Terminating under a ‘pest and building’ condition – “the Buyer must act reasonably”
In Queensland it is standard for contracts of sale to include a pest and building condition. The condition allows a Buyer to engage a licensed inspector to carry out an inspection of the condition of the property. Under an REIQ contract, the Buyer has until 5.00pm on the Pest and Building Inspection Date to advise the Seller whether they are satisfied or not with the inspections. If no notice is provided by the deadline, the Seller has a right to terminate the contract.
If you receive an inspection report and have concerns about the property, we recommend you discuss these with your building inspector in the first instance.
You may then decide to try and negotiate with the Seller to arrange for the Seller to fix the items listed in the report or reduce the purchase price. Buyers should be aware that Sellers are not obliged to agree to fix all issues or reduce the purchase price. Equally, not every issue raised in a pest and building report will automatically give rise to a right of termination.
In order to terminate the contract under a standard REIQ pest and building condition, the Buyer must act reasonably.
In determining what is reasonable, regard will be had to a number of factors including:
- The age of the property
- The quantity and severity of the issues; and
- If the issues were obvious at the time of inspection and when the price was negotiated.
Major structural damage and severe termite infection are examples of where it would be reasonable to terminate. It would not be reasonable to terminate in cases where there is a missing or loose handle, or a broken fence or cracked pavers which were evident at the time of contract.
If a Buyer wishes to terminate the contract, we ask that you provide a copy of the report to us. Under the standard REIQ contract, the Seller is entitled to request a copy of the report where it is the basis of a Buyer’s decision to terminate the contract.
Provided the contract is terminated lawfully, the Buyer will be entitled to a reimbursement of the deposit.
To get the most out of your pest and building condition, we suggest:
- Before signing the contract, you make sure the agent has not limited the scope of the pest and building condition to ‘structural issues only’ or something similar
- You arrange for the inspections to be carried out well ahead of time to allow time for the inspector to prepare the report and negotiations to take place
- You seek an extension of the pest and building condition if you need additional time to arrange for further inspections or quotations for repairs
- You speak to the inspector directly (or attend with them at the inspection) so they can give you as much information as possible about the property; and
Lastly, be realistic – if you are buying an old Queenslander, it is reasonable to expect that there will be some minor repair or maintenance matters to attend to.