Pre-settlement inspections – what you need to know
The standard ADLS agreement for sale and purchase of real estate allows the purchaser a
pre-settlement inspection of the property.
We recommend that a purchaser inspects the property as close to settlement as possible, but no later than one or two working days before the settlement date.
At a pre-settlement inspection, a purchaser is checking that chattels are in working order, and are in no worse condition than as at the date the agreement was signed (fair wear and tear excepted). A purchaser should also check the property is generally in the same condition as when they initially viewed it.
Purchasers must be careful and diligent when they initially view a property. Often, damage is not apparent (e.g. holes in walls or cracks in concrete) until personal possessions have been removed. Once revealed, a purchaser is unlikely to be able to claim for such damage because the damage existed at the time the agreement was signed.
If a purchaser finds new damage at a pre-settlement inspection, or if a chattel is not in working order, then a claim for compensation may be possible. Any pre-settlement claim must be made at least one day before settlement. Only in very limited circumstances can a purchaser cancel due to damage to the property. So, expect to settle and resolve the dispute later.
If the vendor agrees with the claim, the purchaser may deduct the claimed amount from the purchase price on settlement. If the vendor disputes the claim, a reasonable amount can be put aside (in a stakeholder account) pending the resolution of the claim. Often, claims are minor and are resolved by agreement or through the Disputes Tribunal.
Purchasers are often surprised that the standard agreement does not require the vendor to mow the lawns or leave the property in a “clean and tidy condition”. However, if a vendor leaves rubbish on settlement, the purchaser may be able to pursue a post-settlement claim for its removal costs.
Purchasing a house can be a stressful time. You can reduce your stress by inspecting the property thoroughly when you first view it (before signing) and again before settlement. If any issues arise, talk to your lawyer.