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REINZ warns consumers

REINZ warns consumers they can no longer use finance clause to pull out of a property purchase

With the recent launch 10th Edition of the REINZ/ADLS Agreement for Sale and Purchase, the Real Estate Institute of New Zealand (REINZ) is today warning consumers that they can no longer use finance clauses to pull out of a property purchase.

Currently, if a finance condition is inserted into a sale and purchase agreement and the purchaser can’t obtain finance, their word is generally enough for an individual to pull out of a contract. However, under the changes to the finance condition purchasers will now be required to provide evidence if they can’t raise finance. Evidence might include a letter or email from the purchaser’s bank confirming that finance has been declined.

Bindi Norwell, Chief Executive at REINZ says: “This is a significant change to the sale and purchase agreement and it’s imperative that consumers understand the implications as if they can’t provide evidence they can’t raise the finance, they could be forced to proceed with the purchase or face other legal action by the vendor.”

“It’s also essential that anyone looking to purchase a property takes legal advice and talks to their financial provider so that they understand exactly what they’re signing or else the implications are pretty significant,” continues Norwell.

Other changes made to the sale and purchase include:

• An optional toxicology report condition is included on the front page and in the general terms
• A detailed process to resolve compensation disputes between vendors and purchasers has been added
• 'Fixtures' and ‘chattels’ have been removed and replaced with new definitions and warranties
• The GST clauses have been revised
• The timeframe in which deposits may be released has been clarified
• References to fax machines have been removed
• Tenancy documents to be provided by the vendor on the settlement date
• Various other changes to language and formatting.

“The last time changes of this scale were made to the sale and purchase agreement was seven years ago so it’s a really important that anyone looking to buy a house understands the elements of these changes that impact consumers directly,” concludes Norwell.

The 10th Edition of the REINZ/ADLS Agreement for Sale and Purchase has been updated to be in line with current legislation and requirements with more than 18 months of legal and industry consultation. REINZ is currently running education/training for its members to ensure they are up to speed with the changes.

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