September 19, 2023

Terminating Under A Building And Pest Clause

Building and pest clauses typically allow the buyer to terminate a contract of sale if they are not satisfied with the results of a pre-purchase building and/or pest report.

Purchasing property is often one of the most important financial decisions of people’s lives, so it is highly recommended that buyers arrange a building inspection prior to making their contract unconditional, and that the contract includes a building inspection clause that protects the Buyer’s right to terminate. The principle of ‘buyer beware’ applies to property transactions, and a written report can help Buyers by making them aware of any significant issues with the property so they can make an informed decision and avoid costly repairs down the road.

It is important to note that the purchase contract needs to be prepared in a particular way to make a purchase subject to building and pest. Because the law and standard of contracts of sale vary between the states and territories of Australia, it is important to obtain legal advice to make sure your interests are protected, and to review the requirements of the state in which you are buying property.

Building and Pest Clause Queensland

Contracts for the sale of property in Queensland usually include a building and pest condition. This is also known as a contract being ‘subject to building and pest,’ and it allows the Buyer to access the property to have it inspected by a licensed builder who will produce a building and pest inspection report. If the Buyer is not satisfied with the report, they can cancel the contract and retain their deposit.

How Does It Work?

Under the standard REIQ contract, the buyer has until 5:00pm on the building and pest date nominated in the contract to let the Seller know whether or not they are satisfied with the building and pest inspection report. If the Buyer has not advised the seller by this deadline, the contract continues and either the Buyer or the Seller may cancel.

If the Buyer is not satisfied with the report and wishes to cancel the contract under the building and pest clause, they must provide a copy of the building and pest inspection report to the Sellers.

The Buyers must also be acting reasonably in cancelling the contract. Things like the severity of the issues raised in the report, the age of the property, and whether the issues were obvious or disclosed to the Buyers prior to entering into the contract will be relevant to whether they are acting reasonably.

Are There Other Options?

If the Buyer has concerns about the property after receiving your building and pest report, they should discuss them with the building and pest inspector in the first instance.

It may be possible to negotiate with the Seller for a reduction in the purchase price, or for work to be done prior to settlement. However, it is important to note that the Sellers are not obliged to agree and may refuse to negotiate.

Building and Pest Clauses Victoria

Contracts of sale in Victoria usually include separate General Conditions which deal with the Purchaser’s right to cancel the contract because of building defects or pest infestations.

Building Report

If the building report clause applies, it allows the Purchaser to end the contract within 14 days of signing if they obtain a written building inspection report from an architect or registered building practitioner which shows major structural defects in the property.

The Buyer must give the Vendor a copy of the report along with written notice that they are terminating the contract and must also not be in default of any other terms of the contract.

Pest Report

Similarly, if the pest report clause applies, the Purchaser has 14 days to obtain a pest report and may cancel the contract if a major infestation is found on the property. The buyer must use a licensed pest control operator, give the Vendor a copy of the report and written notice terminating the contract, and must not otherwise be in default of the contract of sale.

When Do These Clauses Apply?

It is important to note that for these conditions to apply, the applicable boxes in the Particulars of Sale must have been ticked at the time the contract was signed.

General Conditions can also vary between contracts, and may also be varied by the insertion of special conditions. If you are in doubt you should seek legal advice – our dedicated Victorian solicitors will be happy to review your contract and answer any questions you might have.

Inspection Conditions Northern Territory

The standard contract of sale in the Northern Territory allows the Buyer to cancel the contract and retain their deposit if they are not satisfied with any one of a suite of reports and certificates listed in clause 26.1 of the contract and nominated as required reports by the Buyer when the contract is signed. These reports include a pest report, a condition report, a building status report, a plumbing report and an electrical report.

The time limit for the Buyer to cancel under this clause depends on whether a cooling off period applies to the contract. If the cooling off period does apply, the time limit is 10 working days of the expiry of the cooling off period. If it does not apply, the time limit is 10 working days from the date of the Contract.

If the Buyer is not satisfied with any of those reports, the Buyer is able to rescind the contract by giving written notice.

Buyers should be aware that if the contract is not rescinded on or before the Inspection Condition due date, it will be deemed to be automatically satisfied after 2 business days have passed and if the Buyer has still failed to provide any notice of rescission. The Buyer will then be unable to rescind under this condition of the contract even if they are not satisfied with the reports.

Who Pays For Building And Pest Inspections?

Pre-purchase property inspection reports are paid for by Buyers. Costs vary depending on location and size of the property, but typically building inspections cost anywhere from $500 – $1,000.

More Questions? Give Us A Call!

If you would like to talk to an expert about building and pest clauses, or any other aspect of conveyancing law in Australia, our dedicated team of experienced conveyancing solicitors are waiting to take your call.

Let Keylaw take the stress out of your property buying journey – call us today on 1300 539 529 or head over to our quote page for an obligation free quote.

The above is not legal advice and is general information only.