Building and Pest Inspection Conditions in Victoria
A building and pest inspection can help you understand the condition of a property before you commit to buying it.
However, arranging an inspection and having a building and pest condition in the Contract of Sale are two different things. The inspection provides practical information about the property, while the wording of the contract determines what rights you may have if a problem is found.
What is a building and pest inspection condition?
When purchasing property by private sale you may be able to negotiate a condition making the contract subject to a satisfactory building inspection, pest inspection or both.
The condition must be included in the Contract of Sale before the contract becomes binding. It cannot simply be added afterwards without the vendor’s agreement.
The standard Victorian Contract of Sale contains separate general conditions for building and pest reports. These conditions only apply if the relevant boxes in the Particulars of Sale are selected.
The standard conditions may also be removed, amended or replaced by special conditions. It is therefore important to have the particular contract reviewed rather than assuming the standard wording applies.
What does the standard building condition cover?
Under the current standard building report condition a purchaser may be able to end the contract within 14 days from the day of sale if all the requirements of the condition are satisfied.
The purchaser must obtain a written report from one of the following:
a registered building surveyor
a registered building inspector
a registered domestic builder
an architect.
The report must be prepared in accordance with the Australian Standard specified in the contract. It must identify a current defect in a structure on the land and the person preparing the report must state that it is a major defect.
The purchaser must also give the vendor a copy of the report together with written notice ending the contract within the required time and must not be in default under the contract when the notice is given.
What does the standard pest condition cover?
The standard pest report condition also generally provides a 14-day period from the day of sale.
The purchaser must obtain a written report from a pest inspector which has been prepared in accordance with the relevant Australian Standard.
The report must disclose a current pest infestation on the land and designate it as a major infestation affecting the structure of a building on the land.
As with the building condition, the purchaser must provide the vendor with both the report and written notice ending the contract within the required time and must not be in default.
Not every defect allows the purchaser to end the contract
This is one of the most important points to understand.
The standard building condition does not allow a purchaser to end the contract merely because the report identifies defects, maintenance issues or future repair costs. The report must satisfy the particular requirements of the contractual condition.
A property inspection may identify issues such as:
cracked tiles or plaster
ageing appliances or fittings
leaking taps
deteriorated paintwork
minor moisture issues
general wear and tear
maintenance that may be required in the future.
These findings may still be important when deciding whether to purchase the property. However, they will not necessarily amount to a major defect or give the purchaser a right to end the contract.
Similarly, evidence of previous pest activity may not be enough under the standard pest condition. The report must identify the type of current major infestation required by the contract.
The inspector provides an opinion about the physical condition of the property. The legal effect of the report depends on the precise wording of the Contract of Sale.
Can the purchaser require the vendor to complete repairs?
A building or pest condition does not usually require the vendor to repair the property or reduce the purchase price.
If an inspection identifies a concern the purchaser may ask the vendor to:
repair the issue before settlement
obtain further specialist advice
agree to a reduction in the purchase price
make another negotiated arrangement.
However, the vendor is not automatically required to agree.
The standard inspection conditions generally provide a possible right to end the contract when their requirements are satisfied. They do not give the purchaser an automatic right to insist that the vendor complete particular repairs.
Any agreement to repair the property, alter the price or change another term of the sale should be recorded properly in writing.
What should you do if the report identifies a serious problem?
Send the complete written report to your conveyancer immediately.
Do not wait until the final day of the condition while you decide whether to proceed or attempt to negotiate with the vendor. Negotiations do not necessarily extend the contractual deadline.
Your conveyancer will need time to review:
the wording of the building or pest condition
the qualifications of the person who prepared the report
whether the report complies with the required Australian Standard
how the inspector has described the defect or infestation
the deadline for giving notice
whether you have complied with your other contractual obligations.
Depending on the report and the wording of the contract you may decide to proceed, seek further advice, request an extension, negotiate with the vendor or consider whether the contract can be ended.
Do not rely solely on the inspector, estate agent or another person to tell you that the report allows you to end the contract.
Choosing an inspector
Consider engaging an independent and appropriately registered or qualified inspector with suitable professional indemnity insurance.
Before booking the inspection, tell the inspector that the report is required for a Victorian property purchase and provide them with the relevant contractual wording.
Ask whether:
they hold the registration required by the contract
their report will comply with the required Australian Standard
all reasonably accessible areas will be inspected
a separate pest inspection is required
they can clearly identify and classify any major defects
further specialist inspections may be needed.
A general building inspection may not cover every possible issue. Depending on the property additional advice may be required from a structural engineer, electrician, plumber, asbestos professional, pool inspector or another specialist.
What happens when buying at auction?
If you are considering buying at auction arrange your building and pest inspections before you bid.
A successful auction purchase is generally unconditional. You usually cannot add a building or pest condition after the auction unless the vendor has already agreed to it.
The contract and Section 32 Vendor Statement should also be reviewed before auction day so that you understand the property information and the terms you will be accepting if you become the successful bidder.
You can read more in Buying Property at Auction in Victoria: Before You Bid.
Common mistakes to avoid
Common problems include:
assuming a building and pest condition applies automatically
failing to check whether the relevant boxes have been selected
using an inspector who does not meet the contract requirements
obtaining only a verbal summary rather than a written report
assuming every defect permits termination
failing to provide the complete report with the written notice
missing the contractual deadline
allowing negotiations to continue beyond the deadline without obtaining an extension
assuming the vendor must repair every issue identified
arranging an inspection after an auction rather than before bidding.
The consequences of ending a contract without a valid contractual right can be serious. Obtain advice before any notice is given.
How I can assist
I can review the Contract of Sale before you sign and explain whether the proposed building and pest conditions provide the protection you expect.
I can also check whether the standard conditions have been amended, help arrange appropriate wording where a different condition is required and advise you about the contractual process if an inspection identifies a significant concern.
If you are considering purchasing a property in Victoria please contact me early enough to allow the contract and proposed conditions to be properly reviewed.
This information is general in nature and does not constitute legal or building advice. Building and pest conditions differ between contracts, and the legal effect of an inspection report will depend on the wording of the Contract of Sale and the individual circumstances.