If you are planning to invest in commercial property in New Zealand, you will need to enter into a number of different contracts to complete the purchase. These contracts will protect you and your contracting party in case of a dispute, as contracts are legally binding. They will also outline all the terms of the transactions so that both parties understand their rights and obligations. This article will explain what contracts you need to invest in commercial property in New Zealand.
Elements of an Enforceable Contract
There are several elements to a legally binding contract.
| Question | Explanation |
| Is there a valid offer? | A contract must have a valid offer from one party to another. This offer must be meant for the person being asked to contract with and contain the relevant terms they are asking them to contract on. |
| Was there sufficient acceptance? | The person receiving the offer must send back an acceptance if they are willing to enter into a contract. This acceptance must be sent the way prescribed in the offer. If it was sent in a different way, the offer may not be valid. The acceptance must also be sent before the expiry date of the offer. |
| Was consideration given? | Both parties to a contract must receive a benefit. If there is no benefit, the contract is not valid. Consideration must also be sufficient in value to the exchange. |
| Did the parties intend for the contract to be binding? | The parties must also intend for the contract to be binding. If either party genuinely believes that they are not entering into a binding contract, the contract will not be enforceable. This can be a contentious issue for contracts and is often the source of many disputes. |
| Were the terms of the contract certain and unambiguous? | The terms specified in the contract cannot cause confusion or be interpreted in more than one way. This is so that both parties are clear as to the effect of the contract. Judges can sometimes drop clauses that are ambiguous. |
What Contracts Do I Need to Invest in Commercial Property?
- Offer to purchase: The first contract you will need to enter into is an offer to purchase the commercial property. This contract will outline the key terms of the sale, including the purchase price, the closing date, and any contingencies that either the buyer or seller needs to satisfy before the sale is complete.
- Sale and purchase agreement: Once the seller has accepted your offer to purchase, you must enter into a sale and purchase agreement. The sale and purchase agreement will set out the detailed terms of the sale. These include the property description, any warranties or representations made by the seller, and the buyer and seller’s obligations.
- Financing agreement: If you are financing the purchase of the commercial property with a mortgage or other loan, you will need to enter into a financing agreement with the lender. This contract will set out the loan terms, including the interest rate, the repayment schedule, and any collateral to secure the loan. You should register this agreement on the personal property securities register, to perfect the security interest.
- Lease agreement: If you are purchasing a commercial property that a tenant is already leasing, you will need to enter into a lease agreement with the tenant. A lease agreement will set out the lease terms, including the rental amount, the length of the lease, and any restrictions on the use of the property.
To protect your business, ensure supplier contracts meet your business’ needs. Our free Commercial Contracts Checklist will help.
Key Takeaways
Investing in commercial property in New Zealand will require you to enter into several different contracts, including an offer to purchase, a sale and purchase agreement, a financing agreement, and a lease agreement. It is important to carefully review and understand the terms of these contracts to ensure that your investment is successful.
If you need help with your commercial contracts, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Consideration is an element of a binding contract. It is where both parties receive a benefit under the contract.
You will enter various contracts when purchasing a commercial property as an investment. This includes the offer to purchase the property, the sale and purchase agreement and the financing agreement. If you are purchasing a commercial property that is already leased to a tenant, you will also need to enter into a lease agreement with the tenant.
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