Building Inspection Reports

NSW Labour MP Matt Brown is today releasing the results of a Vendor Disclosure review, recommending that vendors selling by auction must supply pest and building inspection reports. He is restricting his proposal to auctions because people buying by private treaty have a cooling off period during which they can conduct their own inspection and withdraw from the sale if the results are bad, losing only the cost of the report and the .25% deposit.

The review recommends that

• the vendor must supply all reports done in the 90 days before the property was put on the market. This will prevent the vendor cherry picking through reports until an inspector doesn't notice something significant.
• the buyer would have a legal right to sue the inspector (as now) if problems are found after purchase that should have been in the report.
• the inspector must have $5M professional indemnity insurance.

A public forum on the topic was told that $40M of wasted reports were generated in NSW by unsuccessful bidders at auctions. Many other buyers bid at auction without having a report, not willing to gamble the inspection fee against the uncertainty of whether they will win the auction.

Mary Macken, president of the NSW Law Society, opposes the proposals. "It puts a clumsy foot through delicate contractual architecture," she said.

One might think the Law Society would relish the proposal. Vendors will select inspectors with a sympathetic reputation, and there will be endless legal battles as a result, when buyers do find things wrong, with the courts having to decide whether the inspector was negligent, and if so how much compensation must be paid. At present a buyer having doubts about a property can arrange for a thorough inspection to be done, and buy or decline to bid with confidence.

Perhaps a more important step would be to punish estate agents who give demonstrably false low estimates of the price a property will sell for. Unscrupulous agents do this to persuade people to invest in a building inspection, after which such would-be buyers feel compelled to go on bidding way above the promised price, both to protect their investment and in the mistaken belief the bidding will end soon. Maybe the losing buyer should be able to sue the estate agent to recover the cost of the inspection, if he can convince the court that he was 'conned' into having the inspection performed when the sale price of the property was way above what he was told.

The report will be considered by Cabinet and could be in place before the March election.