The week before settlement

When buying a property, you are usually entitled to one pre-settlement inspection. This inspection is typically done during the week before settlement, although it can be completed at any time. 

Any claims for compensation that may arise from a pre-settlement inspection must be raised with the seller no later than 5pm the working day before settlement; we recommend the inspection is completed two to three days before settlement. The inspection is arranged with the real estate agent, who is usually present during the inspection.


Why an inspection?

The purpose of the inspection before settlement day is to ensure that the property is in the same condition as it was when you signed the agreement, and that all chattels included in the agreement are in good working order. 

The pre-settlement inspection is not to raise issues with the property that existed at the time the agreement was entered into. If there were repairs or maintenance problems that were present before the agreement was signed, they should have been negotiated as part of the agreement in the first place.


What to look for?

Key items to check as part of the pre-settlement inspection include:

  • Electrical items, such as lights and power plugs, all work
  • The plumbing is in good working order, for example, all the taps turn on and the sinks drain
  • Testing the oven and hob turn on and heat up
  • Ensuring the dishwasher will turn on and run
  • Checking kitchen extractor and bathroom ventilation fans operate
  • Confirming that heat pumps’ heating and cooling settings function, and
  • Ensuring the garage door opener works. 

If the seller has agreed to complete any maintenance or repairs to the property as part of the agreement, both parties should confirm that this has been completed. You should also check for any new damage to the property, such as damage from the seller moving out of the property.


What to do if something is wrong?

The buyer should not notify the seller directly; this should be managed by the real estate agent and us. You should also notify us as soon as possible that there is a problem. We will advise the best approach to resolve the issue and will discuss this with the seller’s lawyer within the time frame required by the agreement – usually no later than the working day before settlement. 

If the seller agrees to remedy the issue before settlement, you are entitled to re-enter the property no later than the day before settlement to carry out a further inspection and confirm that the work is completed.

Sometimes, due to the nature of the problem or the time required to remedy the issue, it is not possible for the seller to rectify it before settlement day. In that case, you may both agree to either:

  1. Reduce the purchase price by an agreed amount and you will complete the necessary repair work yourself, or
  2. Retain funds in our trust account while the seller completes the work, with the funds paid to the seller once the work is completed (or returned to you should the seller not complete the work in the agreed time frame).

Noting that these arrangements should be clearly set out and agreed to in writing. 

If the parties cannot agree on a negotiated resolution to the issue, we may be able to make a compensation claim on your behalf as per clause 10 of the agreement. These claims must be handled carefully and made the working day before the settlement date. The claim process can hold up settlement so it is important to consider if this is appropriate in your situation. We can advise you on the process of making a compensation claim and whether making such a claim is in your best interests.


Issues post-settlement

Even if the time period to raise a claim for compensation pre-settlement has passed, this does not negate the seller’s warranties under the agreement. 

If the seller has provided a warranty in respect of a chattel and you discover (after settlement) that the chattel is not in good working order, you may still be able to claim compensation from the seller. Any claim for compensation, however, will be outside the process set out in the agreement and any dispute relating to this compensation will usually be heard by the Disputes Tribunal (depending on the amount of the claim). 

If you discover an issue post-settlement or outside of the timeframe for raising compensation claims pre-settlement, you should contact us for guidance on the next steps.


Disclaimer: All the information published in Property Speaking is true and accurate to the best of the author’s knowledge. It should not be substituted for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are the views of the authors individually and do not necessarily reflect the view of this firm. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit being given to the source.
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