A solicitors approval clause is not a get-outjail-free card

BY JULIA INGHAM/LAWYER
13 June 2022

Even as the property market finally cools down a bit, prospective purchasers can feel pressure to get their offers on the table as fast as possible. However, pausing to get your lawyer to check over the contract before signing is absolutely vital.

When contracts aren’t done right, buyers can find themselves involved in costly negotiations trying to amend or exit an agreement which could have been avoided by taking time at the outset to check the agreement.

Some people mistakenly believe that adding in a “solicitor’s approval” clause into the sale and purchase agreement acts as a “get-out-of-jail-free card” if they change their mind on the property later. Just ask your lawyer to say they don’t approve, and the deal’s off right? Wrong. The Court has taken a very narrow interpretation of this clause, and there is in fact only very limited scope for the grounds lawyers can use to cancel a contract using this clause. If you’re not sure the property is perfect for you, but you want to make an offer, a well-drafted due diligence clause would be a better solution.

When your lawyer reviews your contract, one of the things they will do for you is make sure any due diligence clause inserted is fit for purpose. Do you need the scope and time just to review the physical aspects of the property, or work through discussions with your family or test the feasibility of a related project in the background? The due diligence clause needs to be drafted in such a way you can rely on it should you need to change your mind.

Are ‘Covid clauses’ still relevant?
Obviously the Covid-19 pandemic we are in is unpredictable, and restrictions on people’s movements are liable to change depending on where the virus flares up and the government’s response at the time. Agreements may require a Covid-19 clause, but again, it needs to be drafted well to match the specific needs of your situation. Trying to align dates using a catch-all clause, particularly when transactions are reliant on each other (for example, a purchase conditional on another property selling), can quickly make timeframes confusing and, sometimes, unworkable. A good lawyer will be able to draft a condition that allows for changes to timeframes due to Covid-induced restrictions, without overcooking it.

Making sure you understand what is expected of you under the agreement, whether you’re buying or selling – it will help your transaction run as smoothly as possible. A good lawyer will help explain your contract and obligations to you so you can avoid issues from the outset, save a lot of stress, and keep costs in line.

n Julia is an associate at WRMK Lawyers, helping clients from Warkworth to Mangawhai on a wide range of matters including property, trust and estate planning, and business matters. She enjoys keeping fit and going fishing.