What does it mean when a Contract is conditional upon obtaining a building or pest inspection?

Introduction

Quite often, purchasers will request that the Contract be made conditional upon completing a building and/or pest inspection. However, this does not simply allow the purchaser to obtain a report and then decide to terminate the Contract because they may no longer like the property or are suffering from buyer’s remorse. Therefore, it is crucial that both vendors and purchasers are aware of their respective rights under these special conditions.

What to look for in these special conditions?

Generally, the vendor and purchaser should both be aware of the following in relation to these conditions:

• How long does the purchaser have to complete the inspection and obtain the relevant report?
• Who is permitted to undertake the inspection?
• What must be included in the final reports after the inspection to enable a purchaser to terminate the Contract?
• How must the purchaser notify the vendor if they are purporting to terminate the Contract?
• How do these conditions operate for property sold at auction?

All of these points are critical to understand when entering into contracts that may be conditional upon the purchaser obtaining a building and/or pest inspection.

How long does the purchaser have to complete the inspections?

Commonly, the amount of time given to the purchaser to complete the inspections becomes a negotiation between parties. Ultimately, the purchaser should leave enough time to complete the inspections, however it is in the vendor’s best interest for the Contract to become unconditional as soon as possible after signing.

Who is permitted to undertake the relevant inspections?

Ordinarily, many special conditions concerning building and pest inspections will require the individual conducting the inspection to possess a requisite level of qualifications. For example, many building inspections must be completed by a registered building practitioner. You may be able to confirm the status of the builder’s registration by searching for them on the Victoria Building Authority website. It is important to note who is undertaking the inspections prior to paying someone to complete them.

What must be included in the final reports to permit the purchaser to terminate the Contract?

It is very important that you understand this aspect of any special condition concerning building and pest inspections. For example, a special condition may require the building to contain major structural defects before a purchaser can terminate the Contract. Purchasers should seek advice about whether a defect could be structural prior to attempting to exercise any rights under the Contract.

Therefore, even if the registered building practitioner lists defects within their final report, this may not automatically entitle a purchaser to terminate the Contract. Similarly, a pest report may require evidence of pest infestation before a purchaser can terminate the Contract. Ultimately, should a purchaser receive a report and not understand its content, it is crucial that they liaise both with the inspector and a qualified legal practitioner to assist with its interpretation.

What should a purchaser do if the report contains sufficient grounds to terminate the Contract?

Generally, should a building or pest report contain information which permits the purchaser to terminate the Contract, the purchaser should immediately consult with their legal practitioner to ensure the Contract is terminated correctly and in a timely manner. The Contract itself will generally specify the precise method required to terminate.

How do building and pest inspection special conditions operate if the property is sold at auction?

The short answer is they do not operate at all. Property sold at auction does not permit the contract to be conditional upon completing building and/or pest inspections after auction day. Therefore, should you be contemplating bidding at an auction, it would be prudent to organise these inspections prior to auction day.

How can Sharrock Pitman Legal assist?

As Accredited Property Law Specialists, Sharrock Pitman Legal can assist both vendors and purchasers in ensuring that their respective contractual rights are preserved. Should you be contemplating buying a property and require further advice regarding these clauses, please contact our Accredited Specialist in Property Law team on 1300 205 506 or alternatively fill in the contact form below.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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