Australian Property News

Vendor disclosure reports criticised

Posted on Thursday, September 30 2010 at 1:27 PM

The New South Wales Government’s proposal that sellers provide buyers with mandatory building and pest reports has come under fire by the Australian Environmental Pest Managers Association (AEPMA).

While at first glance it seems logical that vendors should be required to provide copies of pest and building reports with the contract, says AEPMA spokesman Mal Trotter, the legal relationship shifts from the purchaser and the report provider to the vendor and the report provider.

“We believe this means that property buyers will have very limited rights of legal redress if a property report is subsequently found to be wrong or misleading and problems with the property are uncovered after change of ownership,” he says.

“If the relationship with the report provider changes from purchaser to vendor, there’s also some potential for bias towards the vendor to infiltrate the reports, particularly if real estate agents work with the same pest and building inspectors on behalf of their vendor clients,” says Trotter.

The Law Society of NSW president Mary Macken agrees.

“The best due diligence report is the one procured by a cautious purchaser on his own account,” she says. “If this proposal were adopted, the danger of a vendor ‘shopping around’ to find a favourable building and pest inspection could be very real.”

Macken believes this supposedly consumer-friendly initiative is actually “a wolf dressed up in sheep’s clothing”.

She says the current system is a balanced regime between the competing interests of vendor and purchaser. “Building and pest inspections can vary dramatically so it’s in the best interests of the purchaser to commission their own inspections,” she says.

The cost is another issue, she says.

“A flawed perception is that this regime would reduce costs for purchasers. But in the ACT (Australian Capital Territory), where this regime has been operating for some time, purchasers are ‘strongly recommended’ to obtain their own reports – meaning a duplication of this service.”

Trotter believes that like in the ACT, very few NSW buyers would simply rely on these reports.

He says that if the government does change the law this month, a new industry code of practice covering inspections and report writing must be developed to increase the report standard.

Additionally, if introduced, AEPMA believes that mandatory vendor disclosure should be limited to auction sales.

To have your say, go to API’s blog on this topic here