New Zealand: Purchasing a property? Read this first!

Last Updated: 14 August 2018
Article by David Fitchett


If you are planning to purchase a property, whether it is residential or commercial, then it is highly recommended you carry out proper due diligence on the purchase.

In this article, we set out some tips to allow yourself an opportunity to work out if the property is right for you before the agreement is unconditional. Ultimately you want to reserve the option to pull out of the purchase if your investigations uncover an insurmountable problem.

Make sure your agreement contains an effective due diligence clause

The sale and purchase agreement should include a robust due diligence clause if you want an opportunity to fully investigate every aspect of the property before you commit yourself to the purchase.

A standard sale and purchase agreement requires a vendor to make several warranties, and several of those warranties require a vendor to provide the purchaser with certain information about the property. For example, a vendor must tell a purchaser if they have received a notice from NZTA that the Transport Agency intends to take part of the property to build a new road.

However, these standard warranties only go so far. The default terms of the sale and purchase agreement would not require the vendor to volunteer a blow-by-blow account of every potential issue with the property.

It is therefore important that your contract contains a robust due diligence clause. If Cavell Leitch is given an opportunity to review the agreement before you sign it, we will be able to tailor a due diligence clause that suits your circumstances. It is important that the clause is broad enough to allow you to dig further as new information on the property comes to light.

What should a due diligence clause cover?

As a minimum we suggest that a due diligence clause should achieve the following:

  • You should be given sufficient time to investigate the property. Depending on the nature of the property, you may need at least 20 working days to get comfortable that this is the right property for you (and also give you enough time to convince other stakeholders such as your bank).
  • The clause should allow you to satisfy yourself as to any aspect of the potential purchase that you consider relevant, rather than just being restricted to a couple of matters. We comment below on some of the areas we suggest a prudent purchaser should look into.
  • The due diligence clause should allow you and your contractors or advisors access to the property, or to anyone who holds information about the property (which could include the current insurer), to complete your investigations. If the property is tenanted, then the clause should require the vendor to help arrange your access at a time that suits the tenant.
  • The due diligence clause should require the vendor to supply you with any information you request within a reasonable timeframe so you can maintain momentum. We think it would be reasonable to expect an answer within 5 working days of you asking the vendor for more info.
  • We would ideally tailor the agreement so that you would only pay your deposit once you are 100% satisfied with your due diligence investigations.

Make sure you ask for the information you need.

A recent High Court decision, Sullivan v Wellsford Properties Limited, highlighted that a purchaser must ask the right questions, or suffer the consequences. The case involved a property for sale that had multiple tenants. The sale contract allowed the purchaser to complete due diligence investigations, and as part of that process, the purchaser asked the vendor whether there had been any disputes with past tenants of the property about the level of outgoings.

However, the purchaser failed to ask the purchaser whether there were any disputes about outgoings with the current tenants of the property. The purchaser also failed to make a general request for all information about the property's outgoings.

It turned out that a current tenant had, in fact, disputed its share of the outgoings, and the property was significantly less profitable as a result.

The High Court decided that the onus was on the purchaser to ask the right questions, and only then would the burden switch back to the vendor to answer those questions fully and honestly. A vendor could be held liable for misrepresentation if they do not provide all of the information requested.

What should your due diligence investigations cover?

What areas your due diligence investigations should cover will differ on a case-by-case basis based on your circumstances and experience, and the type of property you're looking to purchase.

Typically, however, we would suggest that you look into the following:

  • The property's title to see what rights you property has/is subject to.
  • The local Council's information on the property, the majority of which would be summarised in a LIM report (although you may need to obtain a copy of the property file for further information, such as copies of the building consent documents).
  • The strength of any leases of the property should be assessed. This could extend to performing credit checks on the tenants, and also examining any service contracts currently in place to service the building or the tenancies.
  • It may pay to obtain a building report to identify any current or future maintenance or safety issues. For example, you would want to know if there is any asbestos present on the property.
  • The relevant zoning rules should be examined to see what activities are permitted on site.
  • Your bank may require you to obtain specific valuation advice in relation to the property and any plant or equipment being sold as part of the purchase.
  • It may be necessary to request copies of existing engineering, geotechnical or contamination reports for the property (or commission your own).
  • If you have a specific use in mind for the property, then you'll need to check the property's utilities are sufficient. For example, you may need to check the power supply will be sufficient to operate your machinery from the site.

How Cavell Leitch can assist you with your due diligence investigations:

Cavell Leitch has assisted our clients with their due diligence investigations for close to 95 years.

  • We've seen it all, and we have an in-depth knowledge of how the market operates. We're able to use that experience and expertise to guide you as to the pertinent questions which you should be answering to maximise your opportunities and minimise your risk.

For example, we recently advised a client who was seduced by what appeared to be the prospect of very high returns for a property. However, we were able to spot that the building was very specifically designed for its current tenant. If that tenant was to leave, and our investigations uncovered there was a likelihood of this happening, then the building would likely need an expensive re-fit to suit a new tenant. When the refit costs were taken into account, the return for our client would not be so attractive

  • Cavell Leitch will tailor our advice to suit you. We can prepare a full due diligence report which uses plain English to summarise each aspect of the property in as much detail as you require. Alternatively, if you are an experienced operator, you may prefer us to only highlight potential fish-hooks and provide practical and commercial advice on their likely impact on you.

Cavell Leitch is able to provide expert advice on a number of areas. For example:

  • If you are concerned to ensure you would be able to operate your business from the site, then our resource management team can detail exactly what the property's zoning rules will and will not allow you to do.
  • If your plans for the property include completing major works then Cavell Leitch can provide specialist construction and development advice to steer you through the process.
  • If you are purchasing the property with others, then Cavell's business, trusts or relationship teams can help you put a framework in place from the outset which sets out each parties' rights and responsibilities.
  • If you are looking to take on key staff as part of the transaction, then our employment team can help you form those employment contracts.

We can utilise our network of other professionals to put you in touch with whatever additional advice you may need. This might include specific engineering advice, valuation guidance, or financing, insurance or property management assistance, etc.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

David Fitchett
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions