07 Mar Sellers required to supply reports – Andrew Mackie-Smith
How far are we from having a building and pest inspection report generated as part of the listing process. Paid for by the seller and provided to all buyers. Potentially saving buyers hundreds of dollars. There are good reasons why a seller would want to do this. Andrew Mackie-Smith explains.
Kevin: I don’t know how many times I’ve been approached by a purchaser who’s had to go to an auction only to find that they’re outbid at the auction and then all the money they’d spent on building and pest inspections is effectively just wasted. And it can cost several hundred dollars. It’s a very frustrating situation.
There is a solution to this, and it’s a matter of a lot of governments around Australia coming to the table to talk about mandatory building and pest inspection reports generated by the seller at the point of listing. This has been a major drive for a company called BuildingPro and its two owners, Andrew Mackie-Smith and Andrew’s wife, Trish. Andrew joins me to talk about this.
Andrew, it seems to me to be a very logical solution to a very difficult situation for a lot of buyers, and that is to have this building and pest inspection done upfront. Is it being done anywhere else in Australia at this point in time?
Andrew: Yes, Kevin. In fact, it is. In the ACT and Canberra, it’s been around for the last 15 years. So, since 2003, they’ve enjoyed sellers providing building and pest reports as well as other reports, too.
Kevin: I’ve spoken to buyers and sellers, and I’ve spoken to agents in the ACT who tell me that it works extremely well. There’s no opposition to it; it just seems to make a lot of sense. The question that I ask, though, Andrew, is can a buyer rely on a report that’s been generated by a seller?
Andrew: If you’re in the ACT, yes, you can. The legislation makes that clear, and you can rely on it. In fact, how it works is the seller commissions a suite of reports including building, pest, energy, compliance, and asbestos reports. They provide those to potential purchasers, and they get that free of charge. And then the eventual purchaser will have that report and those reports transferred into their name. They can rely upon them, and that’s enshrined in the law.
So, it’s very clear, and there are heavy penalties for sellers not disclosing, and there are also penalties for those consultants. And there’s a clear path for them to be responsible.
Whereas in other states if a seller provides a report, there’s a big question mark. In fact, if you read the fine print on those reports, Kevin, it clearly says “A third party cannot rely on this report.”
Only in Canberra can you rely on it, and that’s why I think the law needs to be changed to make this clearer.
Kevin: Now, that point you made about “third parties can’t rely on the information in this report,” is that done to protect the building inspector from having people pass it on, or is that a legitimate statement of reliability – or lack of reliability?
Andrew: I’m no lawyer, but what I understand is that there needs to be consideration given under the law. In other words, if you provide a service to someone, the consideration is normally payment in return of that professional service.
Now, if third parties are relying on that report, they don’t have a legal arrangement with the building inspector because they’re a third party and the inspector hasn’t provided the report to them and they haven’t accepted the terms and conditions and the scope of that agreement. In other words, often a third party will get a report and they don’t know the limitations that the inspector might have laid out in an inspection agreement.
Going back a step, when you’re a building inspector, you tell the client through an agreement “These are the things I’m going to inspect, and these are the things I’m not going to cover in the inspection.” So, a client would know those things going into it, but a third party might not have those conditions and wouldn’t know.
So, there is a reason beyond just covering the building inspector against litigation. It’s more than that.
Kevin: This seems like a very simple and very logical solution to, as I said at the start, a difficult situation for buyers. But it does actually in itself represent a fairly seismic shift in the law, because at present, it’s very much buyer beware. But this is almost moving the onus from the buyer back to the seller, isn’t it?
Andrew: Yes, Kevin, and I think there’s a general move worldwide towards more seller disclosure. In fact, 30 states of the USA have strict seller disclosure laws, and in London. they have seller disclosure. And as we’ve said, it’s been in Canberra for 15 years. So, it’s working elsewhere, and progressive places are taking this up.
The buyer beware law – or caveat emptor – has been around since the 15th century, and it’s quite archaic, made for the wealthy landowners to protect their interests. But now you have people using the Internet to search for properties and information, they’re hungry for more information. They want to know the condition, they want to know about things like flood risks, they want to know if there’s asbestos, are there any unauthorized business works on the property, are there significant pest infestations or subsidence?
And why shouldn’t they get to know that? Houses are very expensive in Australia; it’s only fair that people get this information. And sellers who are recognizing this and taking it upon themselves to provide disclosure are actually finding something quite interesting – that they’re benefitting by getting a better sales price.
Now, that’s anecdotal, but that’s my experience as a building consultant in this field for the last 15 years.
Kevin: I wish you every success with it. I know that it’s going to take a lot of work to do it, but it certainly does make a lot of sense, as I said at the start.
Andrew Mackie-Smith from BuildingPro, thank you so much for your time.
Andrew: Thanks, Kevin.