1. Background

Houspect WA conducts a large number of pre purchase building inspections every year across WA. The question is often raised, how soon can I conduct my pre purchase building inspection once we have an agreed Offer to Purchase Contract?

The simple answer is immediately, which explodes the commonly held myth that Buyers have to wait for finance approval.

While there can be arguments for and against undertaking an immediate pre purchase building inspection, the arguments are in favour of getting this key contractual condition cleared as soon as possible.

This blog explores this issue in greater detail

2. The myth – gone!

Several Sellers and Sellers Agents continue to suggest that you cannot have your pre purchase building inspection conducted until finance has been approved, assuming finance is a condition in your Contract. Some Agents have held a very firm view on this position and outrightly refuse access to a property for a building inspection until finance has been formally approved.

Given the confusion and angst this has caused on some occasions, The Industry Association of Building and Property Inspectors in WA Inc (“Inspect WA”) sought to explore this position to determine exactly what the Standard REIWA Contracts, General Terms and Conditions and Annexures require. In fact, Inspect WA went one step further and commissioned a detailed legal opinion. See here for more information. In short, there is nothing in the Standard REIWA documentation which requires the pre purchase building inspection to be deferred until finance has been approved. The myth that pre purchase building inspections have to be deferred is not correct unless additional specific clauses are added to the contract!

3. When should you defer your pre-purchase building inspection?

If there is the potential that the finance condition to a pre purchase contract will not be successful, then spending between $500 and $1,000 on pre purchase building and pest inspections may not be a good decision as the investment may be wasted if finance approval is not forthcoming. However, these days with the proliferation of finance preapprovals, the proposes to finance not being approved is likely to be limited.

4. Why the urgency in securing your pre purchase inspections?

The REIWA Standard Pre-Purchase Building Inspection Annexure’s default position in that the report from a pre purchase building inspection is required to be served on the Seller by 4.00 pm 5 business days after the later of the Contract Date or Finance approval, unless another date is nominated. So, the challenge is once finance has been approved:

• The Buyer must engage a Building Inspector
• The inspection needs to be scheduled
• Access to the property needs to be facilitated through the owner, agent or tenant
• The inspection needs to be conducted
• The building inspection report produce and distributed to the Buyer
• The building inspection report needs to be served on the Seller by the due date and time, if required.
• All this in 5 business days!

The issue with the above is that all the risks sit with the Buyer. If the report is not served on the Seller by the due date and time the Annexure likely fails, and any protection afforded to the Buyer by the Annexure may be lost. While in the majority of cases the time frames are achieved, it often creates considerable stress and anxiety to all stakeholders including buyers, property occupants and Agents where Contractual extensions are required. All this unnecessary stress can be avoided if the pre purchase building inspection is conducted immediately after the Contract has been accepted.

5. What if there is a major structural defect?

In the event that a major structural defect is identified in the pre purchase building inspection which enables the REIWA Annexure to be invoked and the Annexure is invoked and the Sellers agrees in writing to remedy the major structural defect then:

• 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)

While remediation work can often be undertaken prior to the planned settlement date, there are many instances that the work will delay settlement. Where there are multiple sequential Settlements aligned for the same date and time, chaos can ensue.

So the solution is simple. Get the pre purchase inspection report completed as soon as possible so as to ensure that maximum amount of time for any remediation work to be undertaken can be provided to minimise any potential delays to settlement.

6. Summary

The myth has existed for an extended period of time that pre purchase building inspection reports cannot be undertaken until after finance has been approved, where finance is a condition of sale. There is no contractual restriction that necessitates the deferral of the pre purchase building inspection in standard REIWA documentation.

Sellers and Buyers can reduce the stress of a residential property inspection by having the pre purchase building inspections undertaken at the earliest possible opportunity after the Contract has been agreed.

7. Important Note

The above general information was considered correct in September 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.

Ph 9240 8855 Web: www.houspect.com.au/wa Email: enquiry@houspectwa.com.au