A purchaser has signed an Agreement for Sale and Purchase with a finance condition that expires in 10 working days. On day 8, they discover they cannot obtain finance. What should they do?
Correct Answer
D) Promptly give the vendor written notice that finance cannot be obtained
An unfulfilled finance condition does not end the agreement by itself. Under the standard TLANZ/REINZ agreement the condition stays unfulfilled until notice of fulfilment, and once its date passes either party may cancel by notice. Telling the vendor promptly and in writing that finance cannot be obtained is good practice. It lets both parties plan, and they can agree to end the agreement early. No statute requires immediate notice, but acting promptly avoids disputes.
Why This Is the Correct Answer
Telling the vendor promptly in writing that finance cannot be obtained is the professional course. The agreement does not cancel itself, and written notice is how the parties end it.
Why the Other Options Are Wrong
Option A: Wait until day 10, when the condition automatically cancels the agreement
An unfulfilled condition does not cancel the agreement automatically. After the date, either party must cancel by written notice.
Option B: Proceed to settlement and try to arrange finance before the settlement date
Going unconditional without finance invites default. A purchaser who cannot settle risks losing the deposit and paying damages.
Option C: Ask for an extension, even though no lender will provide finance
An extension is pointless when no finance is available. It only delays the outcome for both parties.
Deep Analysis of This Sale Purchase Question
This is about good practice as well as law. Legally, a finance condition stays unfulfilled until notice of fulfilment, and after its date either party may cancel by notice. Nothing requires the purchaser to announce the failure the moment they learn of it. But prompt written notice lets the vendor go back to the market, avoids an argument that the purchaser did not try to get finance, and lets the parties agree to end the agreement early.
Background Knowledge for Sale Purchase
Under the standard TLANZ/REINZ agreement, the purchaser must take reasonable steps to satisfy a finance condition. If it is not fulfilled or waived by its date, either party may cancel by written notice. The agreement does not become void automatically, and letting the date pass is not in itself a breach.
Memory Technique
ASAP in writing: As Soon As Practicable, And in writing. Nothing happens automatically, so tell the vendor promptly and follow the notice procedure.
In a failed-condition question, reject answers that say the agreement ends automatically, and prefer prompt written notice.
Exam Tip for Sale Purchase
An unfulfilled condition never cancels itself. Choose the answer involving written notice, and treat 'promptly' as good practice rather than a statutory deadline.
Real World Application in Sale Purchase
Sarah signs an agreement to purchase a $650,000 home with a 10-working-day finance condition. On day 7, her bank declines her loan application due to a credit issue she wasn't aware of. Rather than hoping for a miracle or waiting until day 10, Sarah immediately emails the vendor's agent with written notice that she cannot obtain finance. This prompt notification allows the vendor to immediately re-market the property and protects Sarah from potential breach claims, as she demonstrated good faith by communicating as soon as she knew of the problem.
Common Mistakes to Avoid on Sale Purchase Questions
- •Thinking an unfulfilled condition cancels the agreement automatically
- •Believing verbal notice is enough
- •Thinking letting the date pass is itself a breach of contract
Related Topics & Key Terms
Key Terms:
More Sale Purchase Questions
A property is sold at auction for $850,000 with a 10% deposit required. The successful bidder has concerns about the LIM report after the auction. What is their legal position?
What is the primary purpose of a LIM (Land Information Memorandum) in the sale and purchase process?
What deposit is most commonly agreed in New Zealand residential sale and purchase agreements?
When does an Agreement for Sale and Purchase become unconditional?
In a property auction, when is the sale considered complete?
- → How is the settlement date set in a New Zealand residential sale and purchase?
- → What typically happens to the deposit when an unconditional sale and purchase agreement is signed?
- → During settlement, what document transfers legal ownership of the property from vendor to purchaser?
- → A property is passed in at auction for $800,000 with a reserve price of $850,000. The highest bidder approaches the vendor immediately after. Which statement is most accurate about the subsequent negotiation?
- → When does an Agreement for Sale and Purchase become unconditional if it contains a finance condition with a 10 working day timeframe?
- → What is the typical deposit amount required immediately after a successful auction bid in New Zealand?
- → Under the standard TLANZ/REINZ Agreement for Sale and Purchase, who is typically responsible for paying rates from the settlement date?
- → At an auction, the reserve is $800,000 but bidding stalls at $750,000. The vendor then negotiates with the highest bidder and they agree to sell at $780,000, signing on the auction terms with no conditions. What type of sale is this?
- → A purchaser has included a finance condition with a 10 working day deadline. On day 8, they receive loan pre-approval but final approval is pending. What should they do?
- → What happens if a purchaser fails to pay the deposit by the specified deadline in the Agreement for Sale and Purchase?
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A purchaser has included a finance condition with a 10 working day deadline. On day 8, they receive loan pre-approval but final approval is pending. What should they do?
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