How to Read a Sales & Purchase Agreement: What Every Property Investor Must Know

If you’re a first-time investor or even a seasoned buyer diving into off-the-plan properties, understanding your Sales & Purchase Agreement (S&P) is non-negotiable.

These contracts are often long, legalistic, and easy to skim over. But, buried within are key clauses that could make or break your investment outcome.

With the surge in off-the-plan purchases driven by tax incentives, flexible deposit structures, and long settlement lead times, it’s crucial to know exactly what you’re signing.

Let’s cut through the jargon and break down the key components you need to focus on, especially in the “Further Terms of Sale,” which is where the gold (or landmines) typically lie.

General vs. Further Terms: Where to Look First

Every S&P has two main sections:

• General Terms of Sale – standard terms defined by the Auckland District Law Society (ADLS).

• Further Terms of Sale – the customisable section where developers and their lawyers slip in clauses unique to the property or development.

  
  

While the General Terms are important, it’s the Further Terms that demand your attention.

Why? Because they govern your real-world risk, timelines, vendor rights, and variation allowances.

Let’s unpack the most important clauses, with a focus on off-the-plan investments.

1) Deposit Clause

The deposit clause specifies:

• How much is required to secure the property

• When it's payable

• How it's held (and by whom)
  

Typically, deposits are held in the vendor’s solicitor’s trust account until settlement.

In some cases, these funds sit in an interest-bearing account, and the agreement should specify who keeps that interest. Always confirm this, especially when locking up large sums of capital for extended periods.

2) Vendor Conditions

This clause outlines what the vendor must achieve to proceed with the sale. It protects the developer, not you.

If certain milestones aren’t hit, they can cancel the contract.

Typical vendor conditions include:

• Resource and building consents

• Minimum presales (to secure funding)

• Finance approval from their lender

• Title issuance from Land Information NZ (LINZ)

• Code Compliance Certificate (CCC) from council

You should view this section as a checklist of what could delay your settlement or kill the deal entirely. If any condition isn’t met, the contract may lapse, and your deposit could be returned… but your time is lost.

3) Sunset Clause

The Sunset Clause is perhaps the most well-known of the clauses in an off-plan contract. This clause sets a maximum time limit for the development to be completed.

If that date is exceeded, either party can walk away (depending on the way the contact is written).

Why it matters:

• There have been some instances of untrustworthy developers using this clause to their advantage in rising markets.

• In a softening market, you might want out if the project drags on.
  

Make sure you know:

• When the sunset date is

• Who can trigger it

• What happens if it’s triggered

For a deeper dive, check out our explainer: “Understanding Sunset Clauses.”

4) Variations Clause

The variations clause gives developers room to make minor changes during the construction process, without your approval.

Usually capped at around 5% of the property's value, these changes often relate to:

• Substitute materials (due to supply issues)

• Minor design tweaks

• Layout shifts due to compliance

  
  

If a change reduces the property's value by more than 5%, you can challenge it. This isn't something that's seen much, but the clause is ultimately there to keep the progress going and avoid stalled developments.

Tip: Variation clauses exist to help keep projects moving, not to trick buyers. Still, review this closely if you have specific requirements (e.g., floor plans or finishes).

It's important to understand key clauses to protect yourself during the investment process

5) On-Sell Restriction

Looking to flip before settlement? You need to read this clause.

Many developers insert an “On-Sell” restriction to prevent buyers from assigning their interest in the property before settlement, or within a set period after.

Common restrictions include:

• No on-sell until 3 months post-settlement

• No marketing the property under your name

• Written consent is required from the developer

  
  

These clauses exist to protect the brand and value of the development and prevent price volatility caused by speculative flipping.

6) Due Diligence Clause

Arguably, the most important clause for cautious investors, the Due Diligence (DD) clause, is your exit ramp.

This clause lets you:

• Lock in the property while you run the numbers

• Perform building inspections, financial analysis, and legal reviews

• Cancel the contract within the due diligence period for any reason

  
  

It's a brilliant tool in a hot or uncertain market, especially when you need time to assess:

• Rental yields

• Capital growth potential

• Developer reputation

• Title and LIM reports
  

Learn more in our companion article: “Benefits of a Due Diligence Clause.”

Final Thoughts

Off-the-plan contracts offer incredible benefits - from tax incentives to leveraged capital growth - but they come with fine print that matters.

If you’re not reading the S&P in full (especially the Further Terms), you’re taking unnecessary risk. Smart investors win not just by buying well, but by understanding the contract that underpins the deal.

If in doubt, get advice from a solicitor experienced in off-the-plan property, not just a general lawyer. It’s a small cost upfront for a huge layer of protection later.

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