House and land packages: Beware of the pitfalls.

Their lawyer perused the agreement and advised them that the contract was pretty standard and explained what the purchase price was etc. It was an attractive option for them as the purchase price was not as steep as properties which are already in existence. Furthermore, the settlement date was in June 2016, this gave them ample time to sort their finances for the settlement.

In June 2016, the couple were informed that a Code Compliance Certificate was issued and that the settlement was due in the next five working days. When the couple viewed the property before settlement, they were shocked to find that there was a pillar in the middle of the lounge which was not shown on the original plan. The couple tried their best to replace their unit with another in the same complex and, failing that, tried to cancel their agreement.

However. Cliff and Amanda were bound by their contracts, and therefore unable to cancel the agreement. The contract contained a clause that:

• Allowed the developer/builder to alter plans
• Prevented the purchasers from cancelling the contract due to any change in the plans or reduction in size of the unit
• Prevented the purchasers from seeking damages due to any change in the plans or reduction in size of the unit

The couple were distraught because their lawyer had not explained to them the implications of the clauses, nor did he even try to seek amendment to the clauses which were clearly risky to his client.

The new layout has made it difficult for Cliff and Amanda to move in with all their furniture. Very disappointed with the whole situation, they put the property back on the market. The estate agent advised them that it would be difficult to sell the house due to the pillar in the middle of the lounge, and suggested that they reduce the sale price. To cut their losses, Cliff and Amanda had to agree to a massive reduction in price.

Similarly, another young couple Blake and Jenny signed and paid their deposit for a beautiful three bedroom apartment which was due for completion two years later. However, down the line, the developer cancelled the contract due to not being able to finance the project. The couple’s deposit was refunded but they were left to look for another property in a market that had appreciated over the one year period.

Developers/builders normally are reluctant to agree to any significant amendments to their contracts. You need to take a stand or be willing to accept the risk.

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