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YOUR OBLIGATIONS WHEN AGREEING TO PURCHASE A PROPERTY

Lisa Roberts
Lisa Roberts

Article Published in the Western Leader: 11 September 2007
Written by: Lisa Roberts, Associate

You will have heard in the news recently about a couple who were ordered by the Court of Appeal to pay damages to the Vendor (Seller) on a Northland property deal as the couple had “not done enough” to sell their home, pursuant to a condition contained in an Agreement for Sale and Purchase.

Corban Revell have acted on a similar matter, also with a successful outcome for the Vendors.  Initially, Corban Revell was instructed by the Vendors to act on the sale of their residential property, conditional on the Purchasers obtaining finance approval. Subsequently the Purchasers cancelled the Agreement on the grounds that the Purchasers could not obtain finance.

The Vendors suspected that the Purchasers had found “a better deal” and the inability to get finance was not genuine and instructed Corban Revell’s litigation department to pursue the matter further.

When you enter into an Agreement for Sale and Purchase of a property, you are obliged to use your “best endeavours” to obtain finance and/or fulfill any condition to the agreement.

After receiving an unsatisfactory explanation from the Purchasers’ solicitor, Corban Revell applied to the High Court for an order for “specific performance” of the agreement seeking an order that the agreement was wrongly cancelled and forcing the Purchasers to buy the property. Corban Revell claimed on behalf of the Vendors that the Purchasers had the ability to obtain finance but had not done enough to discharge their obligation to use their “best endeavours”. At the trial the Purchasers could not prove they had used their best endeavours and the Court ordered that the Purchasers had to complete the sale. 

In many circumstances people think they can sign up to buy a property and “get out of the deal” using a finance condition, even if the Purchasers simply had a change of heart, Think again. So if the Agreement is conditional on you obtaining finance, you must do all things reasonably necessary to obtain finance. You do not have to accept the finance if the terms are unreasonable, but you must have made reasonable efforts to secure finance.