Cancelling a Conditional Purchase Contract

Most house buyers enter into a conditional agreement for the purchase of a residential property. These conditions may form part of the further terms of sale or they may be part of the standard terms of the Auckland District Law Society Agreement for Sale and Purchase of Real Estate (‘ADLS Agreement’). For Example, the ADLS Agreement’s standard conditions include (if selected on the front page) a Builder’s Report condition as part of its standard terms, which allows the purchaser to avoid the purchase contract, if, on an objective assessment, they do not approve a Builder’s Report on the property.

However, this sort of condition does not of itself grant a purchaser a right to avoid the purchase contract. The ADLS Agreement specifically requires each party to do all things reasonably necessary to satisfy a condition that is for their benefit.

Using the example of the standard Builder’s Report condition, the purchaser must disclose the specific reasons for any avoidance of the purchase contract. This can lead to disagreement between the parties as to what would be an objective assessment of the Builder’s Report for the purposes of avoidance.

We strongly recommend that you seek legal advice prior to entering into a contract to purchase a property, so that your rights to cancel the agreement are preserved as best as possible.