Building Inspection: Standard Clause or Additional Clause?
Q: What is the difference between using the Building Inspection clause on the front of the standard sale and purchase agreement, and inserting a building clause in the “additional clauses” section? Which would you recommend to a purchaser?
Good question Raewyn. Firstly, there is no obligation to use the standard clause rather than your own ‘custom’ clause (which you can insert under Further Terms of Sale). Formerly your agent or solicitor would draft a clause to go in the further terms of the agreement and the terms of the clause could vary. The new standard clause (clause 9.3 in the agreement) is designed to protect both vendor and purchaser from possible misuse of a custom written clause. The main points are:
- Written report required: The report must be in writing and must be provided to the vendor immediately should the purchaser decide to void the contract on the basis of the inspection. Note, however, that the new clause does not give the vendor the option of rectifying any defects.
- Suitably qualified builder: The clause states that the inspector must be suitably qualified, so no getting your mate to have a look over the property if they are not a qualified builder or building inspector.
- Ability to cancel (objective test): The clause also states that the purchaser must decide whether the report is unsatisfactory on an objective assessment – that is, would any reasonable purchaser, on reading that report, have found it unsatisfactory? The answer must be yes to cancel validly.
So those are the main elements of the clause. Of course, as a purchaser, you may want to have any minor defects found to be rectified by the vendor, or even negotiate a price reduction, and you will still have that right. However, as a seller, you need to be aware that this clause does not give YOU the right to rectify unless the purchaser agrees.
If the above points don’t suit, you are still at liberty to have clause 9.3 deleted and have your lawyer insert your own building inspection clause under Further Terms of Sale. You may want to do this because you have a friend who you feel is qualified to look over the property, rather than paying for a full building inspection. Or if you are a seller and you want the option to rectify any defects identified rather than having the purchaser being able to cancel the agreement automatically.
Whether you are buying or selling, as with all contracts, it is best to get your lawyer to check and explain the agreement to you to ensure you understand what you are signing and that your interests are protected.