In some cases, a vendor may agree to allow a purchaser early access to a property before the official settlement date, often referred to as “early possession.” For example, a vendor might allow a purchaser to move in two days early if the purchaser has already sold their previous home. While this may seem like a simple and helpful gesture, granting early access can come with significant complexities and risks. Here’s what you need to know:

Risks of Default on Settlement

Typically, purchasers only gain access to a property after they have paid for it in full (settlement). Allowing early access increases the risk that the purchaser may default on settlement, leaving you with the challenge of having to remove them from the property. If the purchaser refuses to leave, the situation can become legally complicated.

Insurance Risks

In New Zealand, the standard Agreement for Sale and Purchase of Real Estate states that the property remains at the vendor’s risk until settlement is complete. This means that if any damage occurs to the property during the early possession period, the vendor is liable for the costs of repairs.

Before granting early access, it’s crucial to consult your lawyer. They can draft a clause that protects you, which may include restrictions on storing hazardous materials like LPG bottles or flammable items until after settlement.

Renovations and Building Works Before Settlement

Allowing the purchaser to carry out renovations or building works before settlement presents additional risks. If early access is granted for this purpose, it is essential to amend the Agreement for Sale and Purchase to shift liability and insurance risk to the purchaser during this period. However, there’s a risk that the purchaser could default on settlement, leaving you responsible for incomplete renovations or construction.

Before agreeing to such terms, consult both your lawyer and insurance provider to ensure adequate coverage and protection.

How Vendors Can Protect Themselves

Granting early access is generally discouraged due to the risks involved. However, if you do decide to offer early possession, here are some key steps to protect yourself:

1. Wait for Agreement Confirmation and Deposit Payment
   Ensure the purchase agreement is confirmed, and the deposit has been received before granting early access. If the purchaser defaults, the deposit could be used to cover any damages or losses.
2. Set Clear Terms
   Work with your lawyer to establish clear and robust terms for early possession, outlining the purchaser’s responsibilities and limitations.
3. Notify Your Insurer
   Inform your insurance provider about the early possession and ensure that the purchaser is limited in what items they can bring onto the property to minimize risk.
4. Seek Legal Advice
   Always consult with an experienced property lawyer before agreeing to early access. This will help you mitigate risks and protect your interests.

Many leading law firms offer fixed-price initial consultations, allowing you to quickly understand your options and make informed decisions.

Conclusion

While granting early access may seem convenient, it’s important to weigh the potential risks. By working with your lawyer and taking precautionary steps, you can help protect yourself from any complications that may arise before settlement.

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