What are Pre-Purchase Property Searches? This video takes an in-depth look at the Building Report and why you should consider ordering one before buying a property.
Watch now: https://youtu.be/xyZ70MECj7c
TRANSCRIPT:
This is one of a series of videos I will be presenting on buying a property from the perspective of the purchaser setting out small-ish chunks of the legal process involved, which is also known as “conveyancing”. Today I’m going to talk about Building Reports, which is one of the property inspections your lawyer will typically recommend you obtain before exchange of contracts i.e. before you enter the contract to purchase the property, which we also call the pre-purchase period. I say ‘typically’ because I will be referring to a standard type of property purchase, so if additional complications are evident after reviewing the contract, additional property reports or certificates may also be recommended by your lawyer, depending on the circumstances. Now, in Australia, the laws around property purchases are state-specific so if you are interested in buying a property located in NSW, this video is for you!
The first point to note is that this video series deals with residential property only, such as a house, unit or block of land and not with any type of commercial property. Also, when I refer to exchange of contracts from now on I will be using the abbreviation ‘exchange’ for ease of reference.
If you would like to know more about exchange and the pre-exchange period generally, I have linked my videos on these in the description box below.
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A quick disclaimer that my videos are general and informational in nature only. They are not intended as legal advice, nor should you rely on them as such. Please see the full disclaimer in the description box below.
Now, lawyers typically recommend 4 types of property reports and certificates be obtained before exchange, depending on the type of property you are buying. Some or all of these reports/certificate may be provided to you by the seller, known as the vendor – which may mean you won’t need to consider applying for them yourself, saving you both time and money. The 4 searches are:
(i) Building Report
(ii) Pest Report
(iv) Building Certificate
(v) Survey Report with diagram.
This video will focus on the Building Report.
So, if you are buying land with a house on it, a building report will give you information on the building condition of the property.
Although there are some exceptions (which I can address in a separate video), in most cases you will be buying the property in the condition it is in when you exchange, (subject to fair wear and tear during the settlement period).
The vendor is not legally required to reveal that the house has building problems. It is up to you to see them yourself or arrange someone with the expertise to come in and assess it.
So, a building report is important because it is good to know what you’re buying. This way you can make a more informed decision on whether or not you should buy the property, what problems you will be faced with if you do, or you might wish to use the information in the building report to negotiate a lower purchase price – remember, you still haven’t entered into the contract, which is why it is strongly recommended that the building report be obtained before exchange.
The person who prepares the building report actually inspects the property to assess what building problems they can see and lists them in the building report. The building report may also provide an estimate on how much each problem would cost to repair.
Building reports generally report on similar things, however it would depend on the company providing the building report and what they inspect. Some examples of things the building report generally covers are:
- Structural defects
- Cracks in Walls
- Roof problems, ceiling problems, possible leakage
- Easily ascertainable Plumbing issues
- Electrical Wiring problems
- Rising Damp
- Drainage issues
(and this list is by no means exhaustive)
A building report may also recommend that you obtain an Asbestos Report if the inspector suspects the property may have asbestos. Alternatively for peace of mind, you may wish to obtain an asbestos report in addition to the other reports, if the house is older. Some companies include this service as part of the building report, whereas for others it is a separate report. There is also an online Loose-fill Asbestos Insulation Register in NSW where you can look up the address of the premises and if it has been identified as having loose-fill asbestos insulation it will appear on the register. Of course, not all properties with loose-fill asbestos have been identified and placed on the register, and this register only deals with insulation and not other types of asbestos so a broader asbestos report may be worthwhile ordering in any case.
The thing to remember is that the person preparing the report generally undertakes a visual inspection only. They can’t dig around into the house walls or floor to check the wiring or plumbing or remove wall to wall carpets to check the floors, or move furniture to see what is hidden underneath, they may not have access to roof cavities or under the house… A building report is a provided after a general building inspection by a person who has the expertise to identify building problems in this way.
Of course, a building report also doesn’t cover building issues which may arise after the date of the building inspection. Some issues may be covered by title insurance if you take this out before settlement, but title insurance is a whole issue in itself which I will cover in a future video.
If the vendor provides you with a building report, apart from checking to make sure that it is current, another problem to consider is that if you find that the company who provided the report was so negligent that you would like to sue them for misrepresenting or omitting important issues from their report, you will not be able to sue them because you were not the person who actually commissioned the report. So that is something to bear in mind where you are relying on a building report that you didn’t order.
My final tip for you today is that timing is everything. I can’t stress enough the importance of knowing whether a property has any of these problems before exchange. Generally if you discover most of the issues discussed above after exchange of contracts there is probably nothing you can do about them – you will still be required to complete the purchase.
And that is all I have for you today on Building Reports. As always – please remember to “SUBSCRIBE” and hit the “Like” button if you liked this video, please share it and if you’d like to make an appointment to engage our services, please follow the link in the description box to contact me. If you have any topics you’d like me to address in future videos, please leave a comment in the comment section as I’d love to hear from you. I hope you found this video helpful and thank you for watching.