When you are considering purchasing a property in NSW (including at auction or where there is no cooling off period), it is important to ensure you know the property and that you can fund your purchase before exchanging contracts. This article focusses on the pre-purchase inspections you should consider when buying residential property in NSW.

Some properties may require additional investigations which are not addressed in this article. You should ask your lawyer about these.

Things to consider before exchanging contracts

Things you should consider before exchanging contracts unconditionally include:

1. Know how you are going to fund the purchase, including having your finance in order if you are obtaining a mortgage for the purchase;
2. Obtain your pre-purchase inspections (a pest and building inspection if you are buying a house and a strata inspection report if you are buying a strata unit); and
3. Have a lawyer review the contract.

Entering into a contract for sale with no cooling-off period severely constricts your ability to have the contract changed or to pull out without risking losing your deposit and being exposed to claims by the vendor.

What pre-purchase inspections do I need?

If a purchaser has unlimited time before exchange and unlimited access to the property, they will be able to extensively investigate the property to know exactly what they are purchasing. Unfortunately, where there is a rush to exchange, or a vendor is unwilling to provide unrestricted access to their property, you must decide how far you are prepared to go to understand the condition and quality of the property.

Before purchasing a property, you should consider obtaining at minimum:

1. For a house – a building and pest inspection report. This will help you to understand whether the property is subject to any termite and borer damage, wood rot, building issues affecting the property, fixtures and services, structural damage, etc.
2. For a strata unit – a strata inspection report. This provides information about the strata scheme, such as proposed changes to the management statement, regular and special expenditure, issues with the strata scheme (including proposed capital works and the like).

The cost incurred and the time it would take to obtain a building and pest report of an entire strata complex is usually makes this unviable given the size of most strata complexes. However, for small strata complexes (such as a 2 or 3 lot strata), a building inspection may be suitable.

Information in either of the above reports could impact on your decision to purchase the property.

A lawyer’s primary focus is on ensuring that the title of the property is conveyed to you (i.e. that you own the right to the property). Building inspection reports often speak to the physical condition or quality of the property. Lawyers are typically unable to provide advice on the contents of the reports and cannot recommend that a purchaser proceed with the purchase or not, based on the contents of the reports.

When do I need pre-purchase inspections?

The above inspections should be completed before contracts are unconditionally binding on you. That way, if the inspections identify any issues, you can either factor them into your offer or pull out of purchasing the property.

Key things to remember.

If the property is selling by auction, you should obtain a building inspection before the auction. If you are the successful bidder, you are not entitled to a cooling-off period and would be bound by the contract.

If you are purchasing a property by negotiation or private treaty and:-

1. your 5 day cooling-off period was retained (i.e. your lawyer did not provide a section 66W Certificate on exchange), you should obtain the inspection report before the expiry of the cooling-off period; or
2. you are required to waive your right to a cooling-off period (i.e. the vendor insists on a section 66W certificate as a condition for exchange to proceed), you should obtain the inspection report before exchange.

Additional searches to consider before buying a property

Additional searches to consider when purchasing a house include:

1. Identification survey, which identifies encroachments on or by the property, the position of the home upon the land, the distance of any wall of the home from the boundary etc. It also indicates whether there is any apparent breach of any easements, restrictions or covenants registered on the title.

A survey is not a required document for the contract and if the vendor did not already have a survey, then you would usually have to obtain one at your cost.

• Building Certificate – a survey will not cover whether the construction of the home complies with the Environmental Planning and Assessment Act 1979. Nor will it determine whether the building of the home or any extensions have been undertaken with council approval. You may obtain from the local council a Building Certificate for the home. If granted, a Building Certificate states that the local council will not require any part of the house to be demolished or substantially altered.

Here to Help

It may not be possible to understand all potential issues with a property before the cooling off period expires or contracts are exchanged. But you should consider obtaining the above pre-purchase inspections to enhance your knowledge of what you are buying so you can make an informed decision.

Contact us for assistance with your purchase to minimise the risks associated with buying a property.