Building Inspection Reports - How they affect both the buyer and the seller of property

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

Whilst these clauses are a worthwhile means to encourage buyers, it's important all parties understand their options when applying them, so as to avoid unnecessary outcomes and complications. I'm Building inspection specialists, and I would like to make a couple important points about these clauses.

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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 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.

But a buyer who wants complete flexibility to terminate a contract for any reason should not rely on standard clauses but instead negotiate to include an appropriately worded due diligence clause.

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

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

Without losing side on the legal rights, parties can have open discussion. Seller’s agents are usually very skilled at managing a process and assisting parties to reach a common position. So, to summarize, be mindful of the exact wording of the building inspection clause, and if in doubt, consult a legal advisor.

And, when major defects are identified in the building inspection report, there's 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, Building inspection specialists had happily answer them. And if you found this info useful, then have a look at our website.

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