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Covid has caused disruption to many aspects of our lives including property settlements. When New Zealand entered alert level 4 in March 2020 personal movement was restricted. This was an issue for property settlements as many property settlements require personal movement for:

a. Signing title transfer documentation with
b. Collecting or dropping off keys;
c. Accessing the property for the pre-settlement inspection;
d. The vendor moving out of the property;
e. The purchaser moving into the property; or
f. The tenants vacating the property.

As New Zealand had never experienced a lockdown before and there was only 48 hours’ notice given that the country was moving to level 4, there were no provisions in any sale and purchase agreements signed prior to lockdown to delay settlement as a result of vendors being unable to give vacant possession.

Many property law solicitors had a very stressful 48 hours from the announcement trying to delay settlements on the many property transactions that were occurring in those five weeks that New Zealand would initially be at level 4. Most settlements were agreed to be delayed until 5 or 10 working days after New Zealand moved to alert level 2. As a result of the move to level 4 in March 2020 and the subsequent moves by the Government to put various regions across New Zealand back into alert level 4 during 2020 and 2021, Covid-19 clauses now appear in sale and purchase agreements to cover the eventuality that the Covid-19 alert level changes before settlement.

The Covid-19 clauses vary in agreements and depend on the real estate agency or law firm that has drawn up the agreements. However, clauses typically allow:

a. The settlement date to be delayed if personal movement is not allowed on the settlement date in the contract; or
b. The condition dates to be extended if personal movement is required to satisfy the condition (ie builders report); or
c. The settlement date to be delayed if the real estate agent or solicitor’s office of either party is listed as a location of interest and alternatives for signing of documents and completion of settlement by the solicitor or agent are not available (ie digital signing is not available or the solicitor cannot work from home).

If you are buying and selling and you require your settlement dates to align, you need to check that the Covid-19 clauses in your sale agreement match those in your purchase agreement. If not, you could end up with different settlement dates, meaning you will either need to arrange bridging finance to fund your purchase if your purchase is to settle first or find alternative accommodation if your sale is to settle first.

Another consideration is if you are moving between regions. You will want the Covid-19 clauses to cover the eventuality if either the region you are currently living in or the region the property is in move to an alert level where personal movement is not allowed. If you cannot move out of your existing home, you will need to ensure that settlement of your purchase will be delayed.

You will also need to consider if settlement needs to be delayed if you are moving between regions and must travel through another region that is in lockdown. If you cannot travel through that region due to lockdown then the Covid-19 clauses should cover this situation.

If you are looking at buying or selling, then please contact us before signing your agreement. We can advise you on the effects of the Covid-19 clauses in the agreement to ensure you are covered.

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