When you are buying a property in New Zealand, you will almost always proceed on the basis of a conditional sale and purchase agreement. The word “conditional” makes the deal sound flexible — like you can still change your mind, or adjust the terms once you have had time to think. That is not what it means.

A conditional sale and purchase agreement is a binding contract from the moment both parties sign it. “Conditional” refers to the specific, written conditions that must be satisfied before the transaction is confirmed. Outside of those conditions, you are bound.

What the Agreement Actually Covers

The REINZ/ADLS Agreement for Sale and Purchase of Real Estate (10th/11th Edition) is the standard form used across New Zealand for residential and commercial property transactions. It covers:

  • The names of buyer and vendor.
  • The legal description of the property.
  • The purchase price and GST treatment.
  • The deposit — amount, payment timing, and who holds it.
  • Settlement date.
  • Chattels included in the sale and a warranty as to their working condition.
  • Any conditions that must be satisfied before the transaction proceeds.
  • Vendor warranties about the state of the property.
  • Provisions governing risk, default, and insurance.

Many buyers sign the agreement presented to them by a real estate agent without appreciating that the agent acts for the vendor — and that the agreement may already contain vendor-friendly amendments. Your lawyer should review any agreement before you sign it.

Conditional vs Unconditional

Conditional contractUnconditional contract
Buyer can walk away if A specific written condition is not satisfied by its agreed dateAlmost never — only by mutual agreement or proven vendor default
Deposit at risk Refundable if a condition fails honestly and on timeForfeitable on buyer default
Settlement obligation Triggered once all conditions are satisfied or waivedAbsolute — you must settle on the settlement date
Time pressure Real but bounded by condition deadlinesHard — settlement date is binding and cannot be unilaterally extended
Lawyer's role Run due diligence, manage conditions, advise on declaring unconditionalManage settlement — limited ability to renegotiate

Declaring a contract unconditional is the single most consequential decision in a purchase. After that point, the deposit is forfeitable, the settlement date is binding, and the bank cannot rescue you if finance falls over.

The Most Common Conditions

A well-drafted conditional offer protects the buyer’s position with enough time to carry out meaningful due diligence. The most common conditions are:

Finance Condition

Gives the buyer time to secure mortgage finance from a bank or lender. A good finance condition names the lender and specifies the loan amount and acceptable terms. A vague finance condition (“subject to finance satisfactory to the buyer”) can be challenged.

Allow at least 10–15 working days from signing for a bank to issue formal written approval. If the bank requires a registered valuation, allow additional time.

LIM Condition

A Land Information Memorandum (LIM) is a council report summarising all information the council holds about the property: building consents, code compliance, resource consents, hazard overlays, outstanding issues, and rates. The LIM condition gives you time to review it with your lawyer.

Common issues found in LIMs include unconsented building work (e.g. an extension built without consent), flood or coastal hazard overlays, heritage or character designations, and outstanding infrastructure obligations.

Builder’s Report Condition

Allows you to commission an independent building inspection. Essential for any property over 15 years old, particularly anything built between 1994 and 2004 when weathertight construction failures were widespread. The report should cover structure, weathertightness, plumbing, electrical, and deferred maintenance.

General Due Diligence Condition

A broader condition allowing you to investigate any matter material to the purchase. This gives maximum flexibility but must be exercised honestly — you cannot use it to walk away simply because you changed your mind.

Other Conditions

Depending on the property, you may also want conditions for:

  • Registered valuation (where the bank requires one).
  • Insurance (confirming the property is insurable on standard terms at a reasonable premium).
  • Overseas Investment Office consent (for overseas persons purchasing residential or sensitive land).
  • Review of an existing lease or tenancy (for commercial or tenanted residential property).
  • Title and registered interest review.

The Conditional Period: A Realistic Timeline

  1. Day 0

    Sign the conditional agreement

    The contract is binding. The deposit is typically payable within 2–3 working days. All conditions are now running toward their deadline dates.

  2. Days 1–3

    Lawyer commences due diligence

    Your lawyer orders the Record of Title and registered instruments. LIM applied for (or reviewed if already supplied). Builder’s inspection booked. Bank notified to commence formal approval process.

  3. Days 5–10

    LIM and builder's report received

    Both are reviewed for red flags: unconsented work, hazard overlays, weathertightness, structural concerns. If issues are found, your lawyer will advise whether to renegotiate the price, request vendor remediation, accept the risk, or cancel under the relevant condition.

  4. Days 7–14

    Finance formally approved

    Bank issues written approval, including the loan amount, conditions of drawdown, and any required valuation. Do not treat a verbal or indicative approval as formal approval.

  5. Condition deadline

    Declare unconditional, extend, or cancel

    All conditions are satisfied and waived, or the parties agree to extend. Once unconditional, the contract is fully binding through to settlement. Alternatively, if a condition cannot be satisfied, written notice of cancellation is given and the deposit is returned.

  6. Settlement

    Title transfers, keys handed over

    The balance of the price is paid through the lawyers’ trust accounts. The vendor’s mortgage is discharged. Title transfers to the buyer. Keys handed over.

Waiving vs Satisfying a Condition

There is an important difference between satisfying a condition and waiving it:

  • Satisfying a condition means the condition has been genuinely met — finance is approved, the LIM is clean, the builder’s report is acceptable.
  • Waiving a condition means you are giving up the protection of the condition even though it has not been formally satisfied. Once you waive, you are bound regardless of what the condition would have revealed.

Waiving a condition is sometimes done strategically (e.g. to win a competitive offer situation) but it carries significant risk. If you waive finance and the bank declines, you are in default.

Standard Conditions to Include in Your Offer

Buyer due diligence conditions checklist

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Risk, Deposit, and Insurance

When Risk Passes

Under clause 6 of the REINZ/ADLS agreement, risk in the property passes to the buyer when the contract becomes unconditional — not at settlement. If the property is damaged or destroyed after going unconditional but before settlement, the buyer generally bears that risk.

Practical implication: arrange insurance cover on the property from the moment you go unconditional. Do not wait until settlement.

The Deposit

The deposit (typically 5–10% of the purchase price) is paid after signing and held in the real estate agent’s trust account.

  • If a condition fails and you cancel on time, the deposit is returned to you in full.
  • If the contract goes unconditional and you settle, the deposit is credited toward the purchase price.
  • If the contract goes unconditional and you default, the vendor may elect to forfeit the deposit and sue for any further shortfall.

What Happens if Either Party Defaults

Buyer default (after unconditional): The vendor serves a section 225 notice under the Property Law Act 2007, requiring settlement within 12 working days. If the buyer still does not settle, the vendor can cancel and forfeit the deposit — and can also sue for any shortfall if the property is subsequently resold for less.

Vendor default: The buyer can serve a similar notice. If the vendor still fails to perform, the buyer can cancel and recover the deposit, plus pursue a damages claim. In some circumstances, a court can make an order for specific performance compelling the vendor to complete the sale.

Commercial Property Due Diligence

For commercial purchases, due diligence covers a broader range of issues than residential:

  1. Confirming current and future permitted uses under the District Plan.
  2. Checking building consents, Code Compliance Certificates, and unconsented works.
  3. Reviewing the Building Warrant of Fitness and any outstanding inspection requirements.
  4. Understanding earthquake strengthening obligations (particularly for pre-1976 buildings).
  5. Reviewing any existing lease — lease terms, rent, reviews, tenant covenant, outgoings.
  6. Checking for pre-paid rent or outstanding arrears.
  7. Obtaining an independent valuation.
  8. Confirming the property is insurable at a reasonable cost.
  9. Checking for encroachments, easements, and restrictions affecting use.
  10. Completing any required environmental or contamination report.

For commercial purchases, engage your lawyer at the earliest opportunity — ideally before you submit an offer so that conditions can be correctly drafted.

Get Advice Before You Sign

The time to negotiate favourable conditions — and to understand what you are agreeing to — is before you sign, not after. An agent acting for the vendor will not look out for your interests.

Get in touch with NZ Legal for a fixed-fee review of your sale and purchase agreement before you sign.

This article provides general information only and does not constitute legal advice. Property transactions are complex and fact-specific. The law and standard form agreements change over time — always obtain specific legal advice before signing any property agreement.

Sources

  1. REINZ ADLS Agreement for Sale and Purchase of Real Estate, 11th EditionThe standard NZ commercial and residential sale and purchase agreement form.
  2. Property Law Act 2007, sections 225 to 229Cancellation, deposit forfeiture, and remedies on default.
  3. Building Act 2004Code Compliance Certificate, Building Warrant of Fitness and unconsented work obligations.
  4. Resource Management Act 1991District plan rules governing permitted use, building consent and resource consent.

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Adam Siddall

Written by

Adam Siddall

Founding Director, Property Lawyer

Adam is the founding director of NZ Legal and a New Zealand property lawyer. He advises buyers, sellers, developers, lenders, and overseas investors across residential and commercial property — covering conveyancing, OIA sensitive land consents, commercial leasing, construction finance, and property development from subdivision through to off-the-plan sales.

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