It is crucial that time frames suit both the seller and the buyer in property transactions.
When drafting an Agreement where confirmation of a condition, or the settlement date, falls due over the Christmas and New Year break, you need to be aware that a number of days during that period are not deemed to be "working days".
Under the ADLS Agreement, the days from 24 December to 5 January (inclusive) are not working days (Christmas shut down period).
>Calculating working days for confirmation and settlement dates
Confirmation and settlement calculations are treated differently under ADLS Agreement:
- If a confirmation would have otherwise fallen due during the Christmas shut down period, it will become due on the next working day after 5 January (i.e. Monday 6 January).
- If a settlement date falls due during the Christmas shut down period then it will fall due on the last working day before the nominated date (i.e. Monday 23 December 2024).
The reason behind this provision is that the vast majority of law firms (and other businesses) are closed between these dates or operate with a skeleton staff. The agreement recognises this and formalises the practice of law firms extending confirmation dates to the next available date after the Christmas holiday period.
>Time frames for Land Information Memorandums (LIMs)
In the lead up to Christmas, it may not be as simple as circling the LIM condition on the front page of the agreement – you need to consider timing of any further terms carefully.
The ADLS Agreement extends the Christmas shut down period to 15 January in relation to satisfaction of LIM condition dates. This change was made to take into account Council shut down periods and to bring it in line with Local Council legislation and what is defined as a 'working day' for Territorial Authorities.
You also need to be aware that some Councils also have their own cut off time frames if you order a LIM in December. These vary from Council to Council depending on workloads. You may need to contact the Council to see what time periods they will be processing LIMs as this can differ from what you may expect.
To avoid delays in the confirmation of a LIM condition, we would suggest either putting extra thought into the time frame provided in the general terms of sale or including a LIM condition into the further terms of sale with a specific confirmation date rather than a number of working days from the date of the Agreement.
>Other important things to consider
Most law firms will have an extended shutdown period or may be working with skeleton staff over the holiday period. In practical terms it may be worth checking both parties' lawyers' regarding shutdown periods, their availability or who their alternative contact is if they are away.
You also need to be conscious that other businesses (such as insurance brokers, valuers, accountants, mortgage brokers etc) may also have an extended shutdown period or be operating with skeleton staff. This may also impact on satisfying other conditions.
Withdrawing Kiwisaver Funds
Remember that if a buyer is withdrawing their KiwiSaver funds, some providers require up to 15 working days between application and settlement date.
Unit Title Properties
For the sale of a unit title property, the seller's lawyer must provide a pre-settlement disclosure statement to the buyer at least 5 working days prior to settlement. This may in fact be prior to the shutdown period where settlement is in the New Year. The ramifications for not providing a pre-settlement disclosure statement on time can be significant (a purchaser may cancel the Agreement if disclosure isn't provided on time). At the very least, it can delay settlement. You will need to ensure there is adequate time for this disclosure to happen.
If you can get the timing right for property transactions, it can save you, your sellers and buyers a lot of unnecessary stress, avoid costly mistakes, and ultimately keep your clients happy.