Who should pay for repairs?

11/11/2011


Question: I recently sold my house, with exchange happening in December and settlement about a week ago. The house is located in NSW, and was sold for 1.5m.

I received a letter yesterday from the buyer stating that the electric gates on the property don’t work, and that they were in working order at exchange. The buyer is arguing that I am liable for cost of repair. The buyer is also complaining that the garage has ‘dangerous’ cabling.

The issue is that the gates haven’t worked for a number of months – since well before exchange. They are pretty old gates with old wiring, and they may cost a fair bit to repair. However, not one bidder organised a building report, and there was no pre-settlement inspection. Surely the buyer should have noted this before settlement?

If this was the state of the property at exchange, am I still liable? Who has to prove their side of the story?

Answer: Most contracts for sale in NSW include a special condition to the effect that the property is purchased is in the condition and state of repair that it is in at the time of exchange and subject to all faults and defects. Purchasers are also usually required to acknowledge by way of a clause in the contract that they purchase the property relying on their own inspections. 

If such a clause was included in the contract you entered into with the purchaser, you are not liable to repair the gates and the purchaser cannot use this issue as an excuse to delay or cancel settlement. 

Your solicitor should be able to draft an appropriately worded letter to the purchaser’s solicitor pointing out your rights under the contract and calling for settlement in a timely fashion. 

The situation will be different if the purchaser argues that the gates were working prior to the contracts being exchanged and that they were damaged following exchange. In that case, if you cannot resolve your dispute prior to settlement you are required to settle the sale of the property and then have your dispute determined by an arbitrator. An amount of money will be held in trust from the sale proceeds, and the arbitrator will listen to evidence from both sides before making a determination as to who to believe. 

Having a dispute resolved by an arbitrator can be costly in terms of legal and arbitration fees and time consuming. That being the case, most matters are settled prior to arbitration with both parties compromising their position. 

If you wanted to avoid such a dispute in the future, you would have to make a disclosure about the faulty gate in the contract signed by the purchaser. This could be done by including a clause that specifically refers to the faulty gate or by including a property condition report or pest and building report in the contract that refers to the faults and damages in the property at the time of exchange. 

  • Answered by George Vlahakis, solicitor at Kydon Segal Lawyers

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