We are fielding many questions from clients regarding the effects of the pandemic on upcoming property transactions. Here, Partner Emma Falconer answers the most common queries. (Also see our post here on how the pandemic can affect Commercial Contracts).
Answer: This will depend on what the conditions are that still need to be satisfied. Some conditions, such as a LIM condition or building inspection condition, require the purchaser to specify what they want remedied and the vendor can then elect whether to complete the remedial work or not, so until these processes have been exhausted the contract cannot be cancelled. Other conditions require the purchaser to have taken reasonable steps to have tried to satisfy the condition, such as a finance condition where the purchaser may be asked to show that their loan application has been declined and if these conditions are used to terminate the contract without just cause the terminating party could be liable for damages. Still other conditions have a degree of discretion written into them, using words such as “at the purchaser’s sole discretion” and these clauses may be able to be used to validly cancel the contract. It is best to talk to us about the specific terms of your contract so we can help you understand what might happen in your specific case.
Answer: We are still operating and will be able to complete settlement for you. We won’t be able to meet you face to face, but we can use emails, phone calls and video conferencing to communicate. It will be essential that we stay in contact with the other party to your transaction, usually through their lawyers and/or real estate agents to make sure that they are also operating and able to complete settlement.
Answer: We have already seen transactions where this is a concern and have come up with solutions in each case. What works in your situation will depend on both your personal situation and that of the other party (and any other parties involved in a chain of settlements) so we will be working closely with the other lawyers and real estate agents to find the best outcome for everyone. Possible solutions to consider would be:
1. Mutually agree to vary the contract so that settlement date will be 10 working days after New Zealand’s COVID-19 response level reduces to Level 3 or lower.
2. Agree to settle, but arrange a short term rental of the house you are currently in and rent the house you are purchasing to its current owners.
3. If neither party is able to settle, then both will be in default and many of the penalty provisions cannot be triggered until one party is able to settle. This will put your contract into limbo until a way to settle can be found or until at least one party is able to settle.
Answer: Yes. We already have systems in place to enable you to sign documents via video conference with us. Provided you are able to print, and then either email or text these back to us then we can witness your documents via the video link. We need to confirm your identity, see the documents you are signing, and be comfortable that you are not being pressured into signing. If you are unable to print, then please let us know as soon as possible as we will need to get the documents to you – mail services and couriers continue to operate during the lockdown – but we will still need to use a video conference with you in order to be able to be the witness on the documents.