Before committing to a conditional property purchase, it’s crucial to understand your obligations under the Agreement for Sale and Purchase of Real Estate. A notable example illustrating this is the case of Strack v Grey [2019] NZCA 432, which highlights the potential risks for purchasers who fail to meet the conditions of their agreement.

What Happened in Strack v Grey?

Grey, an Otago businessman, sought to purchase the Strack family’s property in Dunedin for $1.2 million. Despite wanting to make an unconditional offer, his bank manager advised him to include conditions due to uncertain financing.

Grey’s offer was made conditional on two factors:

1. Obtaining satisfactory finance.
2. Securing a building inspector’s report.

The Stracks accepted his conditional offer, but Grey later became dissatisfied with the property, particularly due to concerns about its retrofitted insulation. Grey decided to cancel the agreement, citing the failure of the building inspector’s condition. However, no written report was ever obtained.

Grey also failed to fully pursue financing, instructing his solicitor to end the agreement before completing the bank’s application process.

The Legal Outcome

The Stracks resold the property at a $150,000 loss and sued Grey for the difference.

The Court of Appeal ruled in favor of the Stracks, finding that Grey failed to meet his obligations under the conditional agreement:

• Building Inspector’s Report: Grey never obtained a written report, violating the condition.
• Finance Condition: Grey did not take all reasonable steps to secure financing, including exploring alternative lenders or vendor financing.

The court emphasized that purchasers must actively work to fulfill conditional terms, including investigating multiple financing options.

Key Takeaways for Purchasers

1. Understand Your Conditions: Purchasers are obligated to genuinely attempt to meet all conditions stated in the agreement.
2. Explore Financing Options: This may include non-traditional lenders or vendor financing if necessary.
3. Document Every Step: Properly commission reports and maintain a clear record of efforts to meet conditions.

Why Legal Advice Matters

Cases like Strack v Grey underscore the complexities of conditional agreements. While these conditions can provide flexibility, they also impose strict obligations on the purchaser. Failing to meet these obligations can result in costly legal consequences.

At Core Legal Wellington, we strongly recommend seeking professional legal advice before signing a conditional purchase agreement. Our experienced team can help you understand your rights, obligations, and strategies to protect your interests in property transactions. Contact us today to ensure a smooth and legally sound property purchase.