A builder’s report is usually conducted by a suitably qualified building inspector about the condition of the property.  Often vendors supply builder’s reports to assist with potential purchasers’ due diligence.    

Recently there has been a lot of media attention regarding the dangers of a vendor-supplied builder’s report, for both parties.  So many people have been wondering what are the legal consequences for vendors if a purchaser relies upon a supplied builder’s report without any additional investigation, only to find out after settlement that there was an issue with the property?

If a vendor supplied the property inspection report, then the purchaser will have no recourse against the building inspector as they did not commission the report.  This means that a purchaser will likely try to seek any damages for remedying the issue from the vendor.  

The purchaser may have a claim if they can prove that the fault amounts to a misrepresentation under the Contact and Commercial Law Act.  A misrepresentation could be proven if either the fault was identified but underplayed in the builder’s report, or omitted entirely.  They also would have to prove that they were led to enter into the contract as a result of this misrepresentation.  

This claim can be made regardless of whether the vendor knew about the fault or not.  As such, when a vendor is supplying a builder’s report, it is important to understand the risks that are associated.

In order to mitigate any potential liability that could result from providing a builder’s report, vendors should consider including a clause in the agreement which states that it is acknowledged and agreed to by the parties that the builder’s report is only to be used for general information and due diligence purposes, and that the purchaser agrees to buy the property on the basis that they have conducted their own due diligence of the property.  

This limits a vendor’s liability by placing the burden on the purchaser to conduct further investigations of the property before the agreement is signed.

In addition to this, it is always best practice for a vendor to disclose any issues they are aware of prior to entering into an Agreement for Sale and Purchase.  Providing a purchaser with this information will give them the opportunity to consider whether they would like to proceed with the purchase.  

If a vendor does not disclose any issues that they know about to the purchaser this could result in the sale falling over and/or the purchaser pursuing legal recourse against them.  

If you are planning on selling a property and are unsure of any of your legal obligations around disclosure and/or supplying a builder’s report, it is best to seek legal advice to prevent any issues occurring down the line.

 

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Author

Laurie Pallett / Charlotte Cameron