A pre-settlement inspection provides the opportunity for buyers to inspect the property before settlement.
Now, due to recent government stimulus packages launched amid the COVID-19 pandemic, it is becoming even more apparent that Australian's are engaging in new home builds.
This means that all investors and owner-occupiers should be informed about the requirements and expectations of a pre-settlement inspection.
Incentives include the HomeBuilder scheme, which offers $25,000 to eligible individuals planning on building a new home. Read more about the HomeBuilder scheme and eligibility.
Another incentive is the First Home Owners Grant, offering an additional $10,000 for first home purchasers that are new property under $750,000. Read more about the First Home Owners Grant and eligibility.
Pre-Settlement Inspection Overview
Pre-settlement inspections are not compulsory, however, buyers usually want to use this opportunity to check that the property is in good condition - checking that all rubbish and waste have been removed from the site and that any special contract conditions have been met.
Overall this process reassured buyers, providing them with a sense of certainty as it ensures the property is in the best condition possible.
Important Stages
1. Pre-Settlement Building Inspection Report.
The best practice is to have a pre-settlement building inspection report conducted which outlines a builders defect list.
Roughly 2 weeks before the practical completion date of a new property, the builder will send you a 'notice of handover report', advising of the date and time of your handover.
In some cases, the builder will advise you that you are entitled to attend the inspection and/or engage an independent building inspector to oversee the handover inspection on your behalf.
Whether or not the builder does advise you of this you are within your rights under the contract to engage an independent qualified company to conduct this inspection. Most of the state regulators in Australia such as the QBCC and NSW Office of Fair Trading recommend that you do engage a building inspector to carry out this inspection.
2. Handover Inspection.
Once a third party building inspector is engaged to conduct your handover inspection, they will liaise with the builder to confirm the date and time of the inspection.
The inspector will meet with the building supervisor onsite to allow them to inspect the property and immediately provide the supervisor with a builder's defect list.
3. Report Submission.
A full report with photographic evidence will be sent to you within 24 hours. The reports are thorough, easy to understand, and will give you peace of mind as a buyer.
4. Rectifying Building Defects (if any).
Once the builder receives the defect list, they will organise the required trades to rectify the items noted in your report. Defects need to be rectified by the builder within 30 days of notice.
5. A Second Inspection.
A second inspection is highly recommended once the builder has deemed that all the defect items are completed.
The inspection is carried out to ensure that:
All items noted on the original report are complete
Defects completed to the Australian standards, manufacturers recommendations, and or good building practice
No new defects are noted
Key Takeaways
One of the most important aspects of building a new home is to make sure that the finished property meets the required industry standards and expectations.
It is your legal and contractual right to have an inspection carried out at practical completion and you can insist that the builder complete any items that are their responsibility to rectify within a timely manner.
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Jarryd Gauci – Property Investment Consultant
P: (02) 9939 3249
Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.