Most people know to make their real estate purchase contract conditional upon having the property certified termite-free. But there are several issues with these conditions which the average buyer is unaware of. It’s not just termites that pose a risk: – European borers and wood rot (a fungus) can also destroy roof and wall timber. And it’s not only active infestations you should be concerned about. Past damage from a treated infestation could also cost you thousands to repair.
Therefore, you should request that the contract includes a Special Condition which covers the following issues:
- The contract is conditional upon the property being inspected before settlement and certified free of termites, borers, wood rot and other destructive timber pests and conditions and that there is no damage caused by any of the above in a report which complies with Australian Standard AS 3660.2—2017, to the extent that it applies.
- The Buyer may have the property inspected by a timber pest contractor before settlement to prepare a report on those matters.
- If the report states that active timber pests or conditions are present the Seller must pay the cost of eradication and, if there is damage from those pests/conditions, the Seller must either repair it before settlement to the Buyer’s reasonable satisfaction or allow a discount off the purchase price of the quoted cost of repairs.
Some issues around including this kind of clause in the contract are set out below. (These are the same issues that arise in relation to conditions about building defects and built-in appliances being in working order):
- The Seller may not be prepared to take the risk of an unknown liability for repair costs. Sometimes the seller will accept the clause if it says that the Seller may terminate the contract if they do not agree to pay the repair costs and you do not withdraw your demand that they be paid.
- The Estate Agent will prepare the clause unless you give them your own version – which you can get from us for free. The Estate Agent may say their wording is “standard” so you should just accept it. Estate Agents act for Sellers not Buyers. Therefore some clauses they put in contracts; even “standard” clauses prepared by REIWA, may favour the Seller. Who will win the negotiation over the wording of the condition depends on who wants the deal more.
- Never accept a pre-prepared report or the Seller arranging the report, unless it’s at an auction. You should, however, try to have the Seller agree to pay your costs of getting the report. If an inspector engaged by the Seller prepares the report they may have no responsibility to you to you if the report is incorrect, because you were not their client. Ensure that the contract allows a reasonable time for getting the report and negotiating a solution to any issues which it may reveal.
We can give you free, basic legal advice on negotiating the inclusion of special conditions in your purchase contract if you are nominating us to do the settlement.
IMPORTANT: This information is not legal advice. You reading it does not give rise to a solicitor/client relationship with us. It is general information only. It may be affected by the specific circumstances of your situation. You should not act on anything on this website without obtaining specific legal advice from us.