Major Structural Defects – What to do when the REIWA Pre Purchase Building Inspection Annexure has been used
In WA Pre Purchase Building Inspections on residential properties are generally undertaken as a result of a REIWA Purchase Contract where the Standard REIWA Pre Purchase Building Inspection Annexure has been included.
Every week we see considerable confusion and angst about the remediation requirements for major structural defects. With this in mind the objective of this blog is to explore this often-confusing issue based on the current REIWA Annexure (Ref REIWA 2022).
2. Is there a Major Structural Defect?
Clause 4 of the Annexure is relatively straight forward and clear. If the report identifies a Major Structural Defect on the Residential Building (Refer 4.) then the Buyers may…
So in short, the Pre Purchase Building Inspection report needs to state a major structural defect on the residential building has been identified. If the report does not state this then prima facie the REIWA Annexure cannot be invoked.
There are a myriad of issues with the above but for the purpose of this document let’s assume the Pre Purchase Building inspection report identifies a Major Structural Defect. Both Buyers and Sellers must then navigate a very specific sequence of events to protect their respective positions.
3. Invoking the REIWA Annexure
It is critical that Buyers understand that the REIWA Annexure is not automatically invoked just because a Buyer received a Pre purchase Building Inspection report indicating a Major Structural Defect. There can be multiple reasons why a Buyer chooses not to invoke the REIWA Annexure, the most notable being the issues is too small to worry about. However, if the Buyers wants to invoke the annexure they MUST:
- Ensue the building inspection report is served on the Seller or their authorised Agent by the due date and time.
- The Buyer must then issue a Major Structural Defects Notice on the Seller or their authorised Agent within 3 days of the by the due Date and time. Refer Item 4 of the Annexure.
- See here for a more detailed document on the required forms and time frame calculator.
- If the Buyers does not follow these steps their entitlements under the Annexure may be lost!
- The Buyers Conveyancer should be able to assist.
4. The Sellers Response to a Major Structural Defects Notice
On receipt of a Major Structural Defects Notice the Seller can:
- Chose to not remediate the items listed in the Major Structural Defect Notice.
- Chose to not respond to the Major Structural Defect Notice, which in effect is the same as choosing not to remediate the items in the Major Structural Defect Notice.
- Choose to remediate the items in the Major Structural Defect Notice. If the Seller chooses this option they must communicate in writing their intention to the Buyers by a specified date and time.
5. If the Seller chooses to remediate the items in the Major Structural Defect Notice
If the Sellers chooses to remediate the Major Structural Defect then there are some very clear requirements:
- Sellers must do the work expeditiously and in good workman like manner through a Builder and provide evidence to the Buyer of completion of the work (Refer 6 of the Annexure).
- The required work must be undertaken by a WA Registered Builder (Refer 9.1 of the Annexure)
- Settlement is deferred until the work is completed as certified by the Sellers Builder (Refer 5 of the Annexure)
6. What if the Seller chooses not to remediate the items in the Major Structural Defect Notice
If the Seller chooses NOT to remediate the items in the Major Structural Defect Notice the Buyer can choose to Terminate the Contract but must do so in a very specific time frame. Otherwise, the Annexure will fail and the Contract will continue with the Buyer obliged to purchase the property as is!
Termination Notices can be found here.
7. What is the biggest Issue then?
The Annexure is very clear. The remediation work associated with a Major Structural Defect must be undertaken by the Sellers Builder. The Annexure defines Builder as a Registered Building Service Contractor as defined in the Building Services (Registration Act 2011)
So what the above means that a Major Structural Defect cannot be remediated by:
- The property Owner (Unless they are a Registered Builder in WA)
- Roof carpenters
- Other Tradesman
- Handyman or maintenance contractors
- Well intended individuals
- Any of the above supported by another Building Inspection report.
The above is the fundamental issue. Every week we see remediation of Majors Structural Defects by people not authorized by the Contact to remediate the Major Structural Defect. This often results in disputes and issues between the Sellers and Buyers.
8. Validating the remediation of the Major Structural Defects
Buyers are entitled to sight the notice from the Sellers Builder which certifies the work has been completed. This certification must display the Builders Registration Number which can be validated against Building and Energy’s Registered of WA Registers Builders.
Important to note that a Seller cannot engage another Building Inspector to simply inspect the work undertaken by a Non Registered Builder in an effort to satisfy the obligations of the REIWA Annexure, unless the Buyer agrees.
Quotes, invoices, pictures and receipts or another Building Inspection report from the Sellers Building Inspector are not an appropriate substitute for a Notice of Completion from a Registered Builder who actually undertook the work, unless the Buyer has agreed to the alternative arrangement.
9. Why is it Important to the Buyer that the remediation of a Major Structural Defect is undertaken by a WA Registered Builder
Using a WA Registered Builder to remediate Major Structural Defects provides the Buyer with considerable protection:
- The Buyer and any subsequent owners of the property are covered by the WA six-year statutory defect liability provisions.
- The Buyer can progress issues with the remediation work through the Builder Complaint resolution process with Building and Energy.
- The Sellers Builder can be located in future years if required through the publicly available online WA Builders Registered maintained by Building and Energy
- Using a carpenter, handyman, other trades person of the Seller or their Agent to remediate the major structural defect does not provide the Buyer with the same level of protection.
10. Can the Buyers Building Inspector reinspect the completed works of the Sellers Non Registered Builder
- Potentially yes (although not desirable) but only if both the Buyer and Seller agree. However, the protections to the Buyer as described above are diminished as the Building Inspector is not bound by the Statutory defect liability period as they did not undertake the work.
- There are likely to be costs associated with the Buyers Building Inspector reinspecting a property and producing another report. The Buyer and Seller should agree who will pay these costs prior to booking the inspection. Given the Sellers has not used a Registered Builder, it is likely that the costs should be borne by the Seller, but it is important that the Buyer engaged the Building Inspector.
- A subsequent building inspection is unlikely to be able to certify the actual works undertaken, but they may be able to indicate that the Major Structural defect no longer exists based on what can be seen.
11. Major Structural Defects Beyond the Residential Building.
It is not unusual to identify major structural defects beyond residential buildings, especially on items such a pergolas, veranda’s, sheds, gazebos, patios, carports, fences retaining walls and similar. As these are beyond the residential building, they are normally beyond the scope of the REIWA Annexure, and the Buyer may not be able to make acclaim against the seller via the Annexure.
However, Item 2. of the REIWA enables Buyers to extend the scope of the Annexure beyond the residential building. Where the scope has been extended the Buyer may be able to invoke the Annexure to capture some of the excluded items. But, this option to extended the scope is often not used by Buyers as they are unaware of the option.
12. What about major non structural defects?
The Standard REIWA Annexure only refers to Major Structural Defects. Major non structural defects can be equally important as major structural defects, for example, collapsing ceilings are a major non-structural defect but under the wording within the REIWA Annexure, these cannot be claimed against the Seller and will be up to the Buyer to resolve.
13. We cannot find a Builder – what are the options
If a WA Registered Builder cannot be located and engaged to remediate the Major Structural Defects there is potentially a myriad of options that the Seller and Buyer can agree to:
- Reduce the selling price to compensate the Buyer who would then agree to take the property on as and remediate at themselves (Buyers should consider their insurance disclosure obligations if this position is taken).
- Agree that a trade other than a WA Registered Builder remediate the issue the issue, noting that the Buyers position is eroded.
- Agree that a trade other than a WA Registered Builder remediate the issue the issue and have the Buyers reinspect. Noting that the Buyers position is still eroded but this may be solution if required.
The key to the above is that the Seller and Buyer need to agree to an outcome which departs from the requirements of the REIWA Annexure. It should never be a unilateral decision by one party.
14. Stop – is your Building Inspection Annexure the REIWA Annexure?
Just when you thought it was all clear. If there was only one Building Inspection Annexure it might be simple. At Houspect WA we have collected over 40 different Pre-Purchase Building Inspection Annexures which have been utilised in residential Offer Contracts. The above comments only apply to the Annexure defined. These comments may be entirely redundant if the Annexure in your Contract is not the REIWA Annexure 2022.
The REIWA Pre Purchase Building Inspection Annexure is a very complex document. If you intend on relying on the protections it provides then you must ready the document very carefully and follow the required steps exactly as required. Agents, Conveyances and Lawyers can assist. The devil is in the detail!
16. Important Note
The above general information was considered correct in Aug 2023. Circumstance will change over time. It is recommended that all readers seek their own professional and or legal advice prior to acting on the information contained in this note.
Build, Buy, Invest in property with confidence.