Building and Pest inspection is a standard procedure that can sometimes have non-standard consequences. How should you negotiate if the inspection reveals defects and what are the scenarios for settling the contract?
Director of GM Law, Gerard Pagliaro shares his thoughts on this matter:
Just in case, it makes sense to discuss how the building and pest inspection process works.
The buyer typically bears the cost of the building and pest inspection in Queensland. This arrangement ensures the buyer’s independent assessment of the property without conflict of interest. But there are several scenarios when a seller also can carry out the Building And Pest Inspection:
If the buyer has already carried out an inspection, the seller is not obligated to compensate for its cost, unless this is provided for in the contract.
Example 1. Foundation problem:
The inspection revealed that the property’s foundation was significantly compromised due to subsidence, with visible cracks in the walls and uneven flooring. Repairs were estimated to cost over $50,000, making the property unsafe and not worth the investment. Using the standard “Building and Pest Condition” in the contract, the buyer terminated the agreement by presenting the inspection report within the stipulated timeframe.
Example 2. Active Termite Infestation:
In Cairns, a buyer discovered during a pest inspection that the property had an active termite infestation in the roof trusses and wooden flooring. The damage was extensive, requiring immediate treatment and structural repairs. The buyer determined that the cost of remediation would far exceed their budget and invoked the termination clause under the contract. The buyer provided the seller with the inspection report as evidence and terminated the purchase.
Example 3. Non-Compliance with Building Regulations:
A Gold Coast buyer’s inspection revealed that a rear deck extension on the property was not council-approved and did not comply with Queensland’s building regulations. The inspector highlighted that the extension posed safety risks, and the buyer would be liable for rectifying the issue post-settlement. Since the defect was not disclosed by the seller and constituted a major compliance breach, the buyer terminated the contract under the inspection clause, citing the substantial future costs and liability concerns.
If the damage does not result in the termination of the contract, here are some scenarios that the seller and buyer can follow:
In GM Law’s experience, often a building or pest inspector will raise issues in the report, which would give rise to a right to terminate by the buyer. In these circumstances, if GM law is acting for a buyer, they will bring to their client’s attention the option of either negotiating a price reduction or alternatively formalising an arrangement requiring the seller to attend repairs. Often a buyer will choose one of these options rather than terminate. The seller is of course under no obligation in most cases to agree to the buyers’ request, but often they will agree in order to prevent the contract from falling over.
If you need help to get a contract sorted so you can secure a property for your client, we have set up the GM Law agent hotline.
You can email us at AgentSupport@gmlaw.com.au to get urgent personalized support.
If you need help to get a contract sorted so you can secure a property for your client, we have set up the GM Law agent hotline.
You can email us at AgentSupport@gmlaw.com.au to get urgent personalized support.
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