The recent elevation to Covid-19 alert level four ("level 4") means there are difficulties with many transactions around New Zealand going ahead.
If you are in the process of buying or selling a property, we recommend you discuss matters with your lawyer. Although our physical offices are closed, Gibson Sheat remains open for business to provide its clients with the advice they need in these unprecedented times.
Settlement of most transactions require the occupants of a property to move out. If the vendor or tenants currently occupy a property being sold, the level 4 restrictions require them to remain in occupation. In such a situation, the vendor is unable to give (and the purchaser is unable to require) vacant possession, so settlement cannot take place. Almost all contracts provide for settlement to be delayed where neither party is able to settle. Even if the property is vacant, one of the settlement requirements is for keys to be made available. Usually, keys are handed over by the real estate agent, or directly between the parties or their lawyers if there is no agent involved.
Level 4 also means a purchaser will not be able to undertake a pre-purchase inspection.
The Property Law Section of the New Zealand Law Society has advised that during the current state of emergency, any settlements requiring physical movement of people are, for all practical purposes, illegal. That makes most settlements problematic, as a settlement usually requires a movement of people, either for a property to be vacated or for keys to be handed over.
The Property Law Section has provided lawyers with a recommended clause which can, by agreement of both parties, be added to an agreement. It provides for settlement to take place 10 working days after the alert level drops to level 2. If that clause is not agreed, the agreement will determine when settlement should take place (usually two working days after one party is ready to settle).
The level 4 restrictions are less problematic for some settlements. Bare land can still be settled without the need for the movement of people or keys, as can tenanted properties (where the tenant remains in place).
For new contracts, consideration should be given to the parties obligations during the various Covid-19 alert levels, particularly in relation to time frames for confirmations, settlement, exchange of keys and tenancy terminations. Most lawyers remain open (although working remotely) and can settle transactions, even during level 4, but the other implications should be considered when drafting or negotiating a contract.
If you are in the process of buying or selling a property, contact one of our property team to discuss your specific situation.