Your Building and Pest Inspection Clause: A Guide

Finding a property that feels like home is an emotional experience. However, the transition from emotion to a sound investment requires due diligence. 

One of the most critical tools at your disposal is the “Subject to Building and Pest Inspection” clause. 

Understanding when to use it, how it works, and the protection it offers is fundamental for every property buyer.

When and Why to Include This Clause

The short answer is that this clause should be included in almost every offer you make for an established property. 

It is your primary defence against purchasing a property with hidden, costly defects that are not visible during a standard walk-through.

You should insist on this clause to protect yourself from:

• Major structural issues: such as large foundation cracks, significant sagging floors, or damage to load-bearing walls and roof framing. Other examples are crumbling concrete, material deterioration from pests or rot, and misaligned walls that cause doors and windows to stick
• Significant pest infestations:  termites, which can cause extensive structural damage, rodents (rats and mice) that spread disease and gnaw through wires and other materials, and cockroaches, which are resilient, carry bacteria, and can trigger allergies. Other examples include devastating agricultural pests like the Khapra beetle or invasive species like the European wasp, which pose threats to the environment and industries.  

Victorian law states that a sale at auction is unconditional. 

Therefore, you must complete your building and pest inspections before auction day. Winning a bid without this prior knowledge means you are legally bound to purchase the property, regardless of its condition.

How is the Clause Effected and What is the Process?

“Effecting” the clause means following the specific steps outlined in your contract to satisfy or waive the condition.   Skilled Conveyancing will draft this clause with precision, but the operational process relies on you.

Here is a typical step-by-step guide:

1. Contract Execution: Your offer is accepted with the “Subject to Building and Pest Inspection” clause included, specifying a timeframe (e.g., 14 days) for completion.
2. Engage Professionals: You immediately engage a licensed and insured building and pest inspector to conduct a comprehensive assessment. It is your responsibility to book and pay for this service.
3. Receive the Report: The inspector provides a detailed report outlining their findings.
4. Review and Decide: This is the critical stage. You, with the guidance of your Building Inspector, must discuss the report and decide:

** Conveyancers are not qualified to discuss a Building report

• Satisfied: If the report is clear or only identifies minor, acceptable issues, you formally notify the vendor (through your conveyancer) that the condition is satisfied. 
• Dissatisfied – Negotiate or Terminate: If the report reveals major defects, you have the right to:
  • Negotiate: Request that the vendor complete repairs or agrees to a reduction in the purchase price to cover the cost of the required work.
  • Terminate: If an agreement cannot be reached, you can withdraw from the contract entirely.

The Vital Question: Will I Lose My Deposit?

This is the core of the clause’s protective power. If you follow the process correctly and withdraw based on unfavourable findings in the reports, ie. major structural defects and/or major pest infestations, you will get your full deposit back.

The correct wording of special conditions provides the legal right for termination without penalty. The deposit, held in a trust account, is returned to you. Without this clause, discovering major defects after signing would leave you with no recourse – you would either have to proceed with the purchase or withdraw and risk forfeiting your deposit and facing legal action from the vendor.

What is the Conveyancer’s Role?

As your legal representative, our role at Skilled Conveyancing is comprehensive.  We:

• Draft the Clause: We ensure the clause is worded forcefully, giving you the right to terminate the contract if the report is unsatisfactory to you.
• Advise on the Report: We help you interpret the legal and financial implications of the inspector’s findings.
• Manage the Process: We handle all formal communication with the vendor’s conveyancer, whether notifying them that the condition is satisfied or formally requesting negotiations or termination.

It is important to note that while your bank requires a property to be sound for their security, they do not affect this clause. They will rely on their own valuation, not your inspection report. The clause exists purely for your protection.

Do not leave your property purchase to chance. 

A small investment in an inspection clause from a registered Building Inspector can save you from a catastrophic financial loss. 

For a contract drafted with your best interests at the forefront, contact Skilled Conveyancing today on 03 9729 3512 or email us.to Conditional Purchases