December 13 2016
As always, we like to finish up the round of articles with three helpful hints for buying and selling property. This time we have P testing for vendors, a breakdown of multi-offers on property, and the pitfalls of terminating a lease on commercial property for unpaid rent.
P testing for vendors
You may recall our article about testing for methamphetamine (P) contamination. Now we’re looking at the topic from a vendor’s perspective. “But I don’t use or cook P,” we hear you say. That’s not the issue. How long have you owned your house? If the answer is 10 years or less, this topic could be more important than you realise.
It has become common to include a clause in sale and purchase agreements to allow the purchaser to test for P. This allows the purchaser to cancel the agreement if the property shows signs of P use or manufacture.
The Ministry of Health’s guidelines state what levels of P-contamination are considered unsafe. Standards vary between testing companies, and many return a simple ‘present’ or ‘not present’ result. These results are inconclusive with regards to what the Ministry considers a safe level or not.
For example, your family holiday home is rented out a few times a year and then you decide to sell it. The agreement is subject to a P test. The test comes back positive, and your purchaser cancels the agreement. The deal breaker P test may not have been conducted in a laboratory by professionals working towards a set of unit standards.
This may seem harsh, but this is the purpose a standard P testing clause in a contract.
There is a solution. If your purchaser insists on a P test, don’t rely on a standard test clause. Talk to us beforehand to get a more rigorous test clause that adheres to the Ministry of Health’s guidelines and save your sale.
What is a multi-offer on property?
The shortage of properties for sale has resulted in the rising trend of exclusive property purchase by multi-offer. Multi-offers can be confusing and stressful, particularly for first-home buyers.
A multi-offer sale occurs where more than one purchaser puts in an offer to buy a property. Each potential purchaser prepares an offer and submits it by a deadline. The vendor and real estate agent review all the offers and pick the one they wish to accept or continue negotiations.
A multi-offer situation differs from a tender because there are no vendor’s terms and conditions for the purchaser’s reference. The purchaser has to set their own terms and conditions. The result for the purchaser is no opportunity for initial negotiation, and pressure to put their best offer forward in relation to price, conditions and a settlement date. Naturally, higher prices and fewer conditions are more attractive to vendors.
In a tight property market, purchasers often leave out important and beneficial conditions in the agreement, and overstretch themselves with their offer price. This can be very risky.
We wouldn’t discourage you to enter a multi-offer situation, but we would encourage you to talk with us before you do. We can advise you on risks and how to minimise them.
Terminating a commercial lease for unpaid rent
Before the Property Law Act 2007 came into force, if you were a commercial landlord and had tenants behind on their rent, you could seize their property. Not any more. You have to follow the rules in the Property Law Act to terminate a commercial lease. You could think of the Property Law Act as a code of conduct in this matter.
If you’re in this situation, don’t get frustrated and don’t take matters into your own hands. It’s not longer considered acceptable to take possession of the premises and seize chattels. In a nutshell, you can make the situation worse for yourself by doing this as the Property Law Act contains remedies for tenants if landlords breach the legislation.
Again, we have the solution. Contact our commercial property lawyers as soon as your tenant’s rent becomes overdue. We can advise you on the correct way to remedy the situation without putting yourself at risk.