The Sale & Purchase Contract

12 February 2016
Signing a sale & purchase agreement requires a commitment from the Vendor (to sell the property) and the Purchaser (to buy the property).  Yet sometimes the Purchaser may not be serious about settling on the purchase of the property.  It seems that this practice has been brought to the attention of the law in some high profile cases.
Many of us are under the impression that if there are any conditions on the contract ie. the contract is not “unconditional”, we can choose whether or not to proceed with the purchase, even if we have simply changed our mind about buying that particular property. 
A sale and purchase agreement is a legally binding contract which stipulates that all parties to the contract must make every “reasonable” effort to fulfil any conditions, which they have, in writing, undertaken to complete.
We have, in the past, been asked by some clients to advise the solicitors that we could not arrange finance as the purchasers no longer wished to buy a particular property - often because they have found another house that they preferred. We have tried to point out that this provides the very real risk of being sued for not making every effort to complete the contract. If finance is “declined” for one house, it is also hard to explain how it could approved shortly after for a different house.
If the Vendor of the first house was to become aware that the Purchaser had bought something else, they could well feel justified in suing for any loss they incur. 
Some Purchasers insert a clause stating that the contract is subject to their solicitor’s approval, but even this may not let you off. This clause usually spells out that the solicitor is only to consider the title to the property plus the sale and purchase agreement itself. If there is anything wrong with either of these, then there may be grounds to cancel the contract. However the clause also usually includes wording that specifically states it is not the role of the solicitor to question the wisdom (or otherwise) of, for example, paying a particular price for a house in an unfavourable location, or any other reason not related to the title or agreement.
Sometimes the wording on the sale and purchase agreement does allow room to “get out” of the contract with little risk of being seen to be reneging on the deal, but if you have changed your mind about a property, you should discuss this with your solicitor before taking any action. 
The Vendor also has an obligation to fulfil any conditions that are their responsibility, but these are often things that can be readily rectified, or compensated for, if they are not done. A typical example could be where the vendor has agreed to finish renovations of a bathroom. If these are not done before settlement (as confirmed by a pre-settlement inspection) then a sum of money is withheld from the settlement proceeds paid to the vendor, until the work is done. 
The lesson to be taken from this is that when you sign a sale and purchase agreement you are signing a legally binding – and enforceable – contract. You cannot simply change your mind. The money involved is always substantial, so don’t be pressured, take time to consider, and re-consider as many times as necessary, to feel confident that this is the property that you really want to buy. 

Published In Whakatane Beacon

This post was written by

Trish Marsden - who has written 96 posts

Comment on this post