Property Sales During Lockdown

18 August 2021

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Here we go again... 

If you have a sale or purchase of real estate on the go, Level 4 has probably just put a big fly in your chardonnay.

It’s been a while since the last lockdown, so we thought we would send out a refresher on property sales during lockdown.

First things first
Check if there is a COVID settlement deferral clause in your Agreement. Many agents included a clause in the Further Terms of Sale that states what happens to settlement day if we moved up Alert Levels. Some of these also covered what happens if conditions are due.

If there is one of these clauses – this will set out what day your settlement will be delayed to (often 5 working days after any restrictions on moving house end). If you want to make any changes to this arrangement, it needs to be done by negotiation between lawyers.
If there is no COVID clause in the Agreement, the following rules apply.

Working days

By default, weekdays at Level 4 are still ‘working days’ unless this has specifically been changed in the definition of ‘working days’ in the Sale and Purchase Agreement.

Some conditions, like due diligence, LIM report, builder’s report or valuer’s report can be harder to satisfy under Level 3 and 4, due to limits on travel and access.

As mentioned above, weekdays at Level 4 are still ‘working days’ so the number of days you have for satisfying conditions under an Agreement does not change. If this will be an issue, purchasers will need to contact their lawyer to ask them to request an extension.
For example, a purchaser could ask to amend the definition of working days, as above, or may wish to use an alternative timeframe for their condition (e.g. 5 workings days from returning to COVID-19 Level 2). Agents and solicitors should also encourage vendors to be more flexible with extensions.

Conditions such as solicitor’s approval, finance and insurance are less likely to be affected, as these can generally be completed by email or over the phone. However, banks and insurers can be a bit slower and hard to get hold of, due to staff are working from home, so those timeframes might need to be slightly longer.

Pre-Settlement Inspection

Buyers cannot complete a pre-settlement inspection during Level 4. Some lawyers have argued that settlement cannot occur until a pre-settlement inspection has been completed. We disagree with this view unless a specific clause has been added saying this. A purchaser will still be able to raise any issues with the property, post settlement, under the breach of warranty clauses.

During Level 4, moving to a new house is prohibited, while at Level 3 it is allowed but not recommended (especially if moving between regions). Moving companies and vehicle rental companies could open but will likely be busy.

Each settlement planned for a day where we are in lockdown has to be renegotiated between vendors and purchasers via their lawyers. There is no default rule on how to deal with this situation.

The Property Law Section of the Law Society recommends using the following clause to amend existing Agreements for Sale and Purchase or Auction Agreements due to settle during the Level 4 lockdown:
"The parties agree that settlement is hereby deferred to the 10th working day after the Government reduces the COVID-19 Level to Level 2 or below, or to such other date as may be mutually agreed. For the sake of clarity neither party shall have any claim against the other in relation to this deferral."

Some people prefer Level 3 instead of Level 2. This may depend on buyers’ and vendors’ circumstances, and abilities to move. Clients should contact their lawyer to discuss changing settlement date, and what Level may be appropriate.

Meeting with lawyers
During COVID-19 Alert Level 4 clients and lawyers should both be staying home, so you cannot meet in person.

Convex Legal staff are all set up to work from home, so if you need to meet, we can arrange this for you if you have video call capability. This includes signing bank documents and KiwiSaver applications.

Mortgage payments
If property owners been affected by COVID-19 they may be eligible for a mortgage payment holiday. Contact the bank for more information. In the meantime, we recommend continue paying as normal if possible.

Home loan agreements usually have an ‘unforeseen hardship’ clause, which allows borrowers to ask the lender for assistance in difficult times. Once again, contact the bank or lender for more information.

You can contact our friends at Convex Accounting if you have cashflow or wage subsidy questions.

New Agreements
You won’t be going to any open homes during Level 4, but if you do want to sign up new Agreements for Sale and Purchase, we suggest including the following clause in the Further Terms of Sale:

Settlement Date (COVID-19 Alert Level)

As at the date of this agreement, New Zealand is at Alert Level [4] of the COVID-19 Alert System (the Alert Level) as a result of the COVID-19 pandemic. Under Alert Level [4], personal movement associated with the settlement of property transactions is not permitted to occur.

The parties acknowledge that the Government may change the Alert Level if there is a change to the public health risks in New Zealand as a result of the pandemic. Any change to the Alert Level may apply nationally or in specified regions.

The parties agree that in circumstances where a relevant order made under the COVID-19 Public Health Response Act 2020 (or other legislative instrument, if applicable) which gives effect to the Alert Level provides that it would be unlawful for the personal movement associated with settlement to occur; then the settlement date under this agreement will be deferred to a date 10 working days after New Zealand (or, in the case of a regional Alert Level change, the region in which the property is located) enters into an Alert Level where the personal movement associated with settlement is permitted, or to such other date as may be agreed between the parties in writing.

The parties agree that neither party will have a claim against the other in relation to the deferral of settlement in accordance with this clause.

If you have any questions, please feel free to get in touch with us.

The Convex team are all set up to work from home, so we are ready to help with all your legal or business concerns.

Sam L C P CONVEX JULY22 7023

for more help feel free to reach out. Get in touch with Sam French