Building Inspection Reports

How they affect both the buyer and the seller of property.

John Gallagher from Argon Law discussed how Building Inspection Reports can affect both the buyer and the seller of a property. Contracts for the Sale of Land in Queensland include clauses that allow a buyer to terminate the contract if not satisfied with the results of any building or pest inspection report.

What constitutes a defect sufficient to terminate a property sale contract? How does the standard due diligence clause affect yo

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Many contracts for the sale of land in Queensland are subject to a condition which allows the buyer to terminate the contract if not satisfied with the contents of building and pest inspection reports about the property.

Whilst these clauses are a worthwhile means to encourage buyers, it is important that all parties understand their options when applying them so as to avoid unnecessary outcomes and complications.

Firstly, pay careful attention to the wording of the relevant clause.  In many cases the clause may require the buyer to act reasonably.  This means that the contract can’t be terminated on the basis of a few minor defects.

Exactly what constitutes a defect sufficient to justify termination will depend on the circumstances. A buyer who wants complete flexibility to terminate a contract for any reason should not rely on standard clauses but should instead negotiate to include an appropriately worded due diligence clause.

Standard clauses will generally also require that the builder who issues the report is appropriately licenced and a seller will usually be entitled to see copies of the reports if the buyer seeks to terminate.

Whilst there is no onus on a seller to agree to reduce the price or repair defects identified in a report, generally, the same attitude of compromise that brought the buyer and seller together to sign the contract, will also result in a negotiated outcome that allows a settlement to proceed.

Without losing sight of their legal rights, parties can have an open discussion.  Seller’s agents are usually very skilled at managing the process and assisting the parties to reach a common position.

So to summarise:

  • be mindful of the exact wording of the building inspection clause and if in doubt, consult your legal advisor;
  • when major defects are identified in a report, there is generally plenty of scope to negotiate an outcome acceptable to both sides, so take advantage of the skills and experience of the agent.

If you have any queries about this or any other aspect of contracts for the sale of land please contact us on 07 5443 9988 or[email protected].

Argon Law is a Sunshine Coast law firm based in Maroochydore.  We are commercial lawyers, business lawyers and property lawyers and are eager to assist you in any way we can.

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