Make sure you understand the new Builders report clause in the Ninth Edition Agreement for Sale and Purchase…

Karl, a first home buyer, was hoping to buy a property in a Wellington suburb.  Helen is a real estate agent selling a property that Karl was interested in.

When they discussed putting an offer on paper, Karl indicated to Helen that he wanted his friend Tom who is a building apprentice to look over the house to ensure that he wasn’t buying a lemon.  Karl didn’t want a written report from Tom; he was going to rely on an oral discussion with him.

He asked Helen to make sure there was a clause in the Agreement for Sale and Purchase allowing him to pull out of the Agreement if he was unhappy with what Tom had to say about the property.

Helen pointed out to Karl that there is a new Builders report clause in the standard Agreement for Sale and Purchase (9th Edition) which has a few specific requirements in it, including:

• It requires a purchaser to present a copy of the builder’s report to the vendor if requested if they pull out of the Agreement based on the builder’s report condition.
• It limits who can prepare reports to a “suitably qualified building inspector”.

Helen asked Karl whether he wanted to use that clause or insert a separate builder’s report clause.

Karl realised that he wouldn’t be able to fulfill either of those requirements if he used Tom so asked Helen to insert a separate builders report clause in the Further Terms of Sale to ensure that he could pull out based on a verbal report from Tom.

It pays to make sure purchasers and vendors are aware of the requirements of the new Builders Report clause.  It may not suit all purchasers, depending on who they are using to carry out the building inspection.

If you are inserting a specific Further Term of sale, it will override the other builders report clause in the Agreement.  If you do so make sure you don’t circle the Builders Report option on the front page.