If you’re buying an older property it makes sense to ensure it’s structurally sound before committing to the purchase. The most common way to obtain this assurance is to make your offer subject to a structural inspection. Because it’s so common, most agents make use of a ‘standard’ structural inspection condition that’s attached to the contract as an annexure.
Many REIWA agents use the ‘standard’ REIWA condition called Australian standard pre-purchase structural inspection. As of June 2018 the most recent version is dated 2012.
We believe the condition has a significant loophole that could see you being forced to buy a house that’s structurally unsound!
Clause 2 of the condition states as follows:
“If the Buyer and Seller do not receive the Report before the Date then the Buyer will be deemed to have waived the benefit of this condition. Time is of the essence.”
The legal danger isn’t in what’s said but in what’s unsaid.
You see, there is no requirement in the condition for the seller to provide the buyer and/or the buyer’s building inspector with access to the property for the purposes of completing the inspection.
In other words, the seller is quite within their rights to deny the buyer and their inspector access to the property.
If the building inspector (the Contractor) can’t access the property they can’t complete the inspection. And, if they can’t complete the inspection, they can’t provide the inspection report to the Buyer and Seller prior to the due date as required by clause 2. As a result, the Buyer will be deemed to have waived the benefit of the condition. The buyer could then be forced to settle on a property that may contain one or more structural defects.
Granted the condition has been in use for some time. And we’re yet to hear of an instance where a seller has taken advantage of the loophole.
That doesn’t mean that it can’t or won’t happen!
According to Les Buchbinder Director at Perth law firm Bowen Buchbinder Vilensky the clause contains a defect that could be used by an unscrupulous seller to force a buyer into settling on a structurally defective property.
“The condition should include a right for the Buyer and their Contractor to enter onto the premises at a reasonable time and on reasonable advance notice to the Seller for the purpose of structural inspection”, he said. “Without this right the Buyer could have a problem. Alternatively, the condition could provide that if the Seller unreasonably refuses the Buyer the right of entry to inspect the property this gives the right to the Buyer to terminate the contract without penalty.”
On further research the 2012 REIWA Timber pest pre-purchase inspection clause has a similar problem.
The message here is clear.
REIWA documents have a natural tendency to take care of the seller’s interest. But they can be heavy-handed when it comes to the legal obligations placed on buyers. Just because a document is offered to you as a ‘standard’ document doesn’t mean that it’s designed to protect your interests. Remember, if the real estate agent suggests you use one of these conditions it’s been written to protect the interests of the seller, not the buyer.
Therefore, if you’re buying a property ensure you take appropriate professional and legal advice prior to signing the offer to purchase.
Agents, consider seeking your own independent legal advice before using this condition unmodified.
Photo credit: Seattle Municipal Archives