Conditions in property sale and purchase agreements are often expressed as being for the “sole benefit” of either the purchaser or the vendor. A recent High Court case highlights the importance of understanding what that means – particularly if one party tries to cancel the agreement.
What are the facts?
In Li v GSC Holdings Ltd, the purchaser (Li) and the vendor (GSC) entered into an agreement for sale and purchase for a lot in the vendor’s subdivision. The agreement was conditional on the vendor obtaining a section 224 certificate under the Resource Management Act 1991 within two years of the date of the agreement. A section 224 certificate (Certificate) is a certificate from the territorial authority confirming that all subdivision conditions have been met, and such a certificate must be obtained before titles can issue. The Certificate condition was expressed as being for the sole benefit of the vendor. The agreement also stated that if the Certificate had not issued by 4pm on 30 November 2017, the purchaser could cancel the agreement.
By 21 October 2017 (two years after the date of the agreement), the vendor had not obtained the Certificate. A few days before, the vendor’s solicitor notified the purchaser’s solicitor that the vendor had waived the Certificate condition. Then, shortly after 4pm on 30 November 2017 (with still no Certificate) the purchaser’s solicitor sent a notice of cancellation to the vendor’s solicitor and requested return of the deposit. Finally, on 22 December 2017 the vendor obtained the Certificate.
The case ended in up in the High Court to decide if the purchaser had validly cancelled the agreement on 30 November 2017, or if the agreement was still on foot at the time the vendor obtained the Certificate (which would then satisfy the Certificate condition and the purchaser would be bound by the agreement).
What was the decision?
The key questions for the High Court were whether the vendor’s notice of waiver was sufficient to satisfy the Certificate condition and whether, as a result of that notice, the purchaser’s cancellation right was lost. The High Court found in favour of the purchaser – i.e. that the vendor’s waiver notice did not mean that the Certificate condition was satisfied – and accordingly the purchaser’s cancellation notice was valid. The main reasons were:
- The general principle is that a condition expressed for the sole benefit of one party can be satisfied or waived by that party.
- However, in this case, the parties had agreed a specific cancellation right if the Certificate had not issued by 30 November 2017. The High Court interpreted this to mean that the parties intended the vendor to have the right to waive the need to obtain the Certificate by 21 October 2017 – but the agreement remained conditional upon the vendor obtaining the Certificate by the 30 November 2017 cancellation date.
- The vendor’s obligation to obtain the Certificate went to the heart of the vendor’s obligations under the agreement (i.e. to provide a new title for the lot to be purchased by the purchaser).
- The vendor’s waiver notice did not mean that the Certificate condition had been satisfied, and the purchaser had validly cancelled the agreement on 30 November 2017.
Please contact the authors if you have any queries about this article.
Katrine Kofoed, Senior Associate – Property and Real Estate, is a real estate lawyer with experience advising both public and private sector entities in New Zealand and the Middle East. Katrine has experience advising on property acquisitions and disposals, commercial leasing, property development, financing transactions and property management. After spending four years living and working in Dubai, Katrine joined MinterEllisonRuddWatts in August 2015. Contact Katrine at [email protected]
Ross Pickmere, Partner – Property and Real Estate, is one of New Zealand’s leading commercial property and construction lawyers. He brings more than 35 years’ experience to his diverse property practice with a focus on commercial property, construction, projects and development. Known for his commercial and affable approach, Ross has been the principal legal adviser on some of New Zealand’s’ significant land development and urban renewal projects. Ross’s expertise extends across a broad spectrum of industries including building, forestry, education, health and ageing, transportation and energy. He advises on environmental issues and industry specific regulatory controls including the Resource Management Act, the Building Act and Overseas Investment Act compliance. He’s widely recognised for his legal advice on all aspects of commercial property. Ross is skilled in the development of strategic sites. Contact Ross at [email protected]