Busting the Myths About Conditions in Agreements for Sale and Purchase

When you’re buying or selling property, the conditions you include in agreement can make the difference between a smooth relaxed transaction and a stressful one. Unfortunately, there are plenty of myths circling around about how these conditions work and believing them can lead to delays, disputes, unnecessary costs, or even losing the home you wanted.

Here are some of the most common misconceptions we see in New Zealand property transactions, and the truth behind them.

Myth 1: “A conditional offer isn’t binding until the conditions are met.”

Reality:

A conditional agreement is legally binding from the moment both parties sign it.

The buyer must make genuine efforts to satisfy the conditions, and the seller can’t simply walk away because they get a better offer. Conditions don’t make the agreement optional; they just give the buyer (or sometimes the seller) a pathway to check key risks and either proceed or withdraw in good faith.

Myth 2: “You can pull out for any reason if your offer is conditional.”

Reality:

Most conditions require you to act reasonably. For example, a due diligence condition lets you investigate the property thoroughly, but you still need a genuine reason to cancel, and you must do so within the set timeframe.

If you cancel without proper grounds, you risk breaching the contract which can expose you to claims for compensation or specific performance (meaning that you would have to proceed with the contract).

Myth 3: “You don’t need a lawyer until the agreement is signed”

Reality:

This is one of the most common and most costly misconceptions. Once you sign an agreement for sale and purchase, even if it is full of conditions, you are legally bound.

We regularly see buyers come to us with contracts that don’t include conditions for issues they later discover, for example, boundary concerns, cross-lease complications, or problems with obtaining insurance.  Alternatively, due diligence conditions may have been omitted in circumstances where they were necessary for a buyer. If the lawyer does not see the agreement until it is already signed, it can be too late for these types of omissions to be rectified, and the consequences can be costly.

By getting legal advice before you sign you can ensure that the conditions are tailored to the property and circumstances, the time frames are realistic, and the agreement protects your interests from day one. A short review from your lawyer before you sign can save you thousands of dollars (and a lot of stress) later.

Myth 4: “A solicitor’s approval clause will allow you to cancel the contract if you change your mind about the property, or your lawyer points out a practical consideration you hadn’t thought of”

Reality:

Solicitor’s approval clauses are not an ambulance at the bottom of the cliff, nor are they a substitute for completing due-diligence or obtaining legal advice prior to entering an agreement.

These clauses have been interpreted quite narrowly by the Courts, which have held that cancellation under a solicitor’s approval clause is only valid when there is a genuine legal impediment to completing the transaction or a technical issue with the title. Notably, the considerations which a solicitor may take into account when determining whether to “approve” the agreement do not include: the suitability of the property for the buyer’s intended use; the merits of the transaction; whether suitable conditions (e.g. finance) have been included in the agreement; or a change of the buyer’s circumstances.

Myth 5: “Builders’ reports automatically cover every physical aspect of the property”

Reality:

A builders’ report condition is only as good as its wording.

Some buyers assume the standard clause will automatically cover issues which touch on the building work, for example compliance problems, electrical installations, or asbestos or meth contamination, but many standard building reports do not specifically include these checks.

If you want specific assessments which don’t strictly fall within the ambit of a building report, the agreement should state clearly that the agreement is conditional upon these additional reports being undertaken, and those reports being satisfactory.

It is also important to note that the building report condition requires that a building report be prepared by a qualified building inspector in accordance with accepted principles and methods, and it must be in writing. If your “builder mate” has a look through the property with you and notices something of concern, in the absence of a formal written report from a qualified building inspector, it is unlikely you will have grounds to cancel under a building report condition.

Myth 6: “Finance conditions protect you even if you simply change your mind.”

Reality:

A finance condition only applies if you genuinely can’t secure lending on acceptable terms. It doesn’t let you walk away if you decide the property isn’t right, or if you get cold feet about your mortgage.

You may be required to provide evidence to a seller which demonstrates that you have made reasonable attempts to secure finance within the required timeframe but have nonetheless been unsuccessful. The Court has previously found that approaching only one lender and having your finance application rejected by them may not be sufficient to discharge this obligation: you may need to consider alternative lenders and make genuine attempts to obtain finance elsewhere (Strack v Grey [2019] NZCA 432).

Banks may also require extra valuations or checks, so buyers need to act promptly to meet finance deadlines.

Myth 7: “The real estate agent will make sure all the conditions you need are included.”

Reality:

Agents can help with drafting, but they are not legal advisors, and they are instructed by the seller to obtain the best result for them. Missing or unclear conditions are one of the most common causes of disputes in real estate transactions.

Alternatively, there may be practical considerations unique to the buyer that a real estate agent would have no knowledge of, nor reason to consider. This is where your lawyer, who is independent from the seller, can really be of assistance in troubleshooting and flagging any potential issues before you are bound by the agreement.

As previously mentioned, it is crucial that both buyers and sellers obtain legal advice before signing an agreement for sale and purchase. A house purchase or sale is one of the largest financial transactions you will make in your life: and once the agreement is signed, it can sometimes be too late or difficult to add or amend conditions.

Getting legal advice before signing ensures the contract actually protects you and your interests.

Myth 8: “Sellers don’t need conditions.”

Reality:

Sellers can and often should include their own conditions: especially around timing for settlement, finance for their onward purchase or escape clauses to allow a seller to enter into a back-up agreement, where the initial agreement is still in a conditional stage.

Well-drafted seller’s conditions can prevent last-minute complications when they are relying on the sale to complete another transaction.

Myth 9: “All conditions are standard across agreements.”

Reality:

The standard REINZ/ADLS agreement contains commonly used conditions, but many transactions require more bespoke wording.

Examples include:

•   Confirming compliance for recent renovations.

•   Requiring that the seller undertakes remediation works before settlement.

•   Verifying boundary or survey issues.

•   A broad due diligence condition which allows a purchaser to consider the wider implications of the transaction for them.

•   An insurance condition, where the insurability of the property is in question.

•   A sale condition, where the buyer is relying on a sale of their existing property in order to purchase this one.

Why This Matters

Attempting to cancel an agreement for non-fulfilment of a condition without proper grounds can expose both buyers and sellers to unnecessary risk, cost and stress. A strong, clearly drafted agreement means fewer surprises, fewer disputes, and a smoother path to settlement.

Whether you’re buying or selling, our specialist property team at McMillan&Co. can review your Sale and Purchase Agreement, explain what your conditions actually mean in plain English, and make sure the contract properly protects your interests before you sign it.

If you want clarity and peace of mind from the start, we are here to help.

Emily Robertson, Senior Solicitor
emily@mcmillanco.nz