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Aug 10, 2021

"I HAVE DOUBTS ABOUT THIS PROPERTY"

Often, we receive phone calls that go something like: "We've found a house but we don't know if: a crack in a wall/the watermarks on the ceiling/the bouncy floor/etc/etc are a problem"

The first point is to reiterate the comments in our previous blogs of Aug 4, 2021, "Whoever owns the property owns the problem" and July 26 "Get your contract right, before you sign it" and we urge you to read both, as they are both extremely relevant to precisely this situation.

But the second point to make is to treat most building inspection clauses on contracts with suspicion, because overwhelmingly, they only give buyers any rights to either terminate the contract or insist sellers fix problems, if the building report identifies STRUCTURAL defects.

On the face of it, that sounds fair enough. Lets face it, no one wants to buy a propery with structural defects. But nor does anyone want to buy a property with significant defects that whilst they might not be structural, are certainly not good, are difficult to live with, and more to the point, are expensive to fix.

Certainly, had the buyer known about them before they signed the contract, they would almost certainly have either insisted the defect be fixed before settlement, offered a lower purchase price, or NOT BOUGHT the property at all.

And here's the rub, we experience people in this exact situation every week or two, whereas we only ever see structural defects every couple of years. In fact in over 11,000 settlements in the past 14 years, we've only seen 9 properties with structural defects. Less than one in a thousand!

So what should a buyer do?

Our advice to buyers on the odd occasion (subtle hint) we speak with them before they have signed a contract, is to get their building inspection report done first, before they sign the contract. Then they don't have a contract to get out of, if there are problems with the house.

However the problem with that approach is buyers risk the house being sold to someone else before they get their building report done. And the real estate agent will often have created urgency by telling the prospective buyer there are several others also interested in the property. (Don't be too hard on them, their job is to sell the property, after all!)

So here are three solutions:

  1. Take a builder or building tradesman with you when you re-inspect the property, who may either lessen or heighten your concerns, from which you can proceed to buy the property or alternatively, to find a different property, if you don't want the problems with the property to become your's after settlement.
  2. Include a clause that gives the buyer a week or so to get a building report "to their satisfaction." The advantage of this is that the seller can't sell the property to someone else whilst you go through your due diligence process with a builder. It may be that you simply include the standard REIWA Due Diligence clause into the contract. The advantage of this course for sellers and buyers alike, is that it greatly shortens the process, as long as the time periods are kept to a week or two.
  3. Include a building inspection clause that gives the buyer rights if the property has significant defects as well as structural defects. You'll need to get this drafted by a lawyer or settlement agent as no real estate agent we've ever encountered has one they can use.

We can certainly help you with appropriate clauses for 2 & 3 above.

But the critical point here is any problems with a property become YOUR PROBLEM after settlement, so do what you can to avoid that.

Even in very bouyant property markets, there are always other properties for sale, even if they are not as perfect as the house that has grabbed your heart. The nice heart-grabbing things about the house will all be forgotten if there are significant problems with the house that you just accepted.

Remember, whoever owns the property, owns the problem.

 

DISCLAIMER: Neither Goldfields Settlements, nor any of its staff are lawyers, so none of the above should be construed as legal advice. Readers are advised to seek their own independent legal advice on these or any other matters involving property dealings, preferably before entering into them.


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