The wording on your contract could make all the difference!
It might be hard to believe, but nearly every inspection clause on the standard Offer and Acceptance when you buy a house is either outdated or insufficient in protecting you as the purchaser?
Some History – Prior to 1998, every contract to purchase was subject to a ‘white ant clearance certificate’. In 1998, a new Australian Standard for pre-purchase inspections (AS4349.3-1998) was introduced as the new standard, which gave inspectors and purchaser’s clear guidelines for how inspections were to be carried out. In 2010, a revised standard was introduced, which changed several of the benchmarks now (AS4349.3-2010). Despite two different Australian Standards being introduced in a 13 year period, today, many real estate agents still make the purchase of a home subject to a white ant clearance certificate.
What is a White Ant Clearance Certificate? Does it include inspecting the roof space? Does it include the subfloor? Does it include the wet areas inside the home? Does it involve just the interior or the exterior of the home as well? What about the garage or the workshop? Without a clear standard for what a ‘white ant clearance certificate’ includes, how are you as the purchaser supposed to know what was actually inspected and/or whether you should still buy the house?
Do NOT sign any purchase documents that are subject to a White Ant Clearance Certificate!!!
Is making the offer subject to the Australian Standard inspection enough protection for you as the purchaser?
Well, this depends on what else is mentioned in the clause. For example (one common clause used today says):
“This offer is subject to a timber pest inspection being carried out in accordance with AS4349.3-2010 at the expense of the purchaser no later than 7 days prior to settlement. Should active termites be found in the main dwelling, then it is the vendors responsibility to pay for the eradication of the termites.”
Now on the surface that may sound as if you as the purchaser are fully protected, and it’s no wonder that 99% of purchasers happily sign this clause, however there are many scenarios that you would not be covered for.
- What happens if the termites are on the outside of the building, climbing up the external wall and just about to enter the roof?
- What happens if there are termites in the garage/shed/workshop?
- What happens if there is $80,000 worth of termite damage in the roof, but there are no termites present?
- What happens if the house is full of borers and requires a $30-40,000 fumigation?
- What happens if there was a water leak and several timbers have fungal decay, requiring treatment or replacement?
In any of the above scenarios based on the previous clause mentioned, you would be buying the house ‘as is’. In fact, the only thing the owner would be responsible for is the treatment of ‘active termites’. This means you would have to pay for all the damage to be replaced!
Owner Must Treat Termites: Perhaps one of the most frustrating things that our clients have had to deal with is the treatment of termites when found during an inspection. Most clauses will state that it will be the owners responsibility to have these termites treated. This means they pay for it but also means they get to pick the pest control company to carry out the treatment. The problem arises due to the level of service that varies between pest control companies. Where one company will come in with a one minute quick fix spray and provide a treatment certificate, another company may spend hours installing a baiting system and monitoring those stations for several months into the future. Given the option, which level of service do you think the vendor/owner of the property will want to pay for?
Horrible Thought – Case in point – the treatment of the termites (especially when someone is selling the house) is a contract between the existing owner and their pest control company. Unfortunately, their pest control company doesn’t necessarily have to kill the termite colony, only has to kill the termites present which means any future termites found on the property after you have moved in will be your responsibility. Try to contact that company and they will tell you that you are not their client.
As a purchaser, you do not have any say what-so-ever in whether the termite eradication will be done the ‘right way’ or the ‘cheap way’ by the vendor’s pest company.
Horror Story – We carried out a pre-purchase inspection on a house which had termite damage to the interior and subfloor of the home, however the only termites active were in the frame of the workshop outside. There was also borers in four separate sections of the roof and three sections of the subfloor meaning the entire house needed to be fumigated. We worked out the product cost alone to do the job properly and the cost of the chemical came to $14,000, plus it would take about a week to paint the product on every timber in the roof and subfloor. Then they needed a full termite barrier for the home as well as a colony eliminator in the workshop. The total pest bill came in at $22,000. However, because contract to purchase only mentioned termites in the main dwelling, the vendor did not even have to pay $1 towards the works needing to be carried out.
As you can see the pre-purchase inspection clause is perhaps one of the most important aspects of the contract and given the above scenarios, we at SWATAPEST highly recommend that you request your own clause on the contract.
With the assistance of the legal team at One Stop Settlements (www.onestopsettlements.com) who have helped us in preparing this clause to protect you as the purchaser, we suggest you use the following clause:
Now from your perspective as a purchaser, you would be fully covered by this inspection clause.
One idea, which is becoming more popular, is having us carry out the inspection prior to making the offer. This has multiple advantages for all parties involved. You will know exactly what you may be up for whilst the owners and real estate agents can relax knowing that the offer you have made is ‘unconditional’.
SWATAPEST offers three different levels of inspections: