Choosing between two forms of Sales and Purchase agreement [Aug 2009]

There are now two forms of agreement for sale and purchase to choose from when selling or buying real estate in New Zealand. Since July this year there has been a second form available in the market place published by the Real Estate Institute of New Zealand (REINZ). This form styled the "Plain English version" of the agreement for sale and purchase has been released onto the market and is available for real estate agents and lawyers to use when drafting agreements for clients.

This means that the two forms of agreement in the market are:-

1 The existing form published by the Auckland District Law Society and the Real Estate Institute jointly (the ADLS/REINZ form); and
2 The new REINZ form (the REINZ form)

The former has been published by the two organisations jointly for well over 20 years and is now in its eighth edition. Up until recently it was the principal form of agreement used by lawyers and real estate agents around the country unless you were buying a property from a developer who had drafted its own form of agreement for sale and purchase.

Now you have choices. Buyers and sellers who approach a real estate agent to buy a property or list a property for sale should consider the options between the two forms. It is wise to compare the forms, read them through and if any doubt at all seek advice from your real estate agent and lawyer as to which form should be selected. If a property is being sold by auction or tender the seller is likely to be the party that will choose which form to use as that form will be "pre-drafted" ahead of the auction or tender taking place. In a private treaty negotiation through a real estate agent, the seller may have made a decision at the outset as to which form should be used for the sale. But it is always open to the buyer to have the agreement to buy the property prepared on whichever form they would prefer. Then it is up to the seller to decide whether they accept the offer on that form or not as the case maybe.

In reading the two forms the difference between the two are quite apparent. However it is intended that both agreements cover the same sets of duties and obligations between the buyers and the sellers. They are just dealt with in different ways with clauses reading differently in each case but it is intended that the two agreements should not necessarily impose different obligations.

In comparing the two, the REINZ agreement is styled and written in plain English. The REINZ intended that consumers could read it and understand it better because it does not use legalese. Paragraphs and sentences are shorter. The layout is remarkably different. Standard clauses are contained in a separate booklet called the "REINZ Book of Standard Clauses". These are available for buyers and sellers to obtain off the REINZ website. It has one standard condition and four optional conditions. Using the REINZ form, the standard clauses will be the same whether one is buying by negotiating through the real estate agent (private treaty) or by auction or tender.

By contrast the ADLS/REINZ form is well known and understood to many real estate agents and lawyers as being the industry standard document. It is well accepted by lawyers. It contains clauses and concepts that are well understood legally and have stood the test of time. It has only two standard conditions namely the finance condition and the LIM condition both of which are optional. It is a form that is more familiar to real estate agents and lawyers at present.

It is important point to appreciate that there is now a choice which has not been the case in the real estate market for many years. Buyers and sellers need to ask their real estate agent or lawyer to give them both forms to read over and they should ask for advice as to which form to choose. At the end of the day, after receiving appropriate advice it is the consumer's choice as to which form to use in the circumstances.

[Tim Jones discloses his interest as a consultant to the REINZ on the draft of the REINZ form].

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