Building and Pest Inspection Condition in Queensland Residential Contracts

Most residential contracts in Queensland include a building and pest condition which allows buyers to obtain inspection reports from licensed professionals to ensure the property’s condition is acceptable before the contract becomes unconditional.

What is a building and pest condition on a contract?

The buyer is responsible for arranging and paying for a building and pest inspection. The report provides crucial information on the property as a licensed inspector will assess the structural integrity of the property and check for evidence of pests (particularly termites). This can reveal issues that may not have been visible during the buyers first walk through of the property. The purpose is to protect a buyer from unexpected repair costs or hidden defects.

Without this condition, a buyer may be obligated to complete the purchase regardless of the condition of the property and if serious structural issues are discovered later.

Options available

Once the buyer receives their building and pest reports, under the standard terms of an REIQ contract, they have two options:

1. Accept the property in its current condition and proceed with the purchase; or
2. Terminate the contract on the basis that they are not satisfied with the current condition of the property.

To exercise the right to terminate the contract, the buyer must give written notice to the seller (or the Seller’s Solicitor/Agent) and the buyer must act “reasonably”.

However, in an attempt to keep the contract on foot, a buyer may enter into negotiations with the seller and request that certain issues be rectifies/repaired, or alternatively, negotiate a price reduction in lieu of any works being undertaken. It is important to note that a seller is under no obligation to enter into any negotiations, and it is their choice as to whether or not they entertain any requests made.

Any negotiation must be approached with caution to avoid missing critical deadlines, thereby giving the seller the right to terminate the contract. To mitigate this risk, buyers should obtain inspection reports as early as possible and ensure that their demands are reasonable and supported by evidence from the reports and any relevant quotes.  

Any large reductions should also be raised with a buyer financier to ensure that they take no issue with how the reduction is being dealt with, as this could impact their loan approval.

Timing and Risks

The building and pest condition will specify a date by which the buyer must notify the seller whether they’re satisfied or intend to rely on termination. Under the REIQ contract, Buyers must notify the Seller prior to 5:00pm on the condition due date.

If the buyer fails to provide notice on time, the Seller gains the right to terminate the contract (due to the buyers’ breach).

Practical tips for Buyers

• Arrange inspections early: Engage a properly licensed building and pest inspector promptly after the contract is signed and if possible, attend at the property during those inspections.
• Negotiate reasonably: Focus on major / structural concerns and/or active termites / pest damage, rather than minor cosmetic issues (which likely would have been noticeable at the time you made the offer) and ensure you have sufficient evidence to back up your claims (i.e. quotes for the cost for the necessary repairs/works).
• Don’t leave negotiations to the last minute: If you are seeking to negotiate, do so promptly after receiving the report or seek an extension of the date.
• Stay objective: If you are emotionally attached to the property, be careful about threatening termination as the Seller may call your bluff and terminate the contract if your due date passes.

Disclaimer

This article provides general information only and does not constitute legal advice. Buyers should seek professional advice specific to their circumstances.