Under clause 7 in the standard ADLS sale and purchase agreement, a vendor makes a number of warranties to the purchaser.
- In relation to any the work the vendor has done (or caused or permitted to be done) on the property, they warrant that:
- Any permit, resource consent or building consent required by law was obtained;
- To the vendor’s knowledge, the works were completed in compliance with those permits or consents; and
- Where appropriate, a Code Compliance Certificate was issued for those works.
Importantly, this warranty does not cover any work done by a previous owner.
- That the chattels (and all plant, equipment systems or devices which provide services or amenities to the property) will be delivered in reasonable working order, but otherwise the same state of repair as at the date of the agreement (fair wear and tear excepted).
This means that if any of the items listed above don’t work then this should be made clear in the Agreement.
- All chattels are the unencumbered property of the vendor and electrical and other installations on the property are free of any charge (such as any finance arrangement)
- The vendor has not received any notice or demand and has no knowledge of any requisition or outstanding requirement in relation to the property and the vendor has not given any consent or waiver that directly or indirectly affects the property and that has not been disclosed in writing to the purchaser.
Frequently, the warranties become an issue after a pre-settlement inspection, but can arise at other times too. Breaching these warranties doesn’t allow the purchaser to cancel an Agreement, but it does provide them with a right to compensation. To avoid issues arising after an Agreement has been signed, it’s important to discuss with a vendor before a property goes to market whether they have:
- Done any work to the property,
- Whether there are issues with the chattels or systems at the property,
- Or whether they have received any notices or anything from anyone.