Building Reports – Can they be too detailed and finicky?

Published on 13 August 2011 by david in General Realestate

Builder’s Reports or Pre Purchase property inspections, they are part of the homework a purchaser normally undertakes before committing to a property purchase. How detailed a report do you need? Should the report not only cover the current state of a property but also hazard a guess at what the property will be like in the future five or ten years from now? Do you want to know if there are major repairs or significant problems only or are you interested in how many door hinges squeak, roofing nails are loose, and where the occupiers cat has scratched the wallpaper?

Can a balance be found between the negative and nit picky types of reports that can cause undue buyer panic and has encouraged the growth in the business of contract renegotiations, and the types of reports that let significant defects slip through the net and can end up costing purchasers money that was unforseen. No house is perfect, every property has the potential to leak. Is it reasonable to judge a thirty year old home by today’s standards?

Fair Go recently presented a story on the current state of the Building Inspection Industry in New Zealand. As the article pointed out, there isn’t a standard in NZ that is compulsory. This is an industry that has evolved with the need of purchasers to have information about the physical aspects of a property from an experienced building professional point of view so that they know what they are looking at in terms of current condition and have a feel for future maintenance costs.

In our post-leaky building environment, these reports have evolved in the last fifteen years from being a quick once over by a friend with DIY experience that maybe be verbal only or a 15 minute check by a retired builder with a written one pager, into inspections that can take up to 4 hours and result in a report that extends to 40 pages or more in length.

Some companies have taken it on themselves to comply to the NZ Standard for house inspections NZS 4309:2005. This is a voluntary standard introduced in 2005 “in response to events in the building industry relating to weather tightness and durability and concerns that many property inspections were not picking up important defects”. But not all companies comply with this standard and yet some other companies believe that this standard isn’t enough and have take it on themselves to provide reports that are at a level above the suggested minimum. I believe that the Government needs to step up. It is time for a standard that all Inspection companies have to comply with.

The vibe of the NZS 4309 standard is great. Inspectors should be competent to carry out the inspection (pretty obvious but not a given!), there are minimum requirements which include the areas of the house that should be checked, and a “reasonable attempt to identify significant defects indentifiable at the time of inspection”. The standard has a clear list of things that should be inspected which includes structural defects and weaknesses, deferred maintenance issues, trade specific testing of such things as gas, electrical and plumbing amenities. The standard also suggests that positive attributes should also be mentioned such as double glazing, central heating, insulation etc. The standard was introduced to try and provide some consistency for inspections and give purchasers and lenders surety that “as far as possible, significant issues are identified”. I would like to see this taken further and regulation introduced to make complying with the standard compulsory and standardised so that everyone knows what is expected. Taking it a step further, it would be great if it became the norm for home owners to have their property inspected prior to putting it on the market and then provide the property report to any interested parties, much like a car yard provides an AA car inspection report when offering a car for sale.

Though I’m not going to wade into the mire and give my opinion about individual Property Inspection companies, I do think there needs to be a round table to get this issue sorted. In my experience, the Builders Report clause is the main clause responsible for Sale and Purchase agreements falling over. Real Estate agents are accused of trying to cover their commissions by complaining about pedantic inspections, building inspection companies are accused of using certain sentences like “may allow for the ingress of moisture” even if no undue moisture is present at the time of the inspection to cover themselves from future litigation. There has to be some sort of middle ground so that purchasers have an accurate picture of the state of a property including potential weak points without being panicked by a metre long list of small maintenance items that though desirable to be fixed, do not present any danger to the soundness of the building. As a buyer, are you happy having a property checked to see if there are any significant issues or is a detailed list of faults ranging from major through to totally insignificant to your decision to purchase a house what you want?

One area of concern to me personally is that chattels aren’t generally included in a Property Inspection report. There are a list of chattels that are commonly included in a house sale, these often include a stove or electric oven and gas hobb, a dishwasher, waste disposal unit, gas or electric wall heaters, heatpumps, DVS or other dry air systems, rangehood, auto garage door openers etc. I have yet to see a Property Inspection cover off these things in detail. When I’ve asked about these items in the past,the building inspector at hand has said that they don’t have to comment about chattels because it isn’t part of the standard. Putting myself in the boots of a purchaser, I would want to know the current state of these items when purchasing a property.

I believe open debate on this topic is important, and more needs to be done immediately to bring this issue to the attention of the Powers That Be to formulate a better and practical working solution. The current state is highly undesirable and has created a situation where for lack of direction real estate agents and licensees have been exposed to unnecessary litigation and stress. Building Inspection reports are worded very tightly and often include such strong disclaimers that their clients cannot take them to task if anything is missed. Wording is often used or scenarios added to reports in what seems to me and many other practitioners at the property coalface as thinly veiled butt covering by the inspecting company. The only other avenue for owners who have bought a home with a significant problem that was missed at the time of purchase is to take the agent to task. Agents and licensees are not only expected to now be valuers under the law but also to be building inspectors and have knowledge of property construction that they have never been trained in. The agent has become the easy target for compensation and can be taken to task not only for misinformation (which is fair enough) but also for not having said something about a property defect that they should have reasonably known about. We as agents/licensees are not builders, we are not surveyors, we are not valuers. We are marketers, end of story. To me, it is unfair and unreasonable to be expected to know in detail about a property’s construction, potential defects, and unseen issues.

North Wellington Real Estate