News and views

A residential property was being auctioned in Auckland. The auction stalled at a price of $2.5 million. The vendors had set a reserve of $2.7 million. The auctioneer halted the auction while he asked the vendors whether they would be prepared to reduce the reserve price. The vendors agreed to reduce the reserve price to $2.6 million.

The Court of Appeal recently had to decide the meaning of a condition in a sale and purchase agreement which made the purchase of a property “subject to and conditional upon … approval of directors”. This is the first time that a “subject to director’s approval” clause has been considered by a New Zealand court.

A recent High Court case shows that, in some circumstances, buyers of a property cannot rely totally on a code compliance certificate, but may have to undertake further investigations themselves. This will have implications for agents in circumstances where buyers ask them whether the purchase should be conditional on a builders report.

The High Court, in a recent case (Quin v the Real Estate Agents Authority [2012] NZHC), has discussed what obligations an agent has to explain defects to a potential purchaser. It has also clarified whether a Complaints Assessment Committee (“CAC”) can order an agent to pay damages if there is a breach of those obligations.

Most developers in recent years have placed land covenants (also called restrictive covenants) on the titles to the lots in new subdivisions. These are intended to restrict what can be built on the property, and in some cases what the property can be used for. The recent High Court case of Whittiker v Jericevich looked at the extent of a restrictive covenant.

A recent High Court case looked at the question of whether buyers under a purchase agreement can sue for damages for a breach of warranty by the sellers when the buyers had not carried out a proper due diligence under a due diligence condition, and where proper due diligence would have exposed the error in the warranty.

Buyers are generally required to use reasonable efforts to satisfy any condition in a sale and purchase agreement which is included for the benefit of the buyer. Some buyers include a ‘due diligence’ condition in an agreement in the belief that this will give them a right to cancel the agreement for any reason whatsoever.