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Review of vendor disclosure may prove costly
Released 23 July 2010

Should sellers have to provide mandatory building inspection reports to prospective purchasers?

Currently, purchasers may commission their own pre-purchase report(s) to satisfy themselves as to the physical condition of a property.

The NSW Government is investigating whether or not a vendor should be required to provide a building and pest inspection report, and be reimbursed by the purchaser at the time of settlement.

It’s often the case that multiple pre-purchase and identical reports are purchased when several people are interested in the same property. The advocates of requiring a vendor to include these reports as part of the contract for sale argue that if vendors purchase  these inspection reports, potential purchasers will not need to pay for them upfront. Accordingly, unsuccessful bidders at an auction, for example, will not have to pay for the reports at all, but will have the benefit of them for the purposes of participation at the auction.

While REINSW applauds any cost effective and efficient means of supplying potential purchasers with accurate and relevant information in relation to property, we hold concerns in relation to this issue.

Given that the vendor is required to acquire the reports, will this taint them sufficiently in the eyes of the purchaser so that they will acquire their own reports anyway? Also, if the vendor contracts with the report provider, how will the purchaser, who is not a party to that contract, recoup their loss if the report is defective? This is by no means an exhaustive discussion in relation to this issue.

REINSW in favour of reforming the system to make it compulsory for vendors to supply a pest and building report with the contract of sales, as long as purchasers are also required to buy the report with the property. If purchasers do not buy the report, they retain no contractual obligations from the inspector and can’t sue if it is in breach of contract.