Contract subject to Building & Pest – what does it mean?

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If a contract to purchase a residential or commercial property in Queensland is ‘subject to a building and pest inspection’, it means that the contract is subject to and conditional upon the buyer obtaining a building and pest inspection report which is satisfactory to them, acting reasonably, to proceed with the purchase. If the buyer doesn’t receive satisfactory building and pest reports in accordance with the condition, it allows them to terminate the contract, or negotiate terms, such as asking the seller to complete certain things or provide a price reduction for the buyer to attend to rectifications after settlement, in order to satisfy or waive the benefit of the building and pest condition.

How do I know if my Contract is subject to a building and pest inspection?

There should be a “Building and Pest” section on the contract. On Queensland’s common REIQ residential contracts, the section is on page 3. If the inspection date is left blank, the contract is likely not subject to a building and pest report. There are exceptions to this, such as if there is a special clause providing otherwise.

If the contract is subject to building and pest reports, the building and pest section of the contract should provide a date by which the building and pest condition is to be complied with (such as 14 days from the date the contract is signed by all parties).

It is best to check with your Solicitor, as all contracts are different. You should always send your Solicitor a copy of the draft contract prior to signing to ensure it has all necessary conditions that you require, and that they are correctly worded.

What happens if I do not receive a satisfactory building and pest report(s)?

In the event that you do not receive satisfactory building and pest reports from your licensed building/pest inspector (i.e. there are property defects or pest issues which you are not satisfied with) by the building and pest condition due date, you are able to:

  1. Ask for a price reduction so that you can rectify the issues from the report following settlement;
  2. Ask the Seller to fix the issues prior to settlement; or
  3. Terminate the contract if you do not wish to proceed due to the unsatisfactory report, noting you must act reasonably.

If you will be requesting a price reduction or for issues rectified, it is advisable to discuss with your Solicitor as soon as possible, as the Seller must be provided with notice of either satisfaction, waiver or termination under the building and pest condition by 5pm on the building and pest date.

If you decide to obtain a building and pest inspection for your own information and the report is not satisfactory, but there is no building and pest condition in the contract, you will be unable to terminate the contract if the contract is not subject to you obtaining such reports.

Please note, you must take all ‘reasonable steps’ to obtain a report by the building and pest condition due date.

What happens if I receive a building and pest report(s) that I am satisfied with?

If you do receive building and pest reports that are satisfactory to you on the other hand, while acting reasonably, then you must notify your Solicitor, who then notifies the seller’s Solicitor by 5pm on the condition due date.

If your solicitor does not notify the seller’s solicitor before 5pm on the building and pest due date, then you risk the seller terminating the contract, but the deposit will usually be refunded to you in full.

Please see our previous blog article explaining the steps you should take if your contract is subject to a satisfactory building and pest inspection.

What should you do next?

If you are signing a contract and are unsure whether your contract has a building and pest condition, please contact FC Lawyers to assist. We always recommend sending the contract to us to review prior to signing it to ensure that all is in order for you to sign.

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