What to watch out for

Here's what to be aware of if you're using the new contract:

Getting both parts

The REINZ contract has been split into two parts: an agreement and a book of standard clauses. There’s a risk some buyers or sellers may not receive or read the book of standard clauses because the two documents aren’t stapled together. This could lead to a dispute as to whether both parts of the agreement are binding.

Legal twists

The new contract hasn’t been tested in court yet – so no legal precedent has built up around it as there was with the older joint agreement. Buyers or sellers may get a nasty surprise if a dispute over the new agreement ends up in court, although the agreement requires the parties to go to mediation before court action.

Harder to cancel

The new agreement may be harder to cancel if you’re a buyer. For example, if your contract is subject to a pre-purchase inspection your approval cannot be “unreasonably withheld” once you receive the report. John Meads of law firm Kensington Swan warns that if a buyer wants the ability to approve a builder’s report, the REINZ contract will need to be amended.

A buyer will also need a good reason for objecting to a title defect and must tell the seller the reason. In many cases objections to easements will now be seen as unreasonable, particularly if it’s obvious that the objection is just an excuse to pull out.

The REINZ’s view is that the new contract is designed to stop buyers using “frivolous” reasons for cancelling a contract.

Higher legal bills

Legal bills for conveyancing are likely to be higher for a while with the new contract – lawyers aren’t familiar with it and will take time to get up to speed with its provisions. They may also suggest amending the contract.

You could end up buying and selling at the same time using the two contracts. You will need to be careful that any conditional or unconditional clauses in the two contracts match up and don’t have a different interpretation.