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When can a buyer terminate due to building & pest issues?

The 6th edition REIQ standard contract contains a provision allowing the buyer to obtaining a written building or pest inspection report (or both) - condition 4.

The operation of the clause presupposes that the relevant items in the reference schedule of the contract have been completed. If an "inspection date" is not inserted, the condition does not apply.

The buyer need not obtain both reports even if the names of both a building inspector and pest inspector are inserted in the reference schedule, but the report intended to be relied on to terminate, must be obtained by the "inspection date" and it must be in writing. The reports may be in the form of a combined report.

Note that a person who provides a building report must hold a current licence under the Queensland Building Services Authority Act 1991. "Termite management" which is the basis of most pest reports, also requires licensing under the Act.

To be able to rely on a report to terminate, the report must be "unsatisfactory to the buyer". This has the legal implication that the buyer must act honestly when deciding whether or not the report is satisfactory. There is also a specific requirement in standard condition 4.2 that the buyer must act "reasonably".

Practically, a buyer cannot rely on a trivial matter to terminate, e.g. a leaking tap referred to in a building report. But a staircase with a decaying handrail and defective treads would probably give sufficient grounds. The question will be one of degree, depending on the particular property.

Sellers can protect themselves by including a special condition in the contract alerting the buyer to defects and specifying that the buyer cannot terminate in relation to those matters.

A buyer can only terminate up to 5pm on the inspection date. Failure to give notice by that time deems the building and pest condition to have been satisfied, regardless if an unsatisfactory report is received after that time.


Peter Carter
Property & Leasing Partner
 

If the buyer does not obtain any reports, generally he or she would not be permitted to terminate under the clause if a building or pest defect is otherwise discovered.

Can a buyer rely on a building defect noted in a pest report if he or she does not obtain a building report? Yes (probably) if the building defect has arisen from pest infestation eg termite damage to timber bearers etc.

For answers to all your questions, email or call Peter Carter on 1300 LAW LAW (1300 529 529).

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