Urgent - Terminating a contract based on building inspection report - no cooling off

Discussion in 'Legal Issues' started by Bec717, 1st May, 2010.

  1. Bec717

    Bec717 Member

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    Hi,

    We signed a contract of sale last week subject to building and pest inspection. At the time of signing the contract, the agent had stuck on their clause saying that it has to be a "major structural defect" for the contract to be ended with all money refunded.

    We didn't have cooling off period as it was a property that was passed in from an auction two days earlier.

    The report came back with a list of major repair works required (including demolition of an unsafe carport attached to the house) although there was no major structural defect in the house itself. We've asked to terminate the contract based on "major defects".

    The real estate agent called and told us the vendors would consult with their solicitors and get back to us. We haven't heard back since.

    We have currently paid $1000 and are expected to pay 10% deposit on Tuesday. At this point we have no idea if we need to pay the 10% deposit by Tuesday and the ramifications of not doing so.

    Has anyone had any success in getting out of a contract under similar circumstances? We'd really appreciate any advice. :confused:
     
  2. schweedy

    schweedy Member

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    I'm no legal eagle, but I wouldn't be paying anymore money on a property you dont want to purchase.

    Technically once you have notified them in writing, the contract is ended and you should get back your 1k. Though they may find ways and reasons to keep that (plus any more you add to the kitty by paying the deposit).

    Its been 6yrs and a few sales/buys since I had to cancel a sale because of the building inspection, and although the sales guy tried to push us to go through with it anyway (came back with lower offer to allow us to fix the place up), we decided it wasn't worth the hassles to go through with the purchase. I'm pretty sure we got our money back, and all was sweet. Years later used that same guy to sell one of our IPs, as he had changed companies and moved to that area.
     
  3. Sheryn

    Sheryn Member

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    We cancelled a contract via our solicitor a few years back in aonther state. I was able to ring our solicitor on a Sunday morning and he came to our house to see what we had signed and was able to tell us straight away we can get out of contract = peace of mind.

    On the Monday morning he faxed the other party to say we were cancelling contract.

    End of story except we didn't get our $1000 deposit and I think i paid our solicitor under $300 for his services.

    Money well spent.


    Kind Regards
    Sheryn
     
  4. JamesGG

    JamesGG Member

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    Just curious, Bec, did you put this request in writing...?
     
  5. Lil Skater

    Lil Skater Member

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    From how i see it, because you've bought under "Auction" ruling (as you bought within 3 days of auction). You're not entitled to any cooling off period or special clauses.

    But in saying this, if you were allowed the clause and there is major structural defects then you're allowed to cancel the contract as there is structural damage to the carport - which the way i see it, is apart of the purchase.

    Check the clause as it may state "House", and as the carport (i'm guessing) is detached it has no bearing on the house itself, which means you may have to go through with the sale or lose your deposit.

    Oh, and if you don't pay your deposit because you don't want to go through with the sale - yet you legally have to - the vendor can take legal action against you for damages and you may end up paying more than the 10% deposit to the vendor with no house.

    By the way, i've assumed you've bought in Victoria.
     
  6. WinstonWolfe

    WinstonWolfe Richard Werner fan

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    I don't know the standard clauses of Victorian contracts, but in Qld the pest and building out is not well understood. The clause uses "structurally unsound" and "manifest pest infestation", of which lawyers can argue the definition of all day.

    Rob Balanda, a lawyer know to many SSers, recommends putting in your own clause for pest and building.
     
  7. Luv2Travel

    Luv2Travel Member

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    I always wonder this, I've heard that in order to get out of the "major structural defect" clause, the house has to be almost falling down. I recently helped friends purchase a house and it had the standard wording "major....". I had them cross out the word major so it just read "any structural defect". The house was fine so not an issue, but I don't know if taking that one word out would help your case to get out of it if the other side could argue it's not "major".
     
  8. WinstonWolfe

    WinstonWolfe Richard Werner fan

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    Wise move.

    There's a heap of risk that the Qld REIQ contract doesn't cover - easements, overland flow, stormwater, combined sewerage lines, soil test result (shallow soil over rock), main roads upgrades etc. All these things will impact a site's potential and it is wise to use one due diligence clause to cover such things.
     
  9. marmalade

    marmalade Member

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    The REIQ contract states "The buyer may terminate this contract...if an inspector's report is unsatisfactory to the buyer. The buyer must act reasonably"

    That last sentence seems about as vague as they come! But I guess if you change it to the buyer's favour, it will make the contract a little less appealing to the vendors.

    Just curious Winston, what wording does Rob Balanda recommend? Or which do you use?
     
  10. BayView

    BayView Member

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    Good point.

    We put together our own worded pest control and building clauses, and have them attached to the contract.

    The building one is very specific, and terms such as "fair wear and tear given the age of the building" is used.

    You can word it that the Vendor pays for any repairs needed, or that the cost of said repairs are deducted from the sale price etc.
     
  11. WinstonWolfe

    WinstonWolfe Richard Werner fan

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    Sorry....my thoughts re Rob were in relation to commercial contracts, as I've been more involved with those in the last few weeks.

    You are right. the pest and building for the resi contract is more straight forward for buyers in Qld.


    From REIQ 6th edition COntract for Houses and Residential Land

    4. Building and Pest Inspection Reports

    4.1 This contract is conditional upon the Buyer obtaining a written
    building report from the Building Inspector and a written pest
    report from the Pest Inspector (which may be a single report) on
    the Property by the Inspection Date on terms satisfactory to the
    Buyer. The Buyer must take all reasonable steps to obtain the
    reports (subject to the right of the Buyer to elect to obtain only
    one of the reports).

    4.2 The Buyer may terminate this contract by notice to the Seller at
    any time before 5pm on the Inspection Date if an Inspector’s
    report is unsatisfactory to the Buyer. The Buyer must act
    reasonably.

    4.3 If the Buyer terminates this contract and the Seller asks the
    Buyer for a copy of the building and pest reports, the Buyer mus
    give a copy of each report to the Seller without delay.

    4.4 If the Buyer does not terminate this contract by 5pm on the
    Inspection Date, it will be treated as being satisfied with the
    building and pest reports it has obtained.

    4.5 If required under the Queensland Building Services Authority
    Act 1991, the Inspector must hold a current licence under that
    Act.
     
  12. Fudge

    Fudge Member

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    Depends which way you look at it.

    If the carport is unsfe and needs to be demolished, then there is a major structural defect.

    Who cares if it doesn't relate to the house. Does the insert by the agent only refer to the house??

    I believe you should be able to get out of the contract.

    Also, if the agent added the extra clause, this should have been initial and countersigned by both parties.

    Good luck.

    F
     
  13. Terryw

    Terryw Investor

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    Don';t know about in VIC, but in NSW agents are prohibited from filling in the contract - except for the small box on the front page with names, addresses etc.
     
  14. Bec717

    Bec717 Member

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    Thank you all so much for your feedback, really appreciate it. The real estate agents have really taken out the joy of buying a property for us. Yes, the property is in Vic.

    We emailed the agents the reports and listed out all the defects and they called back trying to downplay the amount of repairs we had to do. They even suggested we took down the car port ourselves to save some money!

    If we had known the "subject to building and pest inspection" would not protect us, we would never have put down an offer.
     
  15. Terryw

    Terryw Investor

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    I think you should stop communicating with the agent, go straight to the other party's solicitor via your solicitor. The agent is just trying to save their commission and shouldn't be giving you advice on this.
     
  16. twobobsworth

    twobobsworth Member

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    Agreed. The agent is not working for you. The only person you need to communicate from here on in is your solicitor.
     
  17. Perp

    Perp Member

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    I have to disagree with schweedy here. I seriously doubt that this would constitute a major structural defect and thus you have no legal right to cancel the contract. You may decide to deliberately breach the contract by not paying the balance of the 10% deposit, and gamble that they won't pursue you for damages, which is probably what I'd do if I'd gotten myself in your situation, but that doesn't nullify the contract - it simply means you've decided to put yourselves in breach.

    But if I were the vendor, I'm sorry, but I wouldn't be releasing you from the contract, and I'd be initiating legal action for the balance of the 10% deposit 9am on Wednesday.

    Do you have a solicitor acting for you? I'm guessing not or they wouldn't have let you sign this contract... If you got a solicitor after signing the contract, what advice have they given you on the building report?

    From the fact that you said you have no idea of the ramifications of not coughing up the balance of the 10% by Tuesday, I'm tempted to think that perhaps you still don't have a solicitor, in which case you need to get one first thing in the morning, and be prepared to throw some more money at them for advice to see if you can get out of this contract.

    Be aware that building inspections nearly always make every house sound like it's about to fall down; they're so nit-picky and I guess feel like they have to earn their fee, so they always finds heaps of things to mention. If there are no major structural defects, and demolishing a carport is the biggest item that the inspector found, then why do you want out? That's really not a big deal.
     
  18. jezza

    jezza Member

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    Bec

    I am surprised they allowed you to put the clause in 9or if it was accidently left in), as its in the " Auction Period" they generally have no cooling of time. Good luck with this and as Terry said I would not speak one more word to the Real estate agent and get your solicitor to see what they can do. This is a reason why people do go to Auction and not accept offers prior in VIC so this clause is eliminated. It happened recently a couple of streets from me Agent told me they were not accepting any offers prior and that 4 people had building inspections done.
    Jezza
     
  19. Bec717

    Bec717 Member

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    Thanks guys, your feedback have been great, really helpful at a time like this. We've got a lawyer to work this out with the Vendor's solicitor now.

    Will update you on what happens.
     
  20. Perp

    Perp Member

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    Bec717, I'd still be interested to know why you want out. Was it really because the building inspection was so dire, or have you changed your mind for other reasons and want to try and use this as your "out"?