Under the standard agreement for sale and purchase used in New Zealand, when does the risk of loss or damage to the property pass from vendor to purchaser?
Correct Answer
C) When possession is given and taken
The Property Law Act 2007 does not set when risk passes. The standard TLANZ/REINZ agreement for sale and purchase provides that the property and chattels remain at the vendor's risk until possession is given and taken, and deals with what happens if the property is damaged before then. Purchasers should arrange insurance to start from possession.
Why This Is the Correct Answer
The standard TLANZ/REINZ agreement for sale and purchase provides that the property and chattels stay at the vendor's risk until possession is given and taken. That is why purchasers arrange insurance from the possession date.
Why the Other Options Are Wrong
Option A: When the agreement for sale and purchase is signed
Signing creates the contract, but the standard form keeps the risk with the vendor until possession.
Option B: When the purchaser pays the deposit to the agent
Paying the deposit does not shift risk. The vendor still bears loss or damage until possession.
Option D: When the transfer is registered at LINZ
Registration usually follows settlement, but risk has already passed at possession under the standard form.
Deep Analysis of This Property Law Question
Risk allocation is a contract term. The standard form keeps risk with the vendor, who is in control of the property, until the purchaser takes possession, and it gives remedies if the property is damaged before that point.
Background Knowledge for Property Law
In New Zealand the widely used agreement for sale and purchase is the TLANZ/REINZ form (The Law Association was formerly ADLS). It keeps the property and chattels at the vendor's risk until possession, and includes provisions for destruction or damage before possession. Early possession before settlement moves the risk earlier, so insurance should be arranged accordingly.
Memory Technique
Remember 'PICK' - Possession Is Critical for Kiwis. In New Zealand property law, think of picking up the keys as picking up the risk. When you physically 'pick up' possession of the property (get the keys), you 'pick up' the risk too. The person holding the keys holds the risk.
When you see risk transfer questions, immediately think 'PICK' and look for the option mentioning possession or taking control of the property. Eliminate options about signing contracts, paying money, or completing settlement - focus on physical possession.
Exam Tip for Property Law
Answer risk questions from the standard agreement: risk stays with the vendor until possession is given and taken, not at signing, deposit or registration.
Real World Application in Property Law
Sarah buys a house with settlement in 30 days but gets possession after 14 days to start renovations. On day 20, a storm damages the roof. Even though settlement hasn't occurred and Sarah doesn't legally own the property yet, she bears the risk because she has possession. Sarah's insurance must cover the damage, not the vendor's. This demonstrates why agents must advise purchasers to arrange insurance from possession date, not settlement date.
Common Mistakes to Avoid on Property Law Questions
- •Assuming risk passes when the contract is signed
- •Confusing settlement date with possession date for risk purposes
- •Thinking legal title transfer determines when risk passes
Related Topics & Key Terms
Key Terms:
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Under the Land Transfer Act 2017, which of the following would NOT be registered or noted on a record of title?
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