Property Settlements during COVID-19 Level 4 Lockdown

The announcement made by the New Zealand Prime Minister on Monday 23 March to prepare to move to Alert Level 4 – Eliminate, by midnight Wednesday, has had far-reaching social, economic and legal ramifications. Not least of all in the area of conveyancing and what should occur for settlements that are scheduled for the period in which the country is at Alert Level 4.

The ADLS Standard Agreement for Sale and Purchase (10th edition) will be the most common contract in use. Clause 3.3 of that contract states that ‘Possession shall be given and taken on the settlement date’. The question for both vendors and purchasers is what is the effect of not being able to take/give possession due to the Alert Level 4?

It is estimated that there are 5,000 property transactions scheduled to take place in the estimated four week lock down period. Each of these transactions will have their own unique set of facts. However, bear in mind the legal impediment to the movement of people. The National State of Emergency issued on 25 March states that “Where you stay tonight is where YOU MUST stay from now on”. It is likely that this legal impediment to movement will mean that the settlement will have to be deferred.

However, what if the property is tenanted and the same tenants will remain after settlement?

This would mean that there is no movement of people required and the transaction could settle.

What happens if the property being sold is due to have new tenants after settlement?

This would require a movement of people so could not settle. There has also been amendments to the Residential Tenancies Act made on 23 March 2020, see post about these changes here Residential Tenancy Act COVID19 Amendments.

What happens if the property is vacant?

This may mean that the transaction could settle but has not been decided by a Court yet.

All these are valid questions and require legal analysis and advice catered to your particular situation.

If you need any advice about your property transaction, then contact either Rick or Wendy from our conveyancing team to get the right advice, first time.

Chris Hallowes
[email protected]