Written by Louise Maginness - Registered Legal Executive (Property)
After an agreement becomes unconditional the agreement allows a purchaser to conduct a once only pre-settlement inspection of the property.
When should the inspection be done?
We recommend to our clients that they conduct the inspection at least two days prior to settlement. Some purchasers wish to do their inspection on the same day as settlement. However, under the current ADLS agreement terms, the inspection cannot be carried out on the day of settlement and the vendor is within their rights to refuse.
Ideally the inspection should be completed after the vendor (or tenant) has vacated the property. However this may not be possible as often the vendor (or tenant) doesn’t move out until the settlement date. Please note that when a property is tenanted, it is essential that a pre-settlement inspection is requested early as the Residential Tenancies Act requires that a tenant is given at least 48 hours’ prior notice before an inspection.
What is the purpose of the inspection?
The purpose of the inspection is to allow the purchaser to check that the property, chattels and fixtures are in the same condition as when the agreement was signed.
The vendor is required to leave all the chattels listed in the agreement in the property on settlement. The current ADLS Agreement for Sale and Purchase provides that the chattels must be in reasonable working order on settlement - fair wear and tear excepted.
If the purchaser is unable to undertake the inspection themselves (e.g. they are out of town) then they can authorise another person to undertake the inspection on their behalf.
What to check
The purchaser should take their time to make sure they check everything thoroughly.
The purchaser should check that no further damage has occurred since the agreement was signed e.g. a broken window. They should turn on the chattels to see if they are functioning correctly e.g. heaters, lights, dishwashers, ovens, spa baths etc. Check the heat pump’s cooling and heating functions.
There have been occasions where a vendor has removed chattels (such as the window coverings or dishwasher) and replaced them with cheaper/older models. If a chattel needed replacing before settlement, then the replacement should be like for like and the same model or type as agreed.
We recently had a client who wished to light the wood burner at the pre-settlement inspection. Our advice was that if the wood burner is coming with the house and they want to check that it is working, then yes, light it! We did suggest that the purchaser bring their own kindling, cones and paper etc.
Once an inspection has been completed the purchaser should contact their lawyer to advise whether they are happy that the property is in the same condition as when they signed the agreement. If there has been damage or if any chattels or fixtures have been removed then they will need to notify their lawyer immediately. The purchaser’s lawyer would then notify the vendor’s lawyer that there are things that need to be rectified before the purchaser will settle.
How clean should the property be?
Many clients believe that the property should be absolutely spotless and ready for them to move in on settlement. The standard agreement does not apply for the vendor to clean the property before settlement. If a client wants the property cleaned before settlement then a further term needs to be inserted into the agreement stating that the carpets and/or house should be commercially cleaned by the vendor prior to settlement.
What if there is damage?
The client must tell their lawyer immediately. It is much easier to deal with any issues prior to the day of settlement. While the client will not be able to cancel the agreement, they may be able to claim for compensation, as long as this claim is served on or before the last working day prior to the settlement date. In most cases a practical solution can be found – usually involving either the negotiation of a price reduction or the withholding of some settlement funds until repairs are complete.
Can the purchaser complete a second inspection?
A second inspection is only allowed if it has been agreed that the vendor will carry out work before settlement and that the purchaser needs to check that it has been completed.
Mortgagee sale, rating sale or “as is where as” properties
If a client is purchasing at a mortgagee or rating sale, or for an “as is where is” property, then usually the agreement will be amended so that the vendor isn’t warranting as to the state of the property or that any chattels will be included. This should be explained to the client prior to execution of the agreement.
If a pre-settlement inspection is carried out at an appropriate time and in an appropriate manner prior to settlement, then any issues raised will normally have a practical solution which allows the settlement to go ahead. If you or your clients have any questions about either the pre-settlement or compensation claim processes then please do not hesitate to contact a member of our expert property team.