The Importance of Final Inspection
Buying real estate can be an emotionally charged experience, with many purchasers being caught up in the excitement of signing the contract that they may overlook the reality of the condition of the property and then be disappointed upon discovering any deficiencies post settlement.
The underlying principle of contract law that specifically applies to Purchasing real estate is ‘Buyer beware’ (Caveat Emptor). This principle places the onus on the Purchaser to have conducted their own due diligence/investigations and be satisfied as to the quality of the property being purchased.
Below we will discuss the importance of a final inspection plus what you can do prior to this to ensure your interests are best protected.
What is a final inspection?
The final inspection, is the Purchasers opportunity to conduct a final inspection of the property prior to the settlement date. Under a standard contract this is arranged between the buyer and the real estate agent to occur within 7 days prior to settlement date. The purpose of this inspection is for the Purchaser to ensure they are being provided the property in the same condition at settlement as it was on the day of sale, save for any fair wear and tear.
What should I be looking out for?
Below are a few potential issues to look for when conducting your final inspection:
Has any damage occurred at the property while the Vendors are moving out?
Are all items listed as being included in the sale still at the property?
Have all items been removed from the property, including any rubbish?
Check all appliances are in good working order (we advise requesting utilities be left connected to the premise to complete this)
If the contract is subject to Vacant Possession is the property vacant? Or if the property is tenanted, are the tenants still in possession?
A common misconception is that a Vendor is required to have the property cleaned and the garden maintained prior to settlement, unfortunately this is not the case under standard contract conditions.
What are my rights if there are issues at the final inspection?
If any issues are discovered by a Purchaser whilst completing the final inspection, their rights under a standard contract are that if both parties agree, a sum of up to $5,000.00 from each party can be directed into trust to be held by a stakeholder until the dispute is determined.
It is often that a Vendor will refuse to facilitate this option and a Purchaser will be left to chase the Vendor for reimbursement post settlement, therefore the best course of action is ensuring the Vendor is liable under the contract to provide the property and all goods being sold in good working order at settlement.
It is important to note that a Purchaser cannot delay settlement of refuse to settle the property on the contract date due to the condition of the property or any goods being sold with the land.
If a Purchaser does refuse to settle on this basis they will be considered in default under the contract of sale and will open themselves up to the risk of penalty interest and potential default actions from the Vendor.
How to best protect my interests?
Below are several steps you can undertake to best protect your interests under the contract and help reduce your risk regarding any deficiencies in the property:
Contact Merton Lawyers to complete a pre-purchase contract review prior to signing the contract of sale.
Conduct a thorough pre-purchase inspection documenting the condition of the property and all goods and appliances being sold. This includes photos/video evidence as to condition of property and working conditions of appliances.
If possible, purchase the property subject to Building and Pest Inspections and have the property and all goods and appliances inspected for defects by a licensed inspector.
Contact Merton Lawyers to discuss what contract amendment(s) or additional special condition(s) can be negotiated to be included in the contract to ensure the Vendor is obligated to provide the property and all appliances in good working order at settlement.
Organise Home and Contents Insurance form the moment you sign the contract.
Arrange for the inspection to occur at the beginning of the 7-day period to allow more time for any negotiations required between the parties or time for repairs (if applicable).
How can we help?
Contact our office today to discuss your property purchase.
