A binding sale and purchase agreement that contains conditions the buyer must satisfy or waive before the deal is final, for example finance approval, LIM, or a building inspection.
A conditional offer is a sale and purchase agreement that has one or more conditions a buyer must satisfy or waive before the contract is binding on both sides. Common conditions include finance approval, a satisfactory LIM, a satisfactory building inspection, due diligence, and OIO consent for overseas buyers.
Plain-English example
You sign an offer on a Pakuranga family home for NZD 850,000. The agreement contains three conditions. Finance, due in 10 working days. LIM, due in 15 working days. Building inspection, due in 10 working days. The agreement is signed by both parties so it is binding, but each side has the right to walk away if a condition is not satisfied. On day 11 your bank declines the loan. You serve a finance condition non-satisfaction notice and the agreement falls away cleanly. Your deposit is returned.
Why it matters
A conditional offer is the buyer’s chance to do due diligence after signing while still having a way out. It is also a real commitment. Once you sign, the property is off the market for the period of the conditions, and the seller is locked in. Misuse of conditions to bid on multiple properties at once can land a buyer in legal trouble.
The wording of each condition is critical. A finance condition that says “finance to the satisfaction of the buyer” gives the buyer a wide margin. A finance condition that says “finance from a registered NZ bank on commercially reasonable terms” gives the buyer much less wriggle room. Similarly, a LIM condition that says “satisfactory in the buyer’s sole discretion” is much more buyer-friendly than one that says “no material adverse matters disclosed”.
Who needs to care
Every NZ residential buyer making a private treaty or negotiated offer should consider a conditional structure. Cash buyers who do not need finance still benefit from a LIM or building inspection condition. Auction buyers cannot bid conditionally, which is why pre-auction due diligence is critical for auction property.
Sellers should look at conditions carefully too. A buyer with a long list of poorly-defined conditions is more risk than a buyer with a clean unconditional offer at the same price.
What NZ Legal does for it
We draft conditions to fit the buyer’s actual due diligence needs and risk tolerance. We turn around conditions notices fast. Once the bank declines or the LIM throws up a red flag, the buyer often only has hours to act before the deadline. We also advise sellers on accepting or counter-offering when a conditional offer comes in. Send us the draft offer and we will run through it with you the same day.
Related glossary terms
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Sale and Purchase Agreement
The contract between a buyer and seller for a NZ property. Almost always uses the ADLS or REINZ standard form, customised with conditions and special clauses.
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Deposit
The first payment a buyer makes to commit to a property purchase, usually 10 percent of the purchase price, paid on the contract going unconditional.
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Settlement
The day a property purchase legally completes. The buyer's lawyer pays the balance of the purchase price, the seller's lawyer hands over the keys, and ownership transfers in Landonline.
