Pre-Settlement Inspections – Property Purchasing

Pre-settlement inspections – why do one and what to look out for.

Many purchasers query why their lawyers urge them to conduct a pre-settlement inspection of the property they are looking to purchase.

The pre-settlement inspection is a chance for a purchaser to go round the property they are purchasing, ahead of the settlement date, and to check that the property and chattels are in the same condition as when they first entered the contract to purchase it. If issues are found, they can be raised with the vendor and hopefully rectified before the settlement date, thus avoiding delays for both parties on the settlement date.

1.   Can a purchaser inspect the property whenever they like?

No. The sale and purchase agreement provides two chances for a purchaser to check on the property and chattels they are purchasing as follows:

  1. A pre-settlement inspection to examine the property, chattels and fixtures included in the sale; and
  2. One additional chance to enter the property prior to settlement to ensure the vendor has complied with any agreement they have made to do work on the property by settlement.

If additional inspections are required, this must be negotiated with the vendor.

2.  Who organises the inspection and when should a purchaser do their inspection?

The purchaser normally arranges a time to complete their pre-settlement inspection with the real estate agent. If the property has tenants remaining in it, allowing enough time for the vendor to give their tenants the required notice of any inspection should be considered.

Purchasers need to be aware that they cannot raise issues on the day of settlement. As such, purchasers should conduct their pre-settlement inspection at least 2 working days before the settlement date. This ensures that issues can be raised with the vendor’s lawyer ahead of the settlement date and hopefully rectified by the vendor, thus avoiding delays in settling on the settlement date.

3.  What should a purchaser look out for in their inspection?

Purchasers should:

  1. Check that the property and chattels included in the sale are in the same condition as when the sale and purchase agreement was entered into.The chattels, equipment and systems that service the property should be in reasonable working order or, otherwise, in the same state of repair as at the date of the agreement (fair wear and tear is excepted).
  2. Check that no chattels included in the sale have been taken away.
  3. Check that rubbish and other miscellaneous items around the property, including in outbuildings and around the garden, have been removed.
  4. If the vendor has agreed to conduct works on the property by settlement, check that those have been completed as agreed.
  5. If tenants have moved out, or furniture has been removed, check that there is no new damage to the property.

However, purchasers need to be aware that the pre-settlement inspection is not an opportunity to raise issues that already existed but were simply not spotted by the purchaser previously. “Buyer beware” applies.  If the issue existed at the time of entering the agreement but was not noticed by the purchaser at the time, or raised during their due diligence period, the vendor cannot then be called upon to rectify the issue.   The vendor is however required to provide the chattels included in the sale in the condition as per point 3.1 above.

 4.  Does a property need to be cleaned and the garden mown by settlement?

Not necessarily. Purchasers can expect that the property be left in a similar condition to when they entered the agreement to purchase. However, though it is polite for a vendor to clean and tidy the property for the purchaser, there is no clause in the contract requiring a vendor to leave the property in a pristine state of cleanliness.

If you, as a purchaser, expect the property to be professionally cleaned or the garden mown and tidied by the vendor when you take possession, you should add that as a further term to your contract.

 5.  What if an issue is found in the pre-settlement inspection?

A purchaser should raise any issues they find in their pre-settlement inspection with their conveyancing lawyer as soon as possible. Again, issues cannot be raised on the day of settlement.  Thus, the sooner the purchaser’s lawyer is alerted to an issue, the more time there is available to contact the vendor’s lawyer and negotiate the issue being rectified or compensation being given.

If you are a vendor or purchaser and have any queries as to your rights and obligations, please contact one of our lawyers in our property team at Saunders & Co.