When buying or selling houses, deep down everyone wants to get along during an often stressful ordeal. Parties commonly agree to let each other into a property after an agreement has confirmed but before the settlement date to store their items or perhaps complete repairs. As well-intentioned as these arrangements are, there are some risks you should be aware of.

Risk
The ADLS Agreement for sale and purchase of real estate is the standard agreement for property transactions in New Zealand. This agreement states that the risk of the property stays with the seller until after settlement. This means that if items stored on your property are stolen or cause damage, you could be liable for any costs incurred. Your lawyer can negotiate to have the agreement amended to provide that any items stored will be at the purchaser's risk, with perhaps an added warranty not to move any dangerous material onsite (e.g., flammable substances).

Where the early access is given to carry out building work before settlement, we normally recommend amending the contract to transfer the risk to the purchaser, at least regarding the repairs being carried out. After all, the works being carried out by the purchaser may invalidate the terms of a homeowners insurance. For serious repairs to a property (such as for an "as is where is" sale), the homeowner should also consider whether they should require the purchaser to organize contract works insurance.

Deposits and the cost of remedying works.
It goes without saying that no access should be allowed until the agreement has fully confirmed and the deposit has been paid across. But in a nightmare scenario where your agreement has confirmed but the purchaser defaults, you would look to use their deposit to remediate any damage or other costs. If a purchaser has either partially completed repairs or completed defective repairs, this could be quite a significant sum.

As a seller, when asked to grant early access to your property you should consider whether the deposit will be sufficient to recover your losses. Often with "as is where is" sales a nominal deposit of $10,000.00 or a sum that is less than 10% of the purchase price is provided.

In the case of a defaulting purchaser, the deposit may be the only expense that can be recovered if other creditors are also pursuing their assets. Remember that the point of the deposit is to protect yourself. Where a purchaser is completing extensive repairs, you should weigh these risks up against the value of the deposit, and again consider whether contract works insurance would be worthwhile.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.