Buying a home is the biggest investment or financial outlay that most of us will make in our lifetime. It is, therefore, critical to your financial future that when you purchase a home, whether it is for personal use or as an investment property, you make well-informed decisions.
Contracts for the Sale of Land basically follow the common law doctrine of “caveat emptor”– “let the buyer beware”. Simply put, this means that the buyer must make their own enquiries and investigate the quality of the property and any improvements to the property before they enter into a contract to buy that property.
The seller of the property is not allowed to deliberately hide defects or deceive the buyer by fraud but the buyer should undertake their own searches and inspections of the property to ensure any defects in the property are uncovered prior to the buyer agreeing to purchase the property. Failure to do this may result in the buyer losing their deposit and being sued by the seller for breach of contract, or the buyer ending up with a property that needs expensive repairs to remedy defects that could have been identified by the buyer for a small fee prior to the purchase.
Pre-contract inspections
There are various inspections that a buyer should arrange prior to entering into a contract to buy a property. The number of inspections and searches will, of course, depend on the location and the type of property being purchased, for example, the inspections you might obtain for a residential house in town may be quite different to the inspections you might obtain for a strata unit, vacant land, a rural property or an industrial property.
In this article, we will consider the pre-contract inspections you might obtain for a standard residential house purchase.
Timber Pest Inspection
In locations which are susceptible to pest infestation a qualified and insured pest inspector should be employed to conduct a visual inspection of the property to determine whether there is any termite or other pest activity presently at the property, or whether there has been such activity in the past. They will also examine the property for any wood decay, borers or rot that will affect the structure of the home.
A more detailed inspection can also be conducted, such as thermal imaging or photographing the walls and bathrooms to highlight any damp areas that should not be present. A moisture meter reading of the bathrooms and other wet areas may also be useful as termites are attracted by damp timber. The inspector can advise you if he thinks these further tests are necessary.
Undiscovered termite damage can not only increase substantially over a short period of time, but the damage created by termites can cost thousands of dollars to repair. Sometimes if the damage is really bad the infected part of the house may need to be demolished and rebuilt.
Building Inspections
A qualified and insured building inspector should be commissioned to inspect the house, any garage and all other buildings located on the property to determine whether there are any defects in both the interior and exterior of the buildings that are not usual wear and tear”, paying special attention to the most costly items to repair such as the roof of each of the structures, the kitchen and any bathrooms.
In a pre-existing home, there are usually small defects which accumulate over time due to use and are readily visible, but these usual “wear and tear” defects are not of major concern. What the building inspector will identify are any not so visible defects that are costly to repair, such as a leaking roof that can cost tens of thousands of dollars to fix.
If the inspection reports show issues of concern, specialist tradesmen can be brought in to assess the specific areas or issues identified and provide you with an estimate for repair.
Plumbing and Electrical
A licensed plumber should be employed to inspect the plumbing at the property to identify any drainage issues.
If the property has a septic waste system that is not connected to the town sewerage supply, a plumber’s report should be obtained because in the event the current septic system is inadequate, a new septic system could cost upwards of $10,000 plus additional excavation works.
If there is any indication that the electrical wiring at the property may be faulty or if the house is old, an electrician should be employed to evaluate the wiring system at the property.
Pools and spas
If the property comes with a pool or a spa then the pump and any ancillary equipment, as well as the pool or spa itself, should be investigated to ensure they are in good working order.
Council records
It may be necessary to make application to the local Council for a copy of the building records for the property. These records will include any development applications (DA), building site records and floor plans of the property, together with details of any termite protection installed at the property.
The DA for the original dwelling house and other buildings on the land should be carefully reviewed against the actual structure to make sure that the plans approved by Council have been complied with and the actual building is the same as the plans. If an owner builds structures on a property that requires Council approval and the owner builds without an approved DA, the Council can lodge a demolition order against the property or require it to be approved as “continuing use” after payment of hefty fees to Council.
Other structures on the land such as decks, large sheds, pools and pergolas can also fall into this category.
If there are unapproved structures on the property you should request that the seller obtains a building certificate to ensure that the Council will not look to you after the sale to demolish, rectify or obtain approvals.
Survey
A survey shows the dimensions and boundaries of the property, and will also identify any encroachments by structures that are erected on the land.
In areas that have been inhabited for a long time quite often, you will find that the fences are not right on the boundary line, or there may be part of a building encroaching on your land as it was erected in the wrong place. In more extreme cases, a driveway which appears to be on the property you are buying may actually be on the next door neighbour’s property which could result in you ending up with no access to your new home.
Strata
If you are purchasing a strata property then a full examination of the strata management records should be undertaken by an experienced person. The strata records can be obtained from the relevant strata company and will show the financial details of the administrative and sinking funds as well as plumbing, drainage, fencing, driveway and other problems that may exist or which have been identified and repaired in the past. Any proposal for additional works or levies should be identified in a strata inspection as well.
A penny saved is a penny earned
Your lawyer can advise you of the pre-contract inspections which should be carried out for each property. Not doing pre-contract inspections before you buy a property is not only risky but it is also false economy. Considering that the cost of a building and pest inspection for an average house costs about $500-$650 the outlay represents about 0.1% of the purchase price of an average home!
The traps when buying a property are easily avoidable and the risk far outweighs the cost of proper and diligent investigation before you buy.
If you or someone you know wants more information or needs help or advice, please contact Frichot and Frichot or complete the form below to request an Introductory Consultation.
