It's common for buyers to be presented with the Auckland District Law Society's (ADLS) sale and purchase agreement.
However, lawyer Nick Kearney of Schnauer and Co says it's important for buyers in particular to realise that not all sale and purchase agreements are standard contracts. In many cases buyers assume that they have been handed a standard contract and sign, only to later find all manner of costly fish-hooks added to the fine print.
Even the "standard form" ADLS agreement has options and clauses that an unsuspecting buyer may not realise have been ticked or removed. Kearney has seen contracts where the provision to check the title has been crossed out and the buyer didn't realise, making the contract in effect unconditional.
Lawyer Tony Steindle of Steindle Williams Legal says that at the height of Auckland's boom earlier this year about half his clients were signing contracts without seeking legal advice. Before the boom around 90 per cent did the right thing and took the document to their lawyer first.
Steindle has seen some eyebrow-raising cases over the past three months. In one case the client thought he was getting a "really good deal" on the property and went cash unconditional. On the day of settlement the buyer discovered the home had never received a code of compliance certificate and there were all sorts of problems behind the walls. That turned into a legal fight.
In another case a client signed a sale and purchase agreement for cross-lease land assuming that it could be built on. It turned out, says Steindle, that the land had no such consent. That case is ongoing, but the purchaser will have to get resource consent to build, which will, at the very least, incur the cost of a planner and legal fees.
Kearney says a straightforward "fee simple" sale and purchase with a mortgage will cost around $1200 to $1500 plus GST. A trickier contract could be about $2000 plus GST.
Over the past few years Kearney has been sent contracts clients have already signed that limit the conditions to two working days, which mean he has one day once it lands on his desk.
Vendors are often keen to have as few conditions as possible in the contract, whereas lawyers encourage clients to insert those conditions. That could include a title search, finance, valuation report, Land Information Memorandum (LIM) report, building inspection report, engineer's report and the sale of an existing home.
These conditions don't, however, mean the buyer can simply pull the plug if they want to, says Kearney. That could be a costly breach of contract.
There are some painful standard clauses that may or may not be included and a lawyer ought to check before buyers sign.
They include what happens if the buyer defaults and insurance clauses that cover what happens if the property is damaged before settlement.
Buyers also need to have sale by tender and auction contracts checked by their lawyer.
Buyers may not want to do so if there is no guarantee that they'll win the tender or auction. But if you win the bid and buy a lemon you'll be glad you coughed up legal fees.
When it comes to auctions there is no guarantee, says John Stirling, property lawyer at Turner Hopkins, that the auctioneers are using the standard ADLS form or that certain clauses haven't been deleted.
A lawyer would spot this. Also be aware that mortgagee auctions may have clauses in the contract weighted in favour of the lender who is selling the property.
It's not just buyers who need to see a lawyer. Kearney has seen cases where a vendor has accidentally sold their property to two different buyers because they didn't understand how multiple offers worked with conditional dates and prior arrangements.
Such cases can end up in court and cost $10,000 or more to solve, says Kearney.
