Unconditional or Conditional Agreement for Sales & Purchases

What is the difference between an unconditional agreement and a conditional agreement?

A “conditional” agreement is an agreement that is dependent on specific events or things happening. For example, if the agreement contains a finance condition, the purchaser will be able to cancel the agreement (depending on the wording of the condition) if they are unable to obtain finance/lending from the bank before the agreed finance condition date.

An “unconditional agreement” is an agreement that does not contain any conditions and is not dependent on specific events of things happening, or an agreement that contained conditions that have subsequently been satisfied. Neither party can cancel an unconditional agreement unless the other party defaults.

Some common conditions that can be included or excluded from an agreement, include: 

• Finance – This condition is included to enable the purchaser to obtain sufficient funding/lending by a certain date. The standard finance clause in the standard Auckland District Law Society (ADLS) Agreement for Sale & Purchase Eleventh Edition 2022 requires a purchaser, if requested by the vendor, to supply evidence from their bank confirming the finance was declined if you wish to cancel under this condition.
• Land Information Memorandum (LIM) – A LIM is a report issued by the relevant council that contains information council holds on the property. For example the zoning of the property, resource consents and building consents, any outstanding issues in respect of such consents, whether there is any contamination of the soil comprising the property etc.  This condition allows the purchaser to obtain a LIM and have this reviewed by their solicitor to confirm there are no areas of concern before going ahead with the purchase. Click here to read more on why you should obtain a LIM before purchasing a property.
• Building Report – This condition allows the purchaser to obtain a building report before the purchase goes unconditional. If the purchaser is unhappy with any aspect of the report, the purchaser may choose to cancel before the agreed condition date (although this must be considered to be on reasonable grounds).
• OIA Consent – if you are an overseas person, you may require consent from the Overseas Investment Office to purchase residential property. This condition allows the purchaser to cancel the agreement if by a certain date they are unable to obtain OIA consent.
• Due Diligence – Solicitors will often recommend inserting a due diligence condition which gives the purchaser the ability to get the property under contract and then review all information relating to the property before confirming if they wish to go ahead with the purchase. Due diligence can include your solicitor reviewing the agreement, LIM, the title for the property and any instruments registered on the title, and the purchaser undertaking a property inspection or site visit. Your solicitor will be able to advise on the wording of the due diligence condition which would be included in the Further Terms of Sale under the Agreement.

You can use the standard clauses included in the ADLS agreement or have your solicitor tailor these to suit your situation. You should discuss your intentions with your solicitor so they can ensure the conditions, and the wording of the conditions, are in line with your intentions. 

If you are thinking about purchasing a property and want expert advice, get in touch with our Property Law Team at TODD & WALKER Law on [email protected] or +64 (03) 441 2743.