Legal Risks - Sale and Purchase Agreements
Sale and Purchase Agreements: The Perils of Tinkering
When it comes to buying or selling property in New Zealand, the standard Sale and Purchase Agreement (SPA) is a well-tested, industry-wide tool. It’s designed to balance the interests of buyers and sellers while reducing the risk of ambiguity or dispute.
However, recent commentary from the Real Estate Institute of New Zealand (REINZ) has highlighted a growing concerns with the casual addition of extra clauses, often under the “Further Terms of Sale” section, without a full appreciation of the legal consequences.
Why the Concern?
The standard SPA is structured so that the General Terms of Sale contain the default legal framework. When extra clauses are inserted in the Further Terms of Sale, they can override or even nullify protections in the General Terms, sometimes unintentionally.
For example:
Poorly drafted timeframes might override standard settlement provisions.
Vague conditions could cause the entire agreement to become uncertain or unenforceable.
Clauses copied from other transactions may not fit the specific property, chattels, or parties involved.
Real-World Impact - A single misplaced or overly broad clause can:
Extend or remove the buyer’s right to cancel.
Create obligations that cannot be met in practice.
Lead to disputes that cost thousands in legal fees.
Best Practice
Understand the hierarchy – Anything in the Further Terms of Sale will generally take precedence over the General Terms.
Avoid “DIY” drafting – Unless you’re a lawyer with property experience, drafting clauses from scratch can be risky.
Seek legal review early – Don’t wait until the agreement is unconditional; have your lawyer check changes before signing.
Be specific and consistent – Use clear language and ensure clause numbering matches the rest of the agreement.
Bottom line: In property deals, small changes can have big consequences. If you must alter the standard form, do it with professional advice and with a clear understanding of what’s at stake. Remember the best time to seek advice on any property transaction, whether you are buying or selling is before you sign on the dotted line.
Need Help - Get In Touch
To contact a member of our property team, use the links below or call us on +64 9 486 2169.
Kate Chivers (Partner) - kate.chivers@turnerhopkins.co.nz
Samantha Davey (Legal Executive) - samantha.davey@turnerhopkins.co.nz
