BUYING A PROPERTY – PROPERTY INSPECTION
Buying a home is one of the most important decisions made in a lifetime. It is important that the transaction goes smoothly and creates the least stress for all involved as possible.
The standard REIQ Contract for the purchase of houses provides a special condition which buyers can elect to use which makes the purchase subject to a pre-purchase property inspection to establish whether there are any defects in the property. In some respects this is similar to a RACQ inspection on a car.
Notably, the clause used requires that the buyer notify the outcome of the inspection by 5.00pm on the specified day and states that if no notification is given that the buyer is not happy and wants to terminate the contract the buyer is deemed to be happy with the outcome of the inspection and must proceed to completion.
This can create difficulties in the event that the buyer is made aware of a number of issues that weren't obvious in their initial inspection and wishes to negotiate a price reduction or have the seller agree to do some work before settlement.
ALLOW ADEQUATE TIME
The time frame in which inspections are to be done and reported upon is generally very short and accordingly most buyers do not have the luxury of being able to negotiate these matters before the due date. This places them in the unenviable position of either terminating the contract and then attempting to renegotiate it on different terms ( and therefore risk losing the property) or being forced to accept the property as is.
Our advice to buyers is that they should allow adequate time to allow getting of the report and then several days to negotiate a variation of the contract if the report raises issues of concern. Without this, the options open to the buyer are limited.
NEGOTIATED VARIATION TO DO WORK
A further issue arises when a buyer has time and does in fact negotiate a variation to the contract requiring the seller to do certain works before settlement. Such a variation is to be carefully drafted to ensure that all possibilities are covered.
A simple clause requiring the seller to "fix up the carport roof" before settlement is doomed to result in dispute. There is no specification as to what work has to be done to meet the buyers requirements nor any agreement as to what the remedies are if that requirement has not been met by the settlement date.
Any agreement which requires the seller to do work before settlement must be very specific in the scope of works and also as to how a decision is made as to whether the work is done is, in fact, satisfactory.
A properly drafted variation should also specify that if the work is not done to the buyers satisfaction by the settlement date that an amount of money adequate to cover the cost of having the work done after settlement is retained in one of the solicitors trust account on settlement and if the seller doesn't attend to the work within a period of time after settlement (14 or 30 days) then the buyer may attend to the work and apply the retention monies to the cost of so doing.
Retention? It is also important to specify whether the amount of retention is the maximum extent of the sellers exposure to costs or whether it is simply security for the costs of rectification where the seller is obliged to meet the full costs regardless of how much.
When specifying a retention amount, external advice should be taken to ensure that adequate funds are covered as it is always difficult to take legal action to recover relatively small amounts of money from sellers after settlement of transactions and accordingly the only real prospect of covering potential costs of rectification works is by ensuring the retention is adequate in the first place.
Consult our team: Our experienced Conveyancers are familiar with the problems outlined above and will assist you should come across this requirement.
REMEMBER allow adequate time for a building inspection report and the negotiation of any cost variations so that you are not put in the untenable position of reluctantly accepting an unacceptable situation.
Jon McCarthy, Partner
McCarthy Durie Ryan Neil Solicitors
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