If you have read an agreement for sale and purchase, you are likely to have seen the term 'building report condition'. But do you know what a building report condition actually allows you to do, and what it doesn't?

A building report condition gives you, as the buyer, the opportunity (10 working days is the standard, but this can be lengthened or reduced) to have a suitably qualified building inspector go through your soon-to-be-settled property and report on various elements of the building including the integrity of the construction materials used and its weathertightness. 

The standard building report clause requires the seller to allow the inspector reasonable access for the inspection. There are some caveats to the inspection; it must be non-invasive so the inspector cannot drill into walls, for example. Also the inspector may not move furniture or any other items. 

It's best to obtain a builder's report after your agreement is signed and make it a condition. If you organise a report before you sign the agreement, the seller could sign with someone else before you submit your offer. The seller can also stop your building inspector from entering the property. 

The standard building report clause allows a buyer to cancel the agreement if the building or any improvements are unsatisfactory to the buyer as long as the considerations are based on an objective assessment and on a builder's report that is prepared in good faith. The buyer is also required to provide the building report to the seller, if requested, and the seller can then argue your reasoning for cancelling the agreement. You cannot, however, use the building report condition as an excuse to back out of the agreement if you simply change your mind about the purchase!

The standard clause is balanced in favour of both the seller and the buyer. We can, however, draft more robust clauses if required.

Whether you are buying or selling, do talk to us before you sign the agreement; we may be able to amend or replace the clause to suit your situation better. Remember, if there is something seriously wrong with the property and you don't have a building report clause in your agreement, then you won't be able to rely on the condition to cancel the agreement.

 

DISCLAIMER: All the information published in Property Speaking, No 31 Spring 2019 is true and accurate to the best of the authors' knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Property Speaking, No 31 Spring 2019 may be reproduced with prior approval from the editor and credit given to the source.  Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513.