Pitfalls when Purchasing a Property
Building Approvals and Finals
Buying property is usually one of the most important investments you will ever make. Making sure that you get what you pay for is very important. While it is usually a condition of a residential purchase contract that the contract is subject to the Buyer obtaining satisfactory building and pest reports, the scope of this clause is often overestimated by Buyers.
Under the current Standard REIQ Contract for House and Residential Land (Fourth Ed) clause 4.1 states that a contract is conditional upon a Buyer obtaining a building report on terms satisfactory to the Buyer.
This provision is often misinterpreted by Buyers into thinking that any improvement on the property, such as a house, garage, shed or patio must have full approvals from their Local Council.
Clause 7.6 of the Standard Contract sets out the Sellers responsibilities in relation to requirements of authorities. The Seller is only responsible if a valid notice or order has been made prior to the Contract Date. This means that unless a Council has issued a notice or order regarding an unapproved or illegal structure, under the terms of the Contract, the Seller is not required to obtain any approvals or final certificates prior to Settlement.
Practically, this means that if finals have not been granted a Buyer is not able to terminate the contract or negotiate for a reduction in the purchase price.
This can become an issue in the future if you sell the home and the new contract includes a requirement to obtain building approvals and finals.
The information regarding these final certificates is found in local government searches (excluding rates) which range from $200.00 to $300.00 in Queensland. Given that most Buyers do not instruct solicitors to conduct these searches until the Contract has become unconditional, unfortunately often Buyers are unaware of the multitude of potential finals that they will become liable for.
We have noticed that this is becoming increasingly common as home owners conduct more and more DIY renovations. Home Owners may take on weekend jobs of adding a patio or shed to their property, without going through the formal approval process and obtains all necessary finals from their Local Council which may impact on future sales.
While this issue has become increasingly common, there is an easy solution. By the inclusion of a special condition addressing this issue, Buyers can stipulate that any Seller must provide final building approval certificates by Settlement.
As part of our service for the Purchase of a Property we are happy to review the terms of the Contract before it is signed to ensure that any concerns you may have are addressed.
If you wish to purchase a property and are concerned regarding additions made to the property ask your Real Estate agent to provide the unsigned contract to us here at Streten Masons Lawyers.