The newly released ADLS/REINZ Agreement for Sale and Purchase of Real Estate - 11 th Edition 2022 (“Agreement”) contains important updates to the provisions to reflect legislative changes and practice. Apart from reformatting changes, the key amendments to the Agreement include:
Purchase Price Allocation (PPA). You should note that the PPA regime will generally apply only to residential transactions where the purchase price is greater than $7,500,000 or for non-residential transactions such as the sale of commercial property and farm sales over $1 million. A purchaser and vendor are now required to make the same allocation of the purchase price across the assets being sold.
The front page of the Agreement prompts the parties to address PPA considerations. A transaction affected by PPA rules can be documented in the Addendum of the Agreement, which contains provisions setting out the process for the allocation in line with the legislative changes to the tax purchase price allocation rules. We strongly recommend legal and tax advice be sought at the outset of the transaction, before the Agreement and Addendum is signed.
Claims of compensation
The Agreement now provides that a purchaser must act reasonably and give notice promptly prior to settlement when making a claim for compensation from a vendor. The purchaser can only make one claim and must be ready, willing, and able to settle except for the claim for compensation. A vendor may dispute the purchaser has a reasonable valid claim. If there is a dispute about a claim that is not resolved, an expert, who is to be appointed by the Auckland District Law Society, may determine the costs.
Limitation of Liability
The Agreement clarifies where a person enters into the Agreement as a trustee but who is not a beneficiary of the trust then that person is an independent trustee, and the liability of that trustee is not personal but is limited to the indemnity available from trust assets. However, if the indemnity is lost due to the actions of the trustee, then the limitation will not apply, and the trustee can be held to be personally liable.
Covid-19 clauses are now included as general terms in the Agreement. Whenever there are restrictions on personal movement either nationally or localised which prevents a vendor or purchaser satisfying conditions in the agreement or settling the transaction, the date for the conditions of sale and or settlement is deferred for 10 working days after the lockdown ends or such later date set out in the Agreement.
The general warnings referencing the need to obtain professional advice has been moved to the signing page of the Agreement to more fully bring to the attention of the parties the importance of seeking advice. It is important to remember the Agreement is a template which should be drafted to meet the specific needs of the parties and reflect the details of the transaction.
We recommend legal and tax advice is sought before signing an Agreement, and, if necessary, your lawyer may amend the general terms or insert further clauses in the Agreement to meet your specific needs and reflect the transaction’s details.
Should you wish to discuss these changes to the Agreement for Sale and Purchase of Real Estate, please contact Gaynor McLean or a member of our Property team.