Guidance for property sales and settlements during COVID-19

The Ministry of Justice has prepared guidance below for people and their lawyers dealing with property sales and settlements during the COVID-19 epidemic. This information will continue to be updated as needed.

Guidance for Lawyers

Guidance for people in an area under COVID-19 Alert Level 3

How are property sales and settlements affected in an Alert Level 3 area?

At COVID-19 Alert Level 3, it is possible to complete some property sales and settlements, as long as certain conditions are complied with. At Alert Level 3, there is an expectation that all activity relating to property sales and settlements is carried out remotely wherever possible.

At COVID-19 Alert Level 3:

  • people can move house, including between regions with different alert levels
  • moving companies can operate
  • real estate agency work is permitted, subject to specific requirements
  • private viewings of properties are possible in limited situations and under certain conditions
  • pre-settlement inspections can take place under certain conditions
  • property professionals (such as builders or engineers) can conduct inspections on the property if the inspection is a condition of the sale and purchase agreement or if the property is to be sold at auction.

The REA website has detailed information about property sales and settlements, and the conditions that must be complied with during Alert Level 3(external link)

Will I be able to meet with my lawyer or sign documents in person if I live in an Alert Level 3 area?

No, at Alert Level 3, you are unable to meet with your lawyer in person, even in situations where it isn’t possible to get in contact remotely. All documents must be signed remotely in an Alert Level 3 area in order to continue limiting close-physical contact.

Guidance for people in an area under COVID-19 Alert Level 2

How are property sales and settlements affected in an Alert Level 2 area?

At COVID-19 Alert Level 2, it is possible to conduct and complete property sales and settlements in person, as long as the necessary public health and physical distancing requirements are complied with.

At COVID-19 Alert Level 2:

  • people can move house, including between regions with different alert levels
  • people can meet with their lawyer or agent in person
  • open homes can take place, as long as certain conditions are met, including contact tracing and maintaining the necessary physical distancing requirements at all times
  • property professionals and tradespeople may visit the property to complete due diligence or complete work to meet the conditions of sale
  • auctions can take place under certain conditions.

The Law Society recommends that lawyers be given the opportunity to review contracts before they are signed.  There are uncertainties in the current COVID-19 environment, for example, how and whether settlement will occur if the Alert Levels increase before the settlement date.  Some believe that a solicitors’ approval clause will allow them to address any problems down the track, but this involves a negotiation and a willingness on the part of both buyer and seller to change the terms of the contract.

The REA website has detailed information about property sales and settlements, and the conditions that must be complied with during Alert Level 2(external link)

General information about property sales and settlements in light of COVID-19

What happens if a party to a sale and purchase agreement cannot settle because of the response to COVID-19?

The sale and purchase agreement sets out what happens if one party is not able to settle. The agreement may allow one party to cancel the agreement and / or seek compensation if the other party can’t complete the sale.

But these clauses do not usually take into account the unprecedented situation of the response to COVID-19. The legal position may not be clear in the particular circumstances. It is best to get in touch with your lawyer to talk about options.

What should buyers and sellers do now?

It is best to discuss what to do with your lawyer. The ideal solution is to negotiate and reach an agreement with the other person involved. Real estate agents are also able to help with these negotiations.

Lawyers can provide advice on rights, obligations and risks and consequences of possible actions in the current, particular situation of their clients. Lawyers can support their clients to find a compromise.

Finding an agreement that works for everyone is the best way to avoid legal disputes and court proceedings which can be time consuming, stressful and expensive.

People should consider that the measures being taken against COVID-19 and the requirements for particular Alert Levels are no one’s fault.

What options do buyers and sellers have?

There are many different options. It’s important to find one that suits your particular circumstances.

The Law Society has issued guidance for lawyers to help people in this situation. One option they recommend that may be appropriate to people in an Alert Level 3 area, is to delay settlement to the 10th working day after a reduction to COVID-19 Alert Level 2. This allows time for buyers to inspect the property in-person, businesses such as movers to return to work, and to make other arrangements. The Real Estate Authority supports this approach.

The option suggested by the Law Society may not be the best for everyone’s specific circumstances and interests. Every situation is different. A lawyer is the best person to provide advice on the range of options available in your particular situation and how to go about reaching an agreement with the other party

Are all settlements automatically delayed as a result of the measures being taken against COVID-19?

No. There is no automatic delay. Some contracts may have a clause delaying settlement where both parties can’t settle. This could be the case where there are technology issues with the settlement.

Every situation is different. In most cases both parties will want to find a way for the sale to carry on.

Can sellers or buyers cancel their contract because of the measures being taken against COVID-19?

No. A person can’t automatically cancel a contract because of the measures being taken against COVID-19. Cancellation rights depend on the terms of the sale and purchase agreement.

The sale and purchase agreement may set out what happens if the sale cannot be completed. A lawyer would be able to provide advice on this and any other laws that may apply to your situation. Because the response to COVID-19 is such an unprecedented situation, it may be unclear whether the requirements for a cancellation are met.

A party cancelling a contract without a proper legal basis may face significant legal consequences. For example, they might have to pay damages for breach of contract. A lawyer is the best person to provide guidance on what may happen if the parties are not able to agree on a way forward.

Can property sales still be registered?

In all cases, it will be possible to transfer ownership electronically if there are no other problems that prevent the sale going ahead. Many lawyers and conveyancers may be working from home but will be available for their clients and have the necessary technology.

Land Information New Zealand (LINZ) ‘s electronic land register Landonline is still operating, enabling the registration by lawyers of relevant documents such as transfers or mortgages. Documents that are sent to LINZ by post or courier are still being accepted but processing times may be longer, as some LINZ staff are working remotely.

Can a buyer cancel their contract because their financial situation has changed due to COVID-19?

Many people’s financial situation has changed because of COVID-19 and its consequences. For example, the value of people’s Kiwisaver funds may have reduced. A buyer cannot generally cancel their contract because of their financial position unless the contract is conditional upon finance. It is suggested that parties discuss financial issues with their lawyers, banks and the other party (for example, the seller) to come to a mutually acceptable agreement based on the individual circumstances.

What can I do if the person refuses to discuss new arrangements for settlement?

You should talk to your lawyer. Your lawyer can help you find a way forward as this is an unprecedented situation.

Can my lawyer charge me for extra work?

You and your lawyer should discuss whether there will be an extra charge for any extra work your lawyer needs to do as a result of the response to COVID-19. You should ask your lawyer whether it will cost extra, and if so, how much. Your lawyer has a duty to charge you a fee that is fair and reasonable and let you know how and when you will be billed.

Read more about this on the Law Society website(external link)

Where can I get more information?

The main contact for parties having issues with residential property settlements should be their lawyers or conveyancers.

Parties can also contact their real estate agent if they have questions about their transaction, especially if they are at an earlier stage of the selling and buying process.

The Law Society is continuing to work on guidance to help lawyers and their clients consider what options might be possible in their circumstances.

The Real Estate Authority (REA) has published some guidance for sellers and buyers and prospective sellers and buyers (external link)

Visit the Real Estate Authority website(external link)

Government agencies with relevant responsibilities are:

COVID-19 response level measures apply to all of us

The purpose of the response to COVID-19 is to save lives. We all need to stick to the rules of physical distancing and only move around for the specific purposes allowed under the current Alert Level.

Across the world, millions of transactions are affected in one way or other by COVID-19. Be kind, cooperate and try to find a good way forward which works for both parties considering this unprecedented situation.

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