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Thinking of on-selling your property?

By Eesha Karamchandani - 31 Jul 2021

If you are a property trader in the business of buying and selling properties (or aspiring to be a property trader), or if you've bought a property and your circumstances have changed, then there are a number of things you can do to lower your risks.

Be aware of your tax liabilites

Whether you are a property trader or a one-off on-seller, your on-sale of residential land will be caught by the Bright Line rule and you will be liable to pay tax on any capital gains.

Even if the property you are selling is not residential land, you are likely to have a tax liability for a sale of property if you have purchased the property with the intention of on-selling. Sales by property traders will most certainly be caught. First time on-sellers will not necessarily be able to hide from this rule either.

Agreement for sale and purchase

An on-sale agreement may appear simple but looks can be deceiving. For starters it should take into account all the terms in your purchase agreement as you cannot promise anything that is not yet under your control.

Vacant possession

Problems can arise if the property is tenanted and your vendor does not give adequate notice to the tenant to vacate by the settlement date (if the property is being on-sold vacant). You will be in default if you are unable to give vacant possession on the settlement day so you should require your vendor to provide you will a copy of the notice of termination served on the tenant.

Contemporaneous settlement

In most cases, you will want the settlement of your purchase and sale of the property to occur contemporaneously. You may wish to have further terms included in your on-sale agreement whereby you are only required to transfer title to your purchaser upon title being transferred to you by your vendor. You can also be at the mercy of your purchaser as you require their funds to pass on to your vendor.

Pre-settlement inspection

The widely used Auckland District Law Society (ADLS) agreement for sale and purchase form gives a purchaser the right to inspect the property prior to settlement (provided it is not tenanted). If you have already inspected the property, your vendor may not be willing to arrange another inspection, in which case your purchaser may not be able to inspect the property. To avoid last minute disputes and settlement fund retentions, you may want the agreement to be tailored to suit your circumstances.


If the agreement is prepared on the ADLS form then some of the standard warranties should be varied or excluded, particularly since you have not had possession of the property and may not be fully aware of matters that need to be disclosed to a purchaser under those warranties. You should ask:

  • are there any outstanding requirements or notices relating to the property?
  • are all the chattels working?
  • do you have any knowledge or notice of any fact which may result in proceedings against the purchaser in respect of the property?
  • are there any unauthorised works for which consents have not been obtained?

You must do your due diligence on the property, including making enquiries with the vendor in relation to the warranties and reviewing the LIM and the property file.

If the property is a unit title then there are additional warranties in the ADLS form that you should review, and it might mean making further enquiries with the body corporate before you agree to give those warranties.

Importance of seeking advice

As with most legal matters, it is best to get legal advice earlier in the process, and most certainly before you sign the agreement to on-sell the property.

If you are looking to on-sell your property and wish to discuss such matters, our property team experts with extensive experience are here to help.


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