Approval of Title clauses are still important

Written by Courtney McHugh - Registered Legal Executive (Property)

We have noticed recently a trend whereby agreements are coming to us without purchaser’s solicitor’s approval of title conditions in the further terms of sale.  We suspect that this is because it is felt that general term of sale 6.2(1) provides the purchaser adequate ‘cover’ in relation to title matters.

Clause 6.2(1), commonly referred to as the title requisition clause, states that “the purchaser is deemed to have accepted the title except as to such objections or requisitions which the purchaser is entitled to make …”. 

Clause 6.2(1) allows a purchaser to requisition the title up to the earlier of 10 working days after the date of the agreement or the settlement date. However the title requisition clause is limited in its scope:

  • Clause 6.2(1) allows a purchaser to request that a vendor removes prior to settlement an easement, encumbrance or another restriction which the purchaser had been unaware of when they signed the contract. For example, a purchaser may be buying a new lot in a subdivision. The purchaser could use clause 6.2(1) to requisition the title if the vendor registered a restrictive covenant after the contract was signed without first warning the purchaser that it intended to do so. If vendor then refused to remove the covenant the purchaser could cancel the sale.
  • Clause 6.2(1) also allows a right of requisition if the title contains a defect. For example a purchaser of a cross lease or unit title property could use clause 6.2(1) to requisition the title if there have been alterations to the external dimensions of the flat or unit that are not on the flat plan or unit plan respectively. The purchaser could cancel the agreement if the vendor refused to obtain a corrected plan before settlement.

Clause 6.2(1) does not cover scenarios where the title is merely not appropriate for the needs of a purchaser. 

  • As an example, a purchaser may wish to add a structure (eg a pool, garage or other outbuilding) to the property, but a review of the title may show an easement running through the part of the land where the purchaser wants to build that structure.  This does not make the title defective and without a suitable approval of title condition, or other another condition (such as a broad due diligence condition) that they can draw on, this could leave the purchaser in a position of having to purchase a property that does not suit their needs.
  • Similarly, many newer subdivisions have restrictive covenants registered on the title that a purchaser may not know of until their lawyer reviews them and advises them on what they contain.  A common restrictive covenant that we encounter is one that expressly prohibits certain breeds of dog.  A purchaser may have a beloved family dog that is forbidden under the covenants, meaning that they need to rehome their dog if they are to continue with the purchase of this particular property.

If we are acting for a purchaser our preference would be that the contract contains a specific approval of title clause in its further terms.  An example clause is below: 

“This agreement is subject to and conditional upon the purchaser and purchaser’s solicitor’s approval of the title to the property within xx working days of the date of this agreement.  This clause is inserted for the sole benefit of the purchaser”.

There are benefits to a vendor if a specific title clause is included in the further terms. For example a vendor may wish for the confirmation period to be short – say 3 working days. The vendor could introduce a specific title clause in the further terms requiring the purchaser to approve the title within this timeframe. If the vendor did not include a specific title clause with a 3 working day deadline (and did not amend clause 6.2(1)) then the agreement could remain conditional for the full 10 working day requisition period under clause 6.2.

This could be dangerous if the vendor had committed themselves to another transaction because they were under the false impression that their contract was unconditional once the further terms were confirmed, and hadn’t been made aware that the requisition period under clause 6.2(1) had not yet expired.

Mental capacity when signing agreements

Written by Lauren Jerard – Solicitor (Property)

A novel situation occurred for us at the beginning of this year when it was determined that our elderly clients did not have mental capacity to sign the agreement for sale and purchase for the sale of their property.

We received the sale agreement from the agent which appeared satisfactory and we rang our clients to discuss the terms of the agreement, at which point confusion arose.

After further conversations with our client and upon further investigation with our clients children, our concerns that our clients lacked mental capacity increased. One client had dementia and the other had recently had a stroke! If our clients could not be explained nor understand the process involved when selling their property then they could not have had mental capacity to sign the agreement. The next step was to determine what to do.

We obtained a medical certificate from their doctor confirming that they did not have mental capacity at the time the agreement was signed. Unfortunately at this point it is too late for our clients to appoint  attorneys as mental capacity is required at the time enduring powers of attorney are prepared and signed. Consequently we had to apply to the Court for a property manager to be appointed in regards to the property. These appointments are in lieu of the usual enduring powers of attorney and are expected to cost our client $5,000.00 - $8,000.00. The judge in charge of these appointments is required to physically meet our clients.

The purchaser’s solicitor under the agreement for sale and purchase was advised of the situation and that, due to the vendor’s lack of mental capacity, that the agreement is not valid at present.

The risk to agents in these situations is being called to appear in front of the Real Estate Agents Disciplinary Tribunal for allowing vendors to sign an agreement when it appeared they did not have mental capacity. An agent is not required to determine mental capacity for the vendors however, if there is any doubt, we would always recommend seeking an opinion from a doctor to determine capacity.

Introducing Harry McCormick to the Cavell Leitch Property Team!!

We are excited to introduce you to Harry McCormick who has joined Cavell Leitch as a solicitor in the Property Team.

Harry graduated in 2017, was admitted to the bar as a barrister and solicitor in June 2018 and after travelling overseas has settled back down in Christchurch.

To read more about Harry or to contact him , please click here.

Mike Parker

+64 3 339 5645

Partner - Property

Phone: +64 3 339 5645

Mobile: +64 21 226 2630


Courtney McHugh

Registered Legal Executive - Property

Phone: +64 3 339 5616


Lauren Jerard

Solicitor - Property

Phone: +64 3 339 5662


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