There is no easy answer to this question. It depends on when the damage occurred, how it was caused and how serious it is.
A buyers rights are determined by the sale contract. This article runs through what they are and includes some tips on what you should do to mitigate the risk of being out of pocket because your new home is damaged before you settle.
Buyer’s right to inspect
In QLD, the contract used (almost universally) for the sale of homes is the REIQ / QLD law society approved contract for houses and residential land (REIQ contract).
The REIQ contract gives a buyer the right (after giving reasonable notice to the seller or their agent) to enter the property before settlement to conduct a pre-settlement inspection.
Do a pre-settlement inspection
Buyer’s should do a pre-settlement inspection to check (amongst other things):
- no fixtures or chattels they are buying under the contract have been removed;
- the property has not been damaged since they last inspected it (i.e. after the contract was signed); and
- there are no anticipated issues with the seller giving vacant possession on the settlement date (e.g. the seller has not removed its property and/or any tenant’s property).
When should you inspect?
We recommend buyers arrange (with the seller’s agent) to inspect the property as close as possible to the day of settlement or even on the morning of settlement.
Who is responsible for the damage?
In short – it depends on the type of damage and how and when it occurred.
The overarching position under the standard REIQ contract is—the property is at the buyer’s risk from 5:00 pm on the first business day after the contract is signed.
This means, if the damage occurs after this time, it is the buyer’s problem except in limited circumstances.
When is the seller responsible?
Only for damage caused by the seller’s failure to take reasonable care of the property between the date the contract was signed and settlement.
Fair wear and tear or damage caused by something outside the seller’s control (e.g. a storm, a flood or fire not wilfully caused by the seller’s negligence) is the buyer’s problem.
Do I have to settle if damage occurs?
In most circumstances—yes. The exceptions are:
- the seller agrees to postpone settlement;
- there is a specific special condition in the contract which expressly gives the buyer a right to elect not to settle in circumstances specified in the special condition (e.g. the seller must have the property cleaned by a professional cleaner prior to settlement); or
- the damage was caused by the seller after the contract was signed: and
- the damage was deliberate or caused by the seller failing to take reasonable care of the property; and
- the damage is bad enough to make the property unfit for occupation.
Under the REIQ contract you may be able to claim compensation from the seller for minor damage, but you can’t refuse to settle or demand compensation be paid prior to settlement or demand any off-set from the purchase price you pay under the contract on settlement.
How do I mitigate the risk of damage?
We recommend (as a minimum) you do the following:
- talk to us before you sign a contract so we can deal with any particular concerns you may have by drafting an appropriate special condition to include in the contract;
- as mentioned above, carry out a pre-settlement inspection;
- let us know straight away if your inspection reveals the property has been damaged or the seller has made any changes to the property so we can advise you on whether you are entitled to terminate the contract and/or could claim compensation from the seller; and
- as soon as you sign the contract, take out insurance by contacting an insurance broker or home insurance company directly.
Give us a call
If you are buying a home in the near future and you want to discuss the issues raised in this article—please don’t hesitate to give any of our lawyers a call.