So you are thinking of buying a residential property in New South Wales?

You might be buying the property to rent it out as an investment, or to live in. Whatever your reason for buying it, there are certain searches and enquiries which you should consider obtaining both prior to entering into the contract to buy the property and following exchange of those contracts.

It is important that purchasers consider obtaining these searches for two reasons – 

  • Firstly, before exchange of contracts, so that any issues which may affect the decision whether to purchase or not can be flushed out and;
  • Secondly, following exchange of contracts, so that any issues which affect the property but may not have been disclosed by the Vendor can be brought to the Vendor’s attention and consideration can be given to altering the terms of the contract or pursuing other remedies.

Searches before exchange of Contracts

The following pre-exchange searches and enquiries should be obtained:

1. An identification survey of the property.

This is a survey carried out by a registered property surveyor who will attend the premises and carry out a survey for identification purposes. This means that the surveyor will examine the physical nature of the property and provide a report to the purchaser as to various matters, including:

  • Easements, restrictions as to use and covenants affecting the property and whether the improvements on the property comply with those covenants and restrictions as to use.
  • Whether the property currently complies, or complied in the past, with Council building lines and development conditions.
  • Whether the property encroaches upon, or whether any neighbouring property encroaches upon, the subject property.

In some cases, a survey will be provided with the contract by the Vendor, however, this is not always the case.

2. Pest Inspection Report.

The purpose of this report is to inform the Purchaser as to whether the property is adversely affected by pests, such as termites. The Vendor does not have to provide disclosure to the Purchaser about such matters and accordingly, if the Purchaser buys the property without having investigated the matter and then discovers that there are substantial issues affecting the property, it is very unlikely that the Purchaser will have any recourse against the Vendor.

3. Building Inspection Report.

This is a report by an Architect or Building Inspector who will attend the property and provide a detailed report as to the structural integrity of the property and many minor and more serious matters affecting the property from a building point of view.

As with the pest report, these matters are not something that the Vendor must disclose or provide to the Purchaser. As such, the Purchaser is very unlikely to have any recourse against the Vendor in the situation where a problem arises once the property is acquired.

The report is often used by Purchasers to commence negotiations with the Vendor in relation to price or special conditions which are to be included in the contract to ensure that remedial work is carried out by the Vendor prior to completion of the purchase.

4. Strata Inspection Report.

If the property being purchased is a strata property (e.g. an apartment, flat or home unit), it is very important that the Purchaser obtains a report from a Strata Inspector as to the compliance by the owners corporation with the applicable strata legislation and other matters relating to the strata scheme, including, importantly, the imposition of any special levies.

Owners of properties in strata schemes are required to pay amounts quarterly to the owners corporation for the credit of the sinking fund and the administrative fund operated by the owners corporation. The administrative fund is used to fund the ongoing expenses of the owners corporation in running the apartment complex (cleaning, gardening, replacement of light bulbs etc). The sinking fund is used to allow the owners corporation to fund significant items of capital expenditure as required from time to time (e.g. painting, structural repairs).

Sometimes, as a result of particular circumstances applying to a particular strata scheme, it will be necessary for the owners corporation to raise a special levy (a one-off non-recurring levy) to enable funds to be raised for a particular purpose.

Searches after exchange of Contracts

Once contracts have been exchanged, it is often the case that the Purchaser’s Solicitor will recommend that a series of searches and enquiries be initiated with various Government Departments and Agencies to determine whether there are any proposals affecting the property. Such proposals may include matters such as road widening, outstanding work orders from the Local Council, proposals to acquire easements for electricity or other matters.

The message to take away is that while Purchasers buying properties have to incur expenditure for many large items, including Stamp Duty and legal fees, it is often wise to invest some money prior to exchange of contracts and after exchange of contracts to determine whether the property you are proposing to acquire is the right property for you in all the circumstances.

If you are thinking of buying a property or have any questions regarding your property purchase, please contact one of our property lawyers.