Pre-settlement inspections

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Pre-purchase inspection when buying a house

The REINZ/ADLS Agreement for Sale of Purchase of Real Estate 9th Edition (at clause 3.2) provides that if buyers are getting vacant possession they are entitled to access the property for the purposes of doing a pre-settlement inspection.

Important facts about Pre-purchase inspections:

Many purchasers don’t realise that they are only entitled to one pre-settlement inspection, and that this inspection must be before the settlement date. The purpose of this inspection is to “examine the property, chattels and fixtures which are included in the sale.” If any problems are found, and remedial work or compensation is required, the purchaser’s lawyer should request this before settlement day. Some agents and lawyers are still not aware of this fact and I regularly come across cases where clients have been advised to conduct their final inspection on settlement date. In this instance the vendor is within their rights to refuse. A second inspection is only allowed if the vendor has agreed to do some work before settlement, and the purchaser needs to check that it has been completed.

What if issues are found in the final inspection?

Everyone in the industry will be familiar with distressed calls from the purchasers complaining about stains on carpets, dirty bathrooms and a myriad of other issues. If these issues were pre-existing, the purchasers have no claim against the vendor. If, however, damage was done subsequent to signing the sale and purchase agreement, or if the issues are covered in the vendors warranties, the purchaser’s lawyer can request that these be rectified by the vendor. The breach of any warranty does not defer the purchaser’s obligation to settle, however in some instances the purchaser may be able to claim a right to compensation under clause 7.1 of the agreement – any claim should be made before settlement day. In most cases an agreement can be negotiated between the respective lawyers either to retain/deduct money on settlement, or have the vendor remedy the situation. If the amount of compensation is disputed, clause 7.4 sets out that an interim amount can be deducted and held by a stakeholder.

What if there is a tenant in the property?

If you have bought the property with vacant possession (i.e. the tenant moves out on or before settlement day) you are still entitled to your pre-settlement inspection. You will, however, need to allow more time to arrange the inspection because the vendor (by virtue of the Residential Tenancies Act) is required to give their tenant a minimum of 48 hours notice before anyone enters the property.

Must the vendor clean the property before settlement?

Unfortunately the standard sale and purchase agreement does not stipulate that the property needs to be cleaned prior to settlement. Dirty bathrooms and kitchens and rubbish being left on the property are the most common complaints raised by purchasers doing their final inspections. If you want to ensure that the property is spic and span, ready for you to move in, you can insert a condition in the sale and purchase agreement stating that the carpets or entire house should be commercially cleaned by the vendor prior to settlement.

 

2017-06-27T11:23:46+00:00 Blog, First Home Buyers, Property Law|