NSW should trial vendor-supplied pre-purchase reports

NSW should trial vendor-supplied pre-purchase reports
NSW should trial vendor-supplied pre-purchase reports

Pre-purchase reports, highlighting building, pest and strata inspection issues, are a necessary, but costly, impost in the lead up to almost all property purchases.

The latest NSW government proposal that toys with requiring vendors to provide pre-purchase reports along with the contract for sale, is not a new idea.

Last time it was raised with vigour under the State Labor Government in 2010, the founder of Aussie Home Loans, mortgage broker John Symond described the longstanding practice of buyer inspection reports as "antiquated, cumbersome and expensive".

"It imposes a serious cost to the consumer in circumstances where there's no guarantee they'll get the property anyway," he said.

Wonder how many wasted inspection reports have been binned since then. Or worse how many buyers have been bidding cold on properties without knowing of the potential defects.

So five years on the Coalition government is again looking at requiring provision of a standard inspection report as a condition of selling a home.

It has come from the NSW Minister for Better Regulation, Victor Dominello who wants to see a one-off impost, rather than the current multiple cost.

The minister sees the changes as part of a broader drive for better regulation of businesses across NSW. The cost of a single inspection can range from $250 to $1500 for a larger house. 

Some inspections might take three hours, others with paperwork and attendance in just 60 minutes.

No sooner had the renewed plan been aired by NSW Fair Trading before it being quickly knock down by a raft of industry players suggesting it could leave property buyers at risk of sub-par inspections, similar to that affecting the Rudd Federal Government home insulation program.

They have expressed concern the inspection reports provided by vendors may not rigorous enough especially if the vendor's mate was the building inspector.

This question of independence is never going to disappear, but savvy buyers will surely sense issues needing further attention, and make their own further inquiries. 

It will be a comfort blanket not a guarantee as clearly the vendor’s motivation for obtaining a pre-purchase report differ to that of a purchaser - the buyer after all wants to get advance knowledge of the nature of any problems with the intended property and better negotiate a price for the property. 

Purchasers are therefore still quite likely to obtain their own reports, but hopefully fewer over their buying journey.

In the Australian Capital Territory vendors have since 2004 been required to provide pre-purchase reports to potential purchasers.

Upon completion of the contract, the purchaser reimburses the vendor for the cost of the reports.

The regulations standardises the minimum content of reports with all inspections being consistent with Australian Standards.  

There are issues around the duration of time for which a report remains valid. 

Important questions too on how would the purchaser, who is not a party to that inspection contract, recoup their loss if the report is defective, so liability insurance helping protect buyers will need to be considered.

The doctrine of privity of contract prevents the property purchaser from directly relying on the contract. In the ACT however the legislation gives the purchaser a direct right to sue the report author in circumstances where loss has been suffered as a result of any materially false or misleading statement or content in a report. 

So let's give it a go in NSW - after all we pioneered our pretty good Torrens and strata title systems.

This column was first published in the Saturday Telegraph.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

Pre Purchase


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