Connect with Us

Agile. Innovative.
Empowered Choices

Insights

Limitations of Pre-Purchase Inspection Reports

Limitations of Pre-Purchase Inspection Report

A recent VCAT decision[1] highlights the significant limitations and implications of purchasing a property based on the findings of a pre-purchase inspection report.

The Facts

  1. 1.      The property was a 100-year-old timber house;
  2. 2.      Prior to the property being purchased and at the time of sale, the property was tenanted and heavily furnished;
  3. 3.      The applicant engaged a registered builder to carry out an inspection of the property and prepare a pre-purchase inspection report;
  4. 4.      A pre-purchase inspection was undertaken prior to the applicant signing a Contract of Sale, at a cost of $500.00;
  5. 5.      The pre-purchase report was provided by the registered builder to the applicant and the applicant proceeded with the purchase of the property for $172,000.00;
  6. 6.      Settlement was completed in September 2014; and
  7. 7.      After completion, termites were found on the Property and the applicant sought expert advice by another builder who concluded that the property was only fit for demolition, not repair.

The Applicant Purchaser’s Position

The applicant sought to claim loss and damages of $344,528.00 from the respondent registered builder for misleading and deceptive conduct, being the costs for demolition of the property and re-construction. The applicant relied on the following:

  1. 1.      The pre-purchase report provided by the respondent was misleading and failed to disclose termites and other major structural issues;
  2. 2.      The respondent’s website was misleading and the registered builder was personally liable of the misleading statements on the website;
  3. 3.      The inspection done was not carried out with due care and skill, in accordance with s60 of the Australian Consumer Law.

The Website

The respondent’s website contended:

  1. 1.      To “Roadworthy the property before you buy it”;
  2. 2.      The use of high-level technology to access restricted areas of a property;
  3. 3.      Conducting high quality inspections;
  4. 4.      Producing quality pre-purchase reports; and
  5. 5.      Being better than their competitors.

The Report

The pre-purchase report provided by the respondent to the applicant stated that the inspection carried out was a visual inspection only due to limited accessibility to the perimeters of the rooms and the entire premise due to it being tenanted and heavily furnished.

Decision

The Tribunal found that:

1.      The respondent’s website was misleading and deceptive in contravention of s 18 of the Australian Consumer Law but that a reasonable person would not have relied on the website in acquiring a property;

2.      The respondent’s report was not misleading or deceptive as the scope of the report was limited; and

3.      The applicant had not taken reasonable measures prior to purchasing the property.

The applicant was awarded compensation for the cost of the pre-purchase report ($500.00). The Tribunal did not award any damages in relation to demolition and construction costs for the property.

The take out message from this case is that purchasers should do their own due diligence and make their own enquiries prior to entering into a Contract of Sale. They should be aware of the disclaimers set out in these reports and accept the limitations.

The property team at Burke & Associates is well equipped to assist in pre-contractual reviews and advice and assist in the due diligence process.

Please contact our Property & Development Team

[1] Garrett V Elim House Pty Ltd (Building and Property) {2018} VCAT 1862

Contacts

Kristy Muhlhan

Principal

Kristy Muhlhan

Principal
LL.B (Hons) GRAD DIP. L.P., GAICD.
Since 2014, she has been an owner and Principal of the firm and has mastered a broad range of essential commercial and business skills which go hand in hand with the work she does for...

Stewart Davis

Associate

Stewart Davis

Associate
LL.B (Hons) B.Com
As well as property law, Stewart has had exposure to VCAT administration matters and commercial law, particularly servicing developer clients.

George Hanger

Associate

George Hanger

Associate
LL.B BA
George was admitted to legal practice in May 2015 after completing a Bachelor of Arts at the University of Melbourne and a Bachelor of Laws at Monash University.

Emma Dickens

Paralegal

Emma Dickens

Paralegal
Emma previously completed a Bachelor of Legal and Dispute studies at RMIT University in 2015.

Request Burke & Associates Lawyers' News