Reinz Finance Clause

The REINZ (Real Estate Institute of New Zealand) finance clause is a critical component of most standard sale and purchase agreements for property in New Zealand. It protects buyers who need to secure a mortgage to finance their purchase, allowing them to withdraw from the agreement without penalty if they are unable to obtain satisfactory finance.

Essentially, the finance clause makes the agreement conditional upon the buyer obtaining finance. This condition typically includes a specified amount, from a specific lender or any lender, and on terms that are acceptable to the buyer. The clause also stipulates a deadline by which the buyer must confirm whether or not they have secured finance. This deadline is crucial, as it provides a timeframe for the buyer to actively pursue their mortgage application and allows the seller to move on if the condition isn’t met.

The wording of the REINZ finance clause is carefully drafted to provide a balance between protecting the buyer and providing certainty for the seller. The clause requires the buyer to take all reasonable steps to obtain finance. This means they must actively apply for a mortgage, provide necessary documentation to the lender, and generally cooperate with the lender throughout the application process. Simply choosing not to apply for finance is not a valid reason to invoke the clause.

Furthermore, the clause often includes a “satisfactory to the buyer” element regarding the terms of the finance. This means that the buyer has the right to decline finance if the terms offered by the lender are not suitable. However, this is not a carte blanche withdrawal option. The buyer must have genuinely considered the terms and found them unsatisfactory, not simply use it as a way to exit the agreement without a valid reason.

If the buyer is unable to obtain satisfactory finance by the deadline, they must notify the seller (or their lawyer) that the condition is not met. This notification typically needs to be in writing. Upon receiving this notification, the agreement is usually cancelled, and any deposit paid by the buyer is refunded. It’s important to note that the exact implications of invoking the finance clause can vary slightly depending on the specific wording used in the agreement and any special conditions added by the parties involved.

From the seller’s perspective, the finance clause introduces an element of uncertainty. The sale is not guaranteed until the finance condition is satisfied. Therefore, sellers often prefer shorter finance condition periods to minimize this uncertainty. They may also be wary of buyers who request unusually long finance condition periods or vague terms, as this could indicate a weaker financial position or a lack of serious intent.

In conclusion, the REINZ finance clause is a vital safeguard for property buyers in New Zealand, providing them with a conditional period to secure necessary funding. It also provides a framework for both buyers and sellers to navigate the complexities of securing a mortgage within the context of a property transaction. Understanding the nuances of this clause is essential for both parties to ensure a smooth and legally sound property transaction.