Caveat Emptor - Vendor Warranties

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06 December 2013

posted in Leaky | Building | Property Law | Contract Law

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In a recent High Court judgment on appeal from the Weathertight Homes Tribunal, Saffioti v Ward [2013] NZHC 2831, Asher J has clarified the law in relation to vendor warranties.

Under an earlier edition of the of the ADLS agreement for sale and purchase (the Seventh Edition – at clause 6.5) the vendor warrants (inter alia) that as at the possession date, where the vendor has had any building works carried out which required a permit or building consent, a permit or consent was obtained, the works were completed in compliance with that permit or consent, a code compliance certificate was issued (where appropriate), and all obligations under the Building Act 1991 were fully complied with.

In Saffioti v Ward it was held that a vendor warranting compliance with the Building Act 1991 (now repealed) does not (necessarily) warrant compliance with the Building Code.

Similarly, it was held that a vendor warranting that the building works were completed in accordance with the permit or consent, warrants compliance with the plans and specifications attached to the consent, and all relevant conditions and endorsements. He/she does not warrant that the building works comply with the Building Code.

This is good news for vendors sued for breach of vendor warranties in leaky building litigation under the Seventh Edition agreement for sale and purchase (the Fifth and Sixth Editions include similar warranties), where a claim may be made against them some years after the relevant sale.

The current edition of the ADLS agreement for sale and purchase (the Ninth Edition (2)) does not warrant that the vendor has complied with all obligations under the Building Act 1991 and therefore this is unlikely to be a live issue for current property sales, however it is relevant in as far as there remains a warranty that the building works complied with the permit or consent (and the current version qualifies this as being to [the best of] the vendor’s knowledge).

There is no implied term of merchantable quality for residential houses in New Zealand or fitness for any particular purpose, and the principle of caveat emptor continues to apply to contracts for the sale and purchase of land.

For more information, contact Melisa Beight, Senior Solicitor.

POSTED BY
06 December 2013

posted in LeakyBuildingProperty LawContract Law

VIEWED 7033 TIMES

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