Why Solicitor’s Approval Clauses are Essentially Useless

We gave someone on the Property Talk forums a hand the other day with clauses for an agreement for sale and purchase.  They had done the usual trick of people unwilling to spend money on lawyers (and unaware that most lawyers will throw in pre-agreement work on conditions for the same price as the conveyancing) and cobbled together their own “due diligence” clauses from advice from other people, and they weren’t that bad….albeit in need of some additions and cleaning them up to make consistent logical sense.

However, one of their conditions was solicitors approval.  A lot of people use this, or just like the sound of it, and have a vague idea that it is a catch-all that allows them to get out if their solicitor points out a clause that they (the lawyer and/or the purchaser) don’t like.

Unfortunately, solicitors approval clauses are limited in case law to mean approval of strict LEGAL aspects of the purchase, typically title to the property.  Now, this is all very well if the title includes encumbrances and land covenants, but it is entirely useless if the title is clean as a whistle, as plenty of them are.  There is nothing for the solicitor to object to.  They will be left scrambling to find something in the terms and conditions that could be characterised as legal, or argue perhaps that a defect in the building (for example, something that has triggered a demolition order from Council) is so serious that it amounts to a defect in title.  This will take them plenty of legal time and effort, and cost you money.  Far better to avoid this in the first place.

What clients usually want is the right to back out of the deal if , for whatever reason at all, they decide they don’t want to purchase.  For that you need a robust clause allowing you to investigate all aspects of the property and making your purchase conditional on your entire satisfaction and at your entire discretion, and providing that you don’t have to give any reasons for your decision.

Even that is not entirely risk free if, for example, you want to cancel not because there is any problem, but because you found a better home down the next street.  The chances of a vendor trying to pull you into court to force you to complete your purchase are vanishingly slim……but if they did, you would be required to front up with reasons relating to the actual property in question.

It would be astonishing if any vendor actually took the chance to sue where there was a “robust” due diligence clause (unless the purchaser was foolishly indiscreet about their “reasons”), but case law has plenty of examples of vendors suing over “solicitor’s approval” clauses.

There is nothing a solicitors approval clause does that is not already covered by a well-written due diligence clause.  Resist the urge to use “solicitor’s approval” or, if you must, pair them with other conditions.  Even better, see your lawyer first…before you put the agreement for sale and purchase together with the agent.


About Ivan McIntosh

I am a partner of Carter Atmore Law...residing in City Road just off the busy thoroughfare of Symonds Street, Auckland, New Zealand....where we are specialist business & property development lawyers, working for both local and international clients. Proud husband to Joanna, and dad to two sons. Passionate rugby supporter. Email: imcintosh@calaw.co.nz Ph: 64 9 921 5026
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One Response to Why Solicitor’s Approval Clauses are Essentially Useless

  1. Pingback: How to get out of an Off-The-Plans Contract – if you are quick enough | The Pitt Street Lawyer

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