Building Inspection clause. Knowing the difference could save you $60,000 – $80,000
When purchasing a property buyers often make the offer subject to a structural building inspection. Understanding what the clause really means, can be the difference between faced to spend an additional $60,000-80,000 as illustrated below or paying nothing.
More likely than not, the agent use the standard “Australian Standard Pre-Purchase Structural Inspection Condition” available to REIWA members in WA.
This form covers “Structural Defects” which is defined as “a fault or deviation from the intended structural performance of a building element and is a major defect to the building structure of sufficient magnitude where rectification has to be carried out in order to avoid unsafe conditions, loss of utility, or further deterioration of the building structure”. In other words a Major Structural Defect.
There are also a number of exclusions including but not limited to general maintenance, plastering, non-structural damp issues, fretting, electrical, gas, plumbing and roof tiles to name a few. This means that a building inspection report can uncover items that still need to be fixed but not by the seller. This is because the seller has no obligation to repair or make good any of the defects identified in the report unless the defect is a Major Structural Defect.
BestWest Building Inspections recently came across such an incident in relation to roof tiling defects, which could prove costly to the purchaser. The following is an extract from their Facebook page (please note that Mavin Real Estate was not involved in this transaction).
“On this pre-purchase building inspection the buyer had signed up for a structural only building inspection clause. The extensive spalling on these roof tiles was so bad that replacement tiling will be necessary costing between $60,000 – $80,000. The 45 degree pitched roof will also require a large amount of scaffolding resulting in additional cost for the buyer.
Unfortunately roof tiles are not considered to be a structural component of the building and the buyer was unable to insist this was repaired.”
Though this is an unusual example, it is a reminder that a standard building inspection clause will not completely protect the buyer.
There are also other aspects that both parties needs to be aware of. For instance, the building inspection may also uncover that the property is not built to the Building Code or that a structure is not council approved. However, any of these findings will not have any impact on the Offer and Acceptance (the purchase contract) unless these are raised as a special condition. If not, the Buyer will not have any opportunity for compensation or the opportunity to cancel the contract.
Alternative options for the Buyer
If a Buyer wants to protect themselves further, the Buyer should consider a more comprehensive building inspection clause in their offer. The downside of that is that the Seller may not wish to accept such a condition as part of the offer and the Buyer may not get their offer accepted and as a consequence, they risk missing out on the property.
Another alternative, is to organise a building inspection prior to making an offer, in which case the Buyer has a complete picture of the condition of the property prior to making an offer.
As a Buyer, you may wish to engage with a Buyers Agent or consult with your Settlement Agent prior to making an offer to discuss your options.
Readers should always seek their own independent advice prior to making any decisions regarding property or finances.