IN THIS ISSUE Toxicology and Methamphetamine Clauses in the REINZ and The Auckland District Law Society New Edition of the Standard Sale And Purchase Agreement
REINZ and The Auckland District Law Society Release New Edition Of Standard Sale And Purchase Agreement
From today the 6th of December 2019, real estate agents nationwide will be using an updated version of the standard sale and purchase agreement (tenth edition 2019) jointly released by the Auckland District Law Society and REINZ.
The purpose of this newsletter is to provide comprehensive commentary around the introduction of the toxicology condition clause (9.5), and new wording for vendor warranties (7.2) and the significance around the introduction of these clauses.
With nearly two years in gestation, the 10th edition of the agreement was released on 27th November – the first full revision since 2012. Barrister Tim Jones, chairman of the ADLS sub-committee driving the process, says the new document “brings the current industry standard form up to date and provides a better mechanism for the parties to work through an agreement.”
Some of the key changes to the agreement include:
Inclusion of toxicology condition
Changes to vendor warranties
Changes to the notice provisions
Changes to how tenancies are addressed including the introduction of a new tenancies schedule
Changes to vendor’s warranties and the associated revised schedules
A revised clause providing a more expansive and comprehensive mechanism for claims for compensation; and
Changes to the GST provisions, including significant amendments to better protect vendors.
These amendments should be explained comprehensively as part of an agents continuing professional development requirements within the workplace.
Toxicology Reporting Conditions and Vendor Disclosure Obligations In Depth
The toxicology condition applies to contamination resulting from both USE and MANUFACTURE of methamphetamine.
The tenth edition requires a potential purchaser to acknowledge whether or not a toxicology report is a condition of the agreement. This is to be included or excluded under the conditions of the contract on the first page.
The standard terms of the toxicology report are outlined under section 9.5 and read as follows:
9.5 Toxicology report conditions:
If the purchaser has indicated on the front page of this agreement that a toxicology report is required, this agreement is conditional upon the purchaser obtaining at the purchaser’s cost on or before the fifteenth working day after the date of this agreement, a toxicology report on the property that is satisfactory to the purchaser, on the basis of an objective assessment.
The purpose of the toxicology report shall be to detect whether the property has been contaminated by the preparation, manufacture or use of drugs including, but not limited to, methamphetamine.
The report must be prepared in good faith by a suitably‐qualified inspector using accepted principles and methods (and where the testing is in relation to methamphetamine, in accordance with the New Zealand Standard 8510:2017) and it must be in writing.
Subject to the rights of any tenants of the property, the vendor shall allow the inspector to inspect the property at all reasonable times upon reasonable notice for the purposes of carrying out the testing and preparation of the report.
The inspector may not carry out any invasive testing in the course of the inspection without the vendor’s prior written consent.
If the purchaser cancels this agreement for non‐fulfilment of this condition pursuant to subclause 9.10(5), the purchaser must provide the vendor immediately upon request with a copy of the inspectors report.
What is "a suitably qualified inspector?"
It is important to note that section 9.5(3) states “a suitably qualified inspector.” For NZS8510:2017 compliant methamphetamine testing a suitably qualified inspector is defined under Section 7 (See Figure 1 below).
This states that screening assessments must be conducted by an NZQA Certified Sampler. This means they must hold the NZQA unit standards 30892,30893 and 30894.
Many methamphetamine testers are still not NZS8510:2017 qualified
At this time, there are still many inspectors within the methamphetamine testing industry that continue to operate whilst failing to hold the required NZQA Certification.
PLEASE NOTE:This means that a potential purchaser will not have the grounds to cancel a sale and purchase agreement if the inspector does not hold the relevant qualifications and the report does not meet the requirements of NZS8510:2017 or the Agreement.
Therefore, employing a company that cannot meet the requirements of the New Zealand Standard is simply wasting a potential purchasers money.
Don't run the risk, only use qualified methamphetamine testers
Evidence may be requested by a vendors solicitor, should the potential purchaser attempt to terminate the agreement on the grounds that the property has failed a toxicology assessment. If the inspector hasn’t met the requirements of the conditions within the agreement, the potential purchaser may have no choice but to conduct another assessment that meets the conditions of the agreement, and the requirements within the Standard.
i.e. The purchaser uses an unqualified testing company. They then try to “back out” of the contract. The vendors solicitor then requires the purchaser to provide evidence (the samplers qualifications and a copy of the report) that the requirements of the contract have been met. If they have not, then the purchaser must simply employ another methamphetamine company, but this time, one that is qualified to do the testing and reporting that meets the requirements on the contract.
To put this simply, don’t waste your money, only employ qualified sampling companies to do meth testing.
In order to illustrate a similar circumstance; the following analogy could be applied: A potential purchaser attempts to terminate the contract on the grounds of “not being able to obtain finance.” The vendors solicitor has the right to then request evidence that reasonable steps have been taken to obtain finance in accordance with the conditions of the agreement. Without a lending institution involved, a letter from your “Auntie” saying she isn’t prepared to lend you money for finance would not suffice.
Of further worthwhile note is that the NZQA course has been available since December 2018 and can be completed by a methamphetamine sampler at any of the following registered providers:
(Please note this is not an exhaustive list, merely a place to start, there are others available with a simple Google search)
Pre and Post Decontamination Qualifications
NZS8510:2017 Page 2 Section 1.3 under Interpretation states "For the purposes of this standard, the word ‘shall’ refers to requirements that are essential for compliance with the standard, while the word ‘should’ refers to practices that are advised or recommended”.
7.2 outlines that Detailed Site Assessments and Post Decontamination Assessments “SHALL” be conducted by an IANZ Accredited Sampler as per Fig 2 below.
What Testing Methodologies are Compliant?
Some methamphetamine testing companies will offer cheaper methodologies that can often fail to comply with the New Zealand Standard. Meth Xpert NZ caution the employment of these services, as relying on the information can put an agent, inspector, or both in breach of contract, should they recommend a non-compliant service.
Some companies will employ what’s called a 5 x wipe “field composite”, this methodology was raised as a concern within the findings within the PMCSA report. To comply with the New Zealand Standards, and legally state that a property is free from contamination, all “High Use” areas must be tested. This field composite test option is, in our opinion, only acceptable where there are five or less “designated High Use Areas” within the property being tested.
Don't be in breach of Contract or the Fair Trading Act
NZS8510:2017 states the following:
Under the definitions section on page 3 it defines a High-Use Area as “ An area in a property that can be easily accessed and is regularly used by adults and children.”
Page 12, section 22.214.171.124 “A minimum of one sample shall be taken from every high-use area.”
Page 2 Section 1.3 (Interpretation) "For the purposes of this standard, the word ‘shall’ refers to requirements that are essential for compliance with the standard, while the word ‘should’ refers to practices that are advised or recommended.”
Page 16 Section 126.96.36.199 (b) “Any area separated from another area by a door shall be considered a separate area."
https://www.standards.govt.nz/faqs/nzs-85102017-q-and-as/ States the following: Is a garage or shed regarded as a ‘limited-use area’ that only needs to be decontaminated to a level of 3.8µg/100cm²? “No. A ‘limited-use area’ is defined in the standard as an area, such as a crawl space, accessed only by adults and for short periods of time. Limited-use areas have a higher allowable level of methamphetamine because they are difficult to access and unlikely to be accessed by children, so the likelihood of exposure is low. Garages, sheds, caravans and vehicles are ‘high-use areas’ for the purposes of decontamination.”
To be clear, using a testing company that does not test the whole property and tells you the property is “contamination free” after they have only tested 5 areas in a property that has more, is a breach of the Fair Trading Act 1986 (11), does not comply with NZS8510:2017 and cannot meet the requirements of the sale and purchase agreement.
The definition of a high-use area is clear
International Accreditation New Zealand (IANZ) have confirmed that it is necessary to sample “any area segregated by a door in order for an assessment to comply with NZS8510:2017."
IANZ advise the following: “The definition of a high-use area is clear including the statement that an area separated by a door should be considered to be a separate area. Therefore cupboards, wardrobes etc. should all be sampled.”
“IANZ accreditation is an attestation of the competence of an organisation. That is, they have demonstrated that they understand the standard and that they have the skills and judgement to perform the tasks in their scope of accreditation. IANZ cannot guarantee that every job is performed in accordance with the standard. However when a report carries the IANZ endorsement the named signatory is responsible for ensuring that the job has been completed in accordance with the standard and the requirements of accreditation.”
Sadly, many current meth testing companies do not currently meet the above requirements. Meth Xpert NZ recommend licenced agents and potential purchasers are careful what reports (whether Screening or Post Decontamination Assessments) are accepted when provided by vendors. At Meth Xpert NZ, we are happy to offer our expert advice on these if you have any concerns.
Instant Screening Devices
Instant screening devices need to be verified that they meet the requirements of Appendix B of NZS8510:2017. ESR (esr.cri.nz) are the only laboratory in New Zealand with the capacity to validate in field screening devices. Confirmation of validation or endorsement of screening assessment device in accordance with NZS8510:2017 can be confirmed at this link here.
Which Accreditation Is suitable for Clearance In Accordance with NZS8510:2017?
Only qualified samplers are able to provide sufficient evidence to issue clearance for a property. There is a misconception in the Real Estate Industry that if the samples taken from a property by an unqualified sampler are then analysed by an IANZ Accredited Laboratory, that is enough to satisfy that the testing has been conducted in accordance with the New Zealand Standard. This is simply not the case.
Unfortunately, the major laboratories commercially conducting methamphetamine wipe analysis, do not hold the IANZ Accreditation required for the collection of samples. This means they are unable to authorise anyone on their behalf to collect samples. Sadly, many meth testing companies feel that “flaunting” that they use an IANZ Accredited Laboratory is enough for them to comply with the New Zealand Standards (and subsequently the new S & P contract), which is simply not true.
Below (Figure 3) is a colour coded version of which assessments can be conducted in accordance with NZS8510:2017. The list has the current (at the time of this newsletters release) IANZ Accredited companies. Red is for sample analysis only, Orange is for sampling only and Green is for Sampling and Reporting to NZS8510:2017 only. This is taken from the IANZ Accredited Directory is available at: www.ianz.govt.nz/directory using the keyword: methamphetamine.
Agent and Vendor Disclosure Obligations
The new clause inserted at 7.2 of the ADSL and REINZ S & P Agreement outlines vendors disclosure obligations.
It reads as follows:
7.2 The vendor warrants and undertakes that at the date of this agreement the vendor has no knowledge or notice of any fact which might result in proceedings being instituted by or against the vendor or the purchaser in respect of the property.
Any previous unqualified testing conducted at the address may raise an issue.
Historical contamination within a dwelling marketed for sale
Where contamination is found within a dwelling that is being marketed for sale, or if the property has historically failed a screening assessment which did not follow the process of NZS851:2017, vendor disclosure obligations are being breached under 7.2 of the sale and purchase agreement.
This means that If a vendor is in receipt of a methamphetamine assessment report, (regardless of when it was conducted), the report must be disclosed to the agent when the listing agreement is signed. If the report does not meet the requirements of NZS8510:2017, and the agent or the vendor are not disclosing, there are significant penalties involved for both parties.
There are new penalties up to $100k that can be awarded against licenced real estate agents, licensees found guilty of unsatisfactory conduct and misconduct by the Disciplinary Tribunal.
Of great concern is that properties that have been subject to methamphetamine decontamination prior to this S & P version, may not meet the requirements of the New Zealand Standard.
A precautionary approach is advised for real estate agents
An IANZ Accredited Methamphetamine sampling company is required to complete the Post Decontamination Assessment. If an unqualified company conducted the testing and issued the report, the property DOES NOT meet the requirements of NZS8510:2017 and therefore DOES NOT meet the requirements of the S & P.
This information will need to be disclosed until the property can be confirmed as meeting the requirements of the Standard by further testing from an IANZ Accredited sampler.
A precautionary approach is advised for real estate agents here. Some examples where you are at risk are: historical methamphetamine assessment reports that may not meet the requirements of the New Zealand Standard; whether it be for non-compliant methodology; or where not all “high use areas” have been sampled; or an inspector did not hold suitable qualifications as outlined in section 7 NZS8510:2017.
Meth Xpert NZ would recommend that agent advice should be for potential purchasers to conduct updated assessments in accordance with the clauses outlined within the sale and purchase agreement to reduce their risk.
SO THE BIG QUESTION; DO PURCHASERS NEED TO TEST?
The International Journal of Environmental Research and Public Health recently released a peer reviewed report into contamination of properties by meth.
The report is critical and scathing towards the approach adopted by the New Zealand Government's use of the Gluckman report on Methamphetamine contamination (PMCSA Report).
The International Journals report raises some very valid concerns around the findings within the PMCSA report and the secrecy around the various information that they used in its development. The journal suggests there is the potential for a legal class action in the future.
With the potential for legal class action on the horizon, and the terms recommended within the Standard Sale and Purchase Agreement latest edition released by the ADLS and REINZ, Meth Xpert NZ questions whether agents are adequately protected, under the agent disclosure obligations recommended by the REA under the Consumer Guarantees Act.
Should you have any concerns with unqualified historical reporting or require a qualified meth test conducted, please contact us for our Xpert advice.