17 January 2017

Cairns Conveyancing and Property Law: Building Inspections – Importance of Contract Conditions

When purchasing a property, particularly in Cairns, it is important to have the conveyancing contract made subject to a building and pest inspection condition to ensure that as a buyer you are protected if there is something wrong with the property.

The Queensland standard conveyancing contracts, contain a building and pest inspection condition in favour of buyers.  It is important that the relevant section of the contract, stating the date which the condition is due, is completed to ensure that the condition is enlivened.

What are building and pest conditions?

The standard condition in Queensland conveyancing contracts allows the buyer to obtain inspections of the property by qualified building and pest inspectors and, if the reports are unsatisfactory, the buyer may terminate the contract.

Specifically the building and pest condition in the standard conveyance contracts provide that the contract is subject to the buyer obtaining a report from a building inspector and a pest inspector by the inspection date and on terms satisfactory to the buyer.

If the reports are not satisfactory to the buyer they may terminate the contract.  However, the buyer must act reasonably.

The inspections will identify any potential issues with the property, but the seller is under no obligation to fix all or any issues raised by the inspections.  If there are major problems, the buyer’s only recourse under the terms of the contract is to terminate or continue with the contract.

However, the inspection reports can be a basis to negotiate with the seller about rectifying any defects or reducing the purchase price.  Any negotiated changes to the contract must be agreed in writing.  Ideally, this should take place before the inspection date, otherwise the seller may terminate the contract.

Acting reasonably

The requirement to act ‘reasonably’ means that the buyer must have good reason for terminating the contract on the grounds of the building and pest inspection condition.  For example, if there is a handle missing on one of the kitchen cupboards but there are no other issues with the property, it would not be ‘reasonable’ for the buyer to terminate the contract.  On the other hand, it may be reasonable to terminate where a major defect in the property has been identified (for example significant termite damage) or if the property has a number of minor defects that would be costly to rectify.

What is considered reasonable depends on the particular circumstances in the conveyance.  The buyer will generally not be entitled to terminate the contract under the building and pest condition simply because the buyer is not happy about some minor defect.

Buyers in Cairns should be aware that due to Cairns’ tropical climate, risk of termite attack in properties is often listed as ‘high’ on pest reports.  This alone will not enable a buyer to terminate the contract.  There would need to be an actual infestation or significant damage to form a basis for termination of the contract.

Tips for building and pest inspections

  1. Ensure that you arrange your inspections early, so there is time to negotiate if there are any problems.
  2. Speak directly with the inspector (or attend with them at the inspection) so they can give you as much information as possible about the property and can answer any questions or concerns you may have on the spot.
  3. Keep your deadlines in mind and if necessary speak to your conveyancer about requesting an extension of the inspection date to facilitate negotiations if there are problems raised in the reports.
  4. Be realistic. In most cases you will not be buying a newly completed building, so it is reasonable to expect that there will be some minor repair or maintenance matters to attend to.

If you have any further questions or would like assistance with your conveyance in Cairns or anywhere in Queensland, contact our conveyancing team today.

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