What is the pre-settlement inspection?

Aug 02, 2018

Just prior to settlement occurring (usually within five business days of when you take formal possession of the home) the buyer is entitled to a ‘pre-settlement inspection’.

The pre-settlement inspection allows the buyer to check the property thoroughly to ensure the seller has complied with the representations, warranties and special conditions.

Standard conditions and obligations are listed in the Joint Form of General Conditions, which forms part of the overall contract for sale.

Representations and conditions
Often confusion arises between one or both of the parties to the contract when they do not understand one of the important representations within the contract, which states the property “will be in the same state and condition at settlement that it was in immediately prior to the contract date”.

Another condition is that the seller is obliged to remove all vehicles, rubbish and chattels from the property prior to the buyer taking possession (unless the property is subject to a lease agreement).

The parties to the contract (the buyer/s and seller/s) may also add special conditions to the contract that are specific to that purchase. For example, they may agree the seller has to remove an old shed from the property prior to settlement.

What happens if the seller has not fulfilled their contractual obligations?
If, upon inspection, the buyer discovers that a warranty or representation has been breached eg the pool water has changed colour, then this does not normally give the buyer the right to delay settlement.

Accordingly, settlement would normally proceed, however the buyer is entitled to seek damages from the seller for costs incurred rectifying the breach post settlement.

On the other hand, if the buyer discovers a special condition (not merely a warranty) has not been completed, such as the seller hasn’t removed the old shed, then they are usually entitled to delay settlement until the outstanding condition has been satisfied.

Thankfully, in most cases, a resolution is reached in such circumstances, although on occasion the buyer is able to cancel settlement and the contract ends.

Your real estate agent is an invaluable tool to help you navigate some of the parameters of a property

If you have questions about your rights, or those of the other party to the contract, speak to the agent managing the sale who will be able to assist you.