MONEY TALKS WHEN THE PURCHASER WALKS
Often we hear “it’s okay, if we want out of our Agreement to buy the house we’ll just cancel under the finance condition”. Opps …it’s not okay, well from a legal perspective anyway. When you sign up to an Agreement for Sale and Purchase you enter into a legally binding agreement that can only be cancelled on valid grounds.
A recent Court of Appeal case is consistent with this and has reaffirmed the need for buyers to use all reasonable efforts to fulfill conditions within Agreements for Sale and Purchase. An individual, let’s call him Mr Rash, signed an agreement to purchase a property in Dunedin for $1.2 million. The agreement was conditional on Mr Rash getting necessary finance.
Mr Rash was however concerned about retrofitted insulation at the property, and was worried he might not get a mortgage from his bank because of it. Rashly, he therefore went and cancelled the agreement under the finance condition. The seller was not at all pleased at that turn of events.
The seller was then forced to sell the property to a third party, but at a discounted sale price of $1.05 million. He then successfully sued Mr Rash for the $150,000 difference between the two sale prices. He said that Mr Rash had not done all things reasonably necessary to confirm the finance condition. For example, Mr Rash did not make contact with other banks or mortgage brokers, nor did he request finance from the seller.
It was found that Mr Rash should have made more of an effort to obtain a finance offer, and pursued matters further. The Court of Appeal awarded the $150,000 plus costs to the seller. It’s a timely reminder that you can only get out of property contracts for valid reasons and buyers need to pay attention to the special conditions.
If you, your friends or family, are intending on making an offer on a property please contact us to ensure the correct conditions have been included within the agreement and so that you’re well protected. At Corcoran French we can review the agreement before you sign and help with what is required in your personal circumstances.