Payment of Deposit

A deposit is common, but the amount, timing and default consequences come from the agreement you sign rather than a single universal rule. Most vendors still ask for a deposit as evidence of commitment. If a deposit is not paid, the seller usually needs to follow the default and notice process set out in the agreement before cancellation.

Clause 3: Possession and Settlement

This clause addresses several important matters including the right for vacant possession if the property is not sold subject to a tenancy, and the right to a pre-settlement inspection which should occur a few working days prior to settlement. It also covers a further right to re-enter the property to check compliance by a vendor if valid issues were raised during the pre-settlement inspection, how expenses will be apportioned in the settlement statement, and the process if there are settlement delays where penalty interest can be charged.

Clause 5: Risk and Insurance

The property and chattels are at the risk of the vendor until possession is given and taken. The legal definition of possession is different than settlement. This clause also details what would happen if substantial damage occurred before possession was given and what your options would be.

Clause 6: Title, Boundaries and Requisitions

This clause allows the Legal Advisor acting for the purchaser to check the title within 10 working days (unless an amendment is made in the agreement) and provides them with a right to object to certain defects. For a valid claim, the interest registered on the title has to be defective and not simply "unfair or adverse".

Clauses 7 & 8: Vendor Warranties and Undertakings

Vendor warranties and undertakings are promises made by the vendor relating to the property. Generally, if any vendor undertakings or warranties are breached by the vendor, the purchaser is still obliged to settle the transaction.

Clause 9: Conditions and Mortgage Terms

This clause relates to the conditions on the front page of the agreement and sets out what happens when a purchaser wants to cancel the agreement. If you can't lawfully cancel a contract and you walk away, you risk losing any deposit that has been paid or being sued by the vendor. Conditions used from the front page of the agreement must be satisfied by 5pm on the due date.

Clause 11: Dealing with Defaults

This clause deals with defaults and some general provisions dealing with the agents' responsibilities, GST, sales information, Pandemic provisions etc. GST is usually not part of a private first-home purchase, but it can matter where a party is GST-registered or the property/use creates tax complexity. Check the GST schedule and get legal or tax advice before signing if GST is mentioned.

Further Terms and Schedules

Signing the Agreement

The last party to sign the agreement (once any changes in the offer have been accepted by both parties) needs to also date the front page of the agreement. During the negotiation process, if conditions or terms are added or amended by agreement between all the parties, the acceptance should be shown by all parties initialing beside the addition/amendment. An agent or your legal adviser can guide you in this process.