Subject to building and pest inspection

If you are looking to buy a house or unit in Queensland, it is not uncommon to make the contract subject to a satisfactory building and pest inspection. Provided the Seller agrees to enter a conditional contract on this basis, the standard contracts of sale (‘Contract of Sale’), being, most commonly, the ‘REIQ Contract for Houses and Residential Land (14th Edition)’ for houses and the ‘REIQ Contract for Residential Lots in a Community Titles Scheme (10th Edition)’ for units, allows this condition to be adopted and made applicable to the purchase.

You have to take particular care when completing the Contract of Sale because if the relevant information is not inserted in the Contract of Sale as required (or the Contract of Sale is not completed properly), the consequence may be that the Contract of Sale is not made subject to a building and pest inspection and that as a result, clause 4.1 of the ‘Terms of Contract’ (which deals with inter alia the Buyer’s obligations in respect of obtaining a building and pest inspection report, and the parties’ respective termination rights in relation to the building and pest inspection condition) is not applicable.

If the Contract of Sale is properly completed, and therefore made subject to a satisfactory building and pest inspection, the Buyer must comply with clause 4.1 of the Terms of Contract. The Terms of Contract is that section of the Contract of Sale (usually towards to the back of the document) which contains the standard terms and conditions applicable to the Contract of Sale. Clause 4.1 is entitled ‘Building and Pest Inspection’ and will usually contain a statement to the following words or effect:

  This contract is conditional upon the Buyer obtaining a written building report from a Building Inspector and a written pest report from a Pest Inspector (which may be a single report) on the Property by the Inspection Date on terms satisfactory to the Buyer. The Buyer must take all reasonable steps to obtain the reports (subject to the right of the Buyer to elect to obtain only one of the reports)

Accordingly, where the Contract of Sale is subject to a satisfactory building and pest inspection, the Buyer must “take all reasonable steps” to obtain the reports by the Inspection Date. If the Buyer terminates the Contract of Sale and the Seller asks the Buyer for a copy of the building and pest reports, the Buyer must give a copy of each report to the Seller without delay.

The ‘Inspection Date’ is specified in the ‘Reference Schedule’ to the Contract of Sale (which is a section located at the front of the contract), and is the date by which the Buyer must obtain the inspection report(s) and give notice to the Seller either terminating the Contract of Sale on the grounds that satisfactory inspection report(s) have not been obtained (but noting that the Buyer must act reasonably), or advising the Seller that the Buyer is either satisfied with the inspection report(s) or waives the building and pest condition altogether, and wishes to continue with the Contract of Sale. If the Buyer does not provide notice to the Seller by 5:00pm on the Inspection Date, the Seller may terminate the Contract of Sale by notice to the Buyer.

This commentary is of a general nature only, containing nothing more than some general information for the reader. It is not intended to be legal advice, nor cannot it be relied upon as legal advice. To this end, please read our Website Terms including the disclaimer contained therein carefully. Laws, rules and principles may be subject to sudden and unexpected changes and you should always consult a lawyer about your specific circumstances.