How are property sales and settlements affected during Alert Level 2?
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:
The Law Society and Real Estate Authority both recommend that lawyers be given the opportunity to review contracts before they are signed. There are still 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.
For more detailed information about property sales and settlements, and the conditions that must be complied with during Alert Level 2, please visit:
What requirements do lawyers need to adhere to when meeting with clients or executing documents in-person during COVID-19 Alert Level 2?
At Alert Level 2, lawyers will be able to meet with clients and execute documents in-person, as long as all public health and physical distancing requirements are met. When meeting clients in person, you should maintain a 2-metre physical distance at all times and adhere to all public health advice, including disinfecting frequently touched surfaces and objects.
At Alert Level 2, documents can still be executed remotely if this is the lawyer or client’s preference. Land Information New Zealand has issued interim guidance on the requirements for remote verification of identity and the use of electronic signatures during this time:
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. It is best to talk with your client about options.
What should buyers and sellers do now?
As many lawyers are already doing, you will need to support your client by giving them options for how to proceed under their current, specific situation. The ideal solution is to negotiate and reach an agreement with the other party.
Finding a mutually acceptable agreement is the best approach to avoid legal disputes and court proceedings which can be time consuming, stressful and expensive.
When advising your client, you should consider that the measures being taken against COVID-19 and the requirements of particular Alert Levels are neither party’s fault.
What options does my client have?
The Law Society has issued interim guidance to help lawyers and clients in this situation. One option they recommend parties consider is agreeing to defer the settlement to the 10th working day after a reduction to COVID-19 Alert Level 2.
The option suggested by the Law Society may not be the best for every client’s specific circumstances and interests.
There are many other approaches. Other options that may suit the parties’ particular circumstances could include:
Every situation is different. You are best placed to provide advice on the range of options available for your clients and how to go about reaching an agreement with the other party.
Are all settlements automatically deferred as a result of the measures being taken against COVID-19?
No. There is no automatic deferral at any Alert Level. Some contracts may include a clause deferring settlement where both parties are unable to 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 proceed.
Can parties cancel their contract because of the measures being taken against COVID-19?
There is no general right to cancel a contract because of the measures being taken against COVID-19. Cancellation rights primarily depend on the individual agreements. In some cases, the sale can go ahead during COVID-19 Alert Levels 3 and 4 without significant problems.
Standard contracts would usually not have specific provisions for the current, unprecedented situation. Under section 36 of the Contract and Commercial Law Act 2017, a party may have the right to cancel a contract if the other party repudiates (makes it clear that they will not comply with) the contract. A party could also cancel a contract if the requirements of the common law doctrine of ‘frustration’ are met. But it is not clear that those requirements are met only because of the response to COVID-19.
A party repudiating or cancelling a contract without a proper basis may face significant legal consequences, such as liability for damages for breach of contract.
You are best placed to provide guidance on what may happen if the parties are not able to agree on a way forward. The Law Society is also working on providing further guidance for lawyers on this issue.
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 continue to work from home but will be available for their clients and have the necessary technology.
Land Information New Zealand (LINZ) continues to accept conveyancing transactions submitted electronically through Landonline and for paper dealings submitted by post to LINZ’s Christchurch and Hamilton offices. Registration is fully automated for around 85% of the transactions received online. All other transactions that are not fully automated continue to be registered by LINZ staff although processing times may be longer, as some LINZ staff continue to work remotely.
LINZ’s physical offices in Hamilton, Wellington and Christchurch are closed to the public.
LINZ has issued interim guidance on the requirements for remote verification of identity and the use of electronic signatures during this time:
Lawyers and conveyancers can still access Landonline remotely. Those lawyers and conveyancers wanting to restore their digital certificate to their work device should follow these steps:
More information about LINZ services can be found at:
Can a buyer cancel their contract because their financial situation has changed due to COVID-19?
A buyer cannot generally cancel their contract because of their financial position unless the contract is conditional upon finance. You should encourage your clients to discuss any financial issues with you and their bank. Even if there is no relevant clause, the other party could be open to hearing about your client’s particular situation and be willing to come to a mutually acceptable agreement given the unprecedented circumstances.
What can I do if my client or the other party refuses to discuss new arrangements for settlement?
Most people are reaching agreements that take into account these extraordinary circumstances and lawyers have had a crucial role in this. Lawyers should make sure their client is aware of the position the other person is in. For example, if your client is the seller, have they thought about whether they will be in a position to hand over keys, or whether the purchaser will be able to carry out the pre-settlement inspection? Have they investigated whether they could get a repayment holiday in respect of their mortgage payments?
Lawyers can provide their best advice and support to their clients but cannot prevent people from insisting on strictly enforcing their contractual rights. Where this happens, and no agreement can be reached, this could lead to court proceedings which can be costly, unpredictable, and in current circumstances have the potential to be significantly delayed. Lawyers are encouraged to make sure their clients are aware of the risks if the parties can’t agree.
Can I charge my client for extra work?
You should be upfront with your client if extra work you need to do as a result of the response to COVID-19 will result in additional costs. You have a duty to charge a fee that is fair and reasonable and to let your client know how and when they will be billed.
Where can I get more information?
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:
Government agencies with relevant responsibilities are:
How are property sales and settlements affected during COVID-19 Alert Level 3?
At COVID-19 Alert Level 3, it will be possible to complete some property sales and settlements, as long as certain conditions are complied with. At COVID-19 Alert Level 3, there is still an expectation that all activity relating to property sales and settlements is to be carried out remotely wherever possible.
At COVID-19 Alert Level 3:
For detailed information about property sales and settlements, and the conditions that must be complied with during COVID-19 Alert Level 3, please visit:
Can lawyers meet with clients or execute documents in-person during COVID-19 Alert Level 3?
At Alert Level 3, lawyers will still be unable to provide legal advice to clients in-person, including in situations where audio-visual link is unavailable. All documents must also continue to be executed or witnessed remotely during Alert Level 3, including in situations where audio-visual link is unavailable. These restrictions seek to continue limiting close-physical contact at Alert Level 3.
In light of COVID-19, a temporary change has been made to the Protection of Personal and Property Rights Act 1988 to enable the witnessing and executing of an enduring power of attorney to occur remotely. More information about this change can be found at:
How are property sales and settlements affected during Alert Level 4?
At Alert Level 4 :
This may make it difficult or impossible to complete a residential house sale. Some reasons people may not be able to complete a sale during Alert Level 4 are:
Are all property settlements affected at COVID-19 Alert Level 4?
No, every situation is different. Some settlements can still go ahead during Alert Level 4 or have already been completed. For example, it may be possible to complete a sale during Alert Level 4 where the property is vacant land or sold as a rental property with tenants remaining and the buyer is still able to pay. Many, however, have agreed to defer their settlements until after we transition to a lower Alert Level.
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 these unprecedented circumstances.
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