COVID-19, Self-isolation, and Property Settlements

COVID-19, Self-isolation, and Property Settlements

For the past two years, lawyers and real estate agents have been inserting bespoke ‘COVID Clauses’ into Agreements for Sale and Purchase. These clauses have provided vendors and purchasers with direction regarding how their settlement would be deferred, should there be any Government imposed restrictions on personal movement. The latest edition of the ADLS/REINZ Agreement for Sale and Purchase now includes a clause to this effect.

As New Zealand is now experiencing widespread community transmission of COVID, this has posed a new issue to be addressed: what will happen if, at the time of settlement, a vendor or purchaser is in self-isolation because either they, or someone in their household, has COVID, and they are required to self-isolate? The bespoke clauses that have been commonly used, and the standard clause now in the latest edition of the ADLS/REINZ Agreement for Sale and Purchase, do not cover self-isolation.

The wording of the relevant section 70 order, which was made by the Director-General of Health, is not clear in respect of self-isolation.  It states that a person must remain isolated at their “usual place of residence” – suggesting they cannot move whilst they are in self-isolation. Obviously, it may also be impractical in such a situation for either party to move residences. For example, a vendor may have sold their house in the South Island, have a moving truck and ferry booked to relocate to their new apartment in the North Island, but then contract COVID, and now have to isolate over the date that they are supposed to move.

What should they do?

Ideally, they would be able to defer settlement. However, the standard Agreement for Sale and Purchase does not provide this ability.

The Law Society has been liaising with the Department of Prime Minister and Cabinet (DPMC) and the Ministry of Justice on this issue. The DPMC has confirmed that currently there are no permissions or exemptions in the section 70 order to leave self-isolation in order to fulfil the obligations of a vendor or purchaser in an Agreement for Sale and Purchase.  The Ministry of Health is reviewing the orders, but apparently will not be able to remedy this matter in the short-term, given the priority of other matters at present.

This means that, for now, if you are required to self-isolate, there will be no right to defer settlement if you do not have a self-isolation clause drafted into your agreement. In that case, you will need to negotiate alternative accommodation arrangements with the other party, which may be difficult and stressful, as well as costly, at a time when you are self-isolating and moving properties.

At Taylor Shaw, we have been discussing this issue with our clients and advising about whether to include suitable bespoke self-isolation clauses in their agreements to cover them in the event of them being in self-isolation on the settlement date. If you have any questions about your upcoming settlement or would like to talk to us about COVID considerations when you are considering purchasing or selling a property, don’t hesitate to get in touch with a member of our team.