Pre-contract Building Inspection Report
What is a building inspection report?
The building inspection report is a written account of the condition of a property, ordinarily by a registered building practitioner. It should identify any significant building defects or problems.
There are usually always exclusions contained in the building inspection report and areas that the inspector has not been able to review, so it is important to read and understand the report and any limitations it contains. For example, reports will usually be based on visual inspections and do not usually extend to inspection of plumbing, gas, water, use of appliances etc. If there are defects or problems (minor or significant) identified in the report, you may be able to negotiate price and terms with the vendor prior to entering into a contract.
In the event that your contract includes a building condition and after the day of sale, the building inspection report identifies major structural defects, then you may be able to terminate the contract or re-negotiate terms with the vendor.
Post-contract Final Inspection
What is a final inspection?
A final inspection is a walkthrough of the property by the purchaser prior to settlement to ensure that the property is in the same condition as at the day that the contract was signed (except fair wear and tear). This is usually conducted with the real estate agent who sold the property. Although it is not compulsory to complete an inspection, it is a good idea to complete one as close as possible to settlement date to identify if any damage has been caused to the property (or the goods within the property) since the contract was signed. This is particularly crucial for long settlements. A standard contract of sale will usually include a condition that a final inspection can occur in the 7 days preceding settlement and ordinarily you would only be entitled to one inspection unless agreed otherwise.
Case Study
Our client, 'AB', obtained pre contract advice on a property she was interested in purchasing. We advised her of the importance of obtaining a building inspection report. The building inspection report did not identify any major issues and AB proceeded with the purchase. Three days prior to settlement, AB completed her final inspection and discovered that the floorboards throughout the property were significantly damaged. As it could be shown that the floorboards were not damaged at the ‘day of sale’ (the date that both parties had signed the contract) which was supported by the building inspection report, we were able to exercise AB’s rights under the contract. Our client did not want to end the contract and we were able to negotiate a compensation payment from the vendor at settlement to enable the purchaser to complete the works to the damaged floors. If the final inspection had not been completed, the damage would not have been noticed until after settlement which could have been a costly expense for AB.
Lessons learnt
- Thoroughly inspect the property prior to signing the contract and ensure that anything of concern is written in the contract to ensure it is rectified before settlement. You should ask your solicitor to prepare special conditions in the contract of sale to ensure they are legally binding and enforceable.
- Obtain a building inspection report. A building inspector will have the knowledge to identify issues or potential issues you may not be aware of.
- Complete your final inspection shortly before settlement to make sure any agreed work has been completed and that the property is in the same condition when you signed the contract.
Other types of Inspections
Below are other types of inspections worth considering when you are purchasing a property:
- Pest
- Plumbing
- Electrical
- Asbestos
If you are a purchaser and find yourself in a situation where the property you had purchased is not in the same condition as when you signed the contract or if you require advice before signing a contract, contact our Real Estate Lawyers on +61 3 9822 8588 or email us HERE.
