Oops, we made a big mistake


Question: My husband and I recently signed a contract of sale for a property passed in at auction that was subject to building and pest inspection. When we signed the contract we understood that there was no cooling off period, and we noted that the contract included a clause saying that the contract could only be ended if the building and pest inspection found 'major structural defects'.

Our question relates to what constitutes a 'major structural defect'. The property report came back with a list of major repair works that were required, including the demolition of an unsafe carport, though there were no major structural defects reported for the house itself. We want to terminate the contract but have already paid $1,000 and are expected to pay a 10% deposit within a matter of days. What are our options?

Answer: You have asked a very complicated and technical question. It is necessary to obtain more detailed instructions from you as to the exact terminology used in the clause saying that the contract could only be ended if the building and pest inspection found 'major structural defects'.  It will also be necessary to obtain an expert report from a building consultant as to the precise nature and extent of defects.

As a general guide only, the question of what constitutes “major structural defects” is one of legal interpretation which will be determined by reference to advice provided by an expert building consultant and by reference to the clause in which the phrase is used. 

An unsafe carport that requires demolition might constitute a major structural defect in the context of the agreement you signed if the relevant clause gave you a right to terminate the contract if the pest and building inspection found a major structural defect in any part of the property.

It is recommended that you seek legal advice from a properly qualified and experienced solicitor as soon as possible. 

Answer supplied by George Vlahakis, www.clickconveyancing.com.au

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  • Lilly says on 26/03/2012 03:59:43 PM

    We just bought a house and paid for a detailed building report. Both Major and Minor Defects were reported as well as Safety Hazards. Anything that was 'Major' (or a Safety Hazard) i took to mean as 'significant'. The Australian Standard AS 4349.1-2007 for Residential building pre-purchase inspections, states a Major Defect to be:

    "A defect of sufficient magnitude where rectification has to be carried out without undue delay to avoid: unsafe conditions, posing a threat to life or serious injury; loss of utility, whereby the defect is such that the whole of the relevant part of the building can no longer serve its intended function; or further substantial deterioration of the building."

    I think you could definitely opt out.

  • Lexus Conveyancing Melbourne says on 28/07/2015 04:01:24 PM

    Hi, It comes down to this you need to have a builder or a building inspector to provide a written report that sates that the property has a major structural defect. You have a big problem if the property does not have a major structural defect. A major structural defect example is the roof collapsing or the house subsiding it has to be a very major fault.
    There are other possible ways of getting out of contracts. If you purchased in Victoria you are welcome to contact me.

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