PRIVATE CLIENT NEWS, AUGUST 2009

Contracting to buy or sell land - new form of agreement

You may have read in the National Business Review or elsewhere that the Real Estate Institute of New Zealand is proposing to introduce a new form of agreement for buying and selling property in New Zealand. The agreement differs significantly from the usual agreement used in New Zealand. In this article Mike Toepfer of our Commercial Property team sets out why you need to be wary of the new form.

We understand that the new agreement will be made available to real estate agents in New Zealand shortly.

For over 20 years, the buying or selling of property in New Zealand has been recorded using a standard agreement produced jointly by the Auckland District Law Society and the Real Estate Institute of New Zealand. The agreement is now in its 8th edition, having been improved over the intervening years periodically to take account of changes in the way in which property is bought and sold, and to take account of changes in the law over that time.

The ADLS/REINZ 8th Edition form of agreement is tried and tested. It has been the subject of many court cases, in which the provisions have been scrutinised, interpreted and upheld. It has been taught in our law schools and has been the subject of much academic commentary, including the subject of a book.

In summary, the ADLS/REINZ 8th Edition form of agreement has a proven track record, its provisions are widely known and understood, it hopefully regulates the way in which lawyers deal with each other and third parties through the course of a sale or purchase of land. It is a "no surprises" agreement.

On the other hand, the new REINZ agreement introduces new concepts, rules of interpretation and timeframes which may be unexpected, particularly if you have previously bought and sold property using the ADLS/REINZ 8th Edition agreement. It has already been reviewed and criticised by a leading academic.

If you are planning to either buy or sell property in the near future, please contact us for legal advice prior to signing any agreement. In most situations, we will recommend the continued use of the ADLS/REINZ 8th Edition form of agreement until such time as the provisions of the REINZ agreement have become widely known, judicially interpreted, and well settled. This may take a considerable period of time.

Don't be persuaded to use the plain English format of the new agreement. Plain English wording can cause problems if it is not precise, particularly where the agreement has not had the benefit of many years of use. Please be aware that all agents have access to both forms of agreement, so this should not present any difficulty or delay in the buying and selling process. We also have the 8th Edition form readily available.