What should be in the legal contract for purchasing a section, and what legal advice should you get before you sign.

The contract for sale and purchase

When you buy a section from someone, you are entering into a contract with you as the purchaser and them as the vendor. You sign a sale and purchase agreement, which will contain the terms and conditions for purchase of the section.

The sale and purchase agreement will usually be drawn up by the person selling the section, or by the real estate agent.

There are a couple of standard forms available. The most common one is the Auckland District Law Society (ADLS) form which has been in use for many years. You can purchase copies of these from the ADLS, phone (09) 303-5270 or fax (09) 309-3726.

Some bookshops also sell standard forms.

Whatever form is used, the sale and purchase agreement should contain:

  • The details of the certificate of title.
  • Any improvements to be made by the vendor before settlement, for example to services.
  • The price, including the deposit.
  • Provision for adjustments to be made to land tax, council rates and water rates.
  • The rights of the parties to cancel the contract.
  • Warranties which relate to such matters as council requisitions and consents under the Resource Management Act 1991.
  • Special clauses making the agreement conditional on such things as:
    • Your solicitor’s approval of title;
    • A satisfactory valuation;
    • Your approval after you have obtained a LIM;
    • You arranging suitable finance.
  • The date when the agreement becomes unconditional and the settlement date.

Before signing anything, read the agreement thoroughly. And get legal advice.

Both you and the vendor carry risks in signing an agreement for sale and purchase and once signed it is a binding contract.

However, if the agreement is conditional and one of the conditions is not met – for example, your finance falls through or you find something on the LIM that means you won’t be able to build the house you want – then you may be able to cancel the agreement. But once all the conditions are met, you must follow the purchase through.

Using a lawyer

Before you sign anything, discuss the legal details with your lawyer, i.e. the certificate of title, information in the LIM and council files, and the terms in the sale and purchase agreement.

Basic conveyancing services from a lawyer won’t include a check on zoning, and other specific information about the site unless you ask them to do this.

The lawyer can advise you about items on the title like a right of way, how many other people have the right to use it and what obligations users have to maintain it.

They can help you negotiate the price and help you organise finance.

A lawyer can also advise you about your ownership of the site – whether you want to own it jointly with your partner or spouse, or in differing shares with your partner, spouse or someone else, depending on your circumstances.

For more information on the services lawyers can provide, go to the Property Law Section of the New Zealand Law Society website www.nz-lawsoc.org.nz.