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Talking Property: Drafting an agreement to sell.

Steve had a commercial building in Albany which he wanted to sell. The tenant’s lease had come to an end and Steve was not sure whether to grant a new lease. The lease was therefore now on a periodic tenancy. Steve was confident with the estate agent he had chosen.

The agent was experienced and assured Steve that he would get him the best possible offer. The estate agent even drafted the agreement for him which Steve thought was in order. The property sold for more than he expected. The purchaser needed the premises vacant to start his warehousing business so Steve terminated the lease and, two weeks before the settlement date, the tenant moved out.

On the settlement date, the purchaser did not complete the settlement because he had discovered defects and illegal alterations in the premises which the purchaser required Steve to rectify before settlement is completed. Steve would have had to spend a lot of money to attend to the repair works so declined to take any action.

Steve claimed that he had informed the estate agent of the illegal alterations he had undertaken before putting the property on the market and that he wanted the purchaser to purchase the property as is. The agreement did include a clause which made clear that the property was to be sold “as is”. The purchaser claimed that he was not made aware of the illegal alterations and defects until after a final inspection just two days before settlement date. He also said that had he known of the defects he would not have signed the agreement. Consequently, the purchaser cancelled the agreement for breach of contract and sued Steve for damages.

Steve is now left with a property which is untenanted and is facing a legal suit for breach of contract. The agent had already deducted his commission from the deposit amount and what is left of the deposit is negligible considering the damages Steve has sustained.

Please don’t make the same mistakes as Steve. Even if you are using a ‘standard form’ agreement, clauses often need to be added or amended depending on your circumstances. Legal implications need to be considered in doing this. Please get in touch before you sign to see if you need help with your agreement.


For further Property Law advice, get in touch with Nick and the Property Law team.
nick@davenportslaw.co.nz | 09 883 4420



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