When a pre purchase building inspection in Western Australia identifies a structural defect and the purchase contract has utilised the standard REIWA Building Inspection clause, a very specific sequence of events needs to be followed, starting with the provision of the completed building inspection report to the seller and then the serving of a formal Structural Defects Notice by the buyer on the seller.
More often than not, the formality of the REIWA Building Inspection clause is not followed and the vendor will simply agree to address the structural defect and settlement can proceed as planned.
Structural defects can range from minor items costing well under $1,000 to resolve to more significant items which can cost substantial sums to resolve. Fortunately the majority of structural defects will fall into the relatively minor category.
There are however many key aspects of the REIWA building inspection clause that buyers and sellers need to carefully consider in relation to resolving Structural Defects. These include:
- The Buyer must formally serve the seller with a Structural Defects Notice within three days of the “Date” (the Building Inspection report was required to be provided) giving the seller 5 business days to agree to remedy the structural defects
- If the Seller elects in writing to remedy the Structural Defects then Settlement will be delayed until the later of:
- 3 Business Days after the Seller’s Works are practically completed as certified by the Seller’s Builder; and
- the Settlement Date.
- If the Seller does not agree to remedy the Structural Defects within 5 Business Days from when the Structural Defects Notice was served then the Buyer or the Seller may at any time within Five (5) Business Days after that period, give notice in writing terminating the Contract and the Deposit and other monies paid will be repaid to the Buyer
- If neither the Buyer nor the Seller terminate the Contract, then this condition ceases to apply and the Contract continues unaffected by the condition.
One of the key challenges above is where the seller uses a tradesman to rectify the structural defect, as is often the case and as opposed to, using a Builder to undertake the work. There are arguments to suggest that if the seller uses a tradesman and not a Builder they would not have complied with the specific contractual obligations that a builder must be used and moreover, the tradesman would be unable to certify that the works “are practically completed as certified by the Seller’s Builder”.
The certification of the resolution of the Structural Defect is important as the REIWA Building Inspection clause does not provide the ability for the buyer to have the rectification of the structural defect work reinspected by their building inspector. Even if the seller agrees to the reinspection by the building inspector, the costs of the reinspection often becomes yet another challenge.
Where a Registered Builder has been used by the seller, the buyer has additional remedies against the builder for up to 6 years if the rectification work has not been undertaken in accordance with the National Construction Code and or Australian Standards.
As indicated, the formal sequence for events as described by the REIWA building inspection clause may be overkill for small structural defect rectification work where a more pragmatic negotiated solution may be negotiated and utilised. However, both buyers and sellers should be made aware of the contractual obligations and any deviations thereon. Where appropriate, buyers and sellers should seek independent legal advice in relation to the interpretation and impacts of this important clause.
Of course the above will often need to be negotiated within a very short period of the proposed settlement, adding additional pressure to an often stressful period. One solution is for the seller to have a structural inspection undertaken on their property prior to going to market. For a modest sum (Houspect structural inspections start at $430 for a single storey 4×2 home in Perth) the seller and seller’s agent can progress with confidence that there will not be any structural defects identified once an offer has been accepted, even if the REIWA Building Inspection clause has been utilised.