16 Aug Property briefs | spring 2019
Building report conditions
If you have read an agreement for sale and purchase, you are likely to have seen the term ‘building report condition’. But do you know what a building report condition actually allows you to do, and what it doesn’t?
A building report condition gives you, as the buyer, the opportunity (10 working days is the standard, but this can be lengthened or reduced) to have a suitably qualified building inspector go through your soon-to-be-settled property and report on various elements of the building including the integrity of the construction materials used and its weathertightness.
The standard building report clause requires the seller to allow the inspector reasonable access for the inspection. There are some caveats to the inspection; it must be non-invasive so the inspector cannot drill into walls, for example. Also the inspector may not move furniture or any other items.
It’s best to obtain a builder’s report after your agreement is signed and make it a condition. If you organise a report before you sign the agreement, the seller could sign with someone else before you submit your offer. The seller can also stop your building inspector from entering the property.
The standard building report clause allows a buyer to cancel the agreement if the building or any improvements are unsatisfactory to the buyer as long as the considerations are based on an objective assessment and on a builder’s report that is prepared in good faith. The buyer is also required to provide the building report to the seller, if requested, and the seller can then argue your reasoning for cancelling the agreement. You cannot, however, use the building report condition as an excuse to back out of the agreement if you simply change your mind about the purchase!
The standard clause is balanced in favour of both the seller and the buyer. We can, however, draft more robust clauses if required.
Whether you are buying or selling, do talk to us before you sign the agreement; we may be able to amend or replace the clause to suit your situation better. Remember, if there is something seriously wrong with the property and you don’t have a building report clause in your agreement, then you won’t be able to rely on the condition to cancel the agreement.
AML one year on
By now property purchasers will be aware of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, generally known as ‘AML’. Since 1 July 2018, this legislation has imposed obligations on most of the professionals you deal with when you’re buying property. AML affects your bank, accountant, lawyers and conveyancers. Since 1 January 2019, real estate agents must comply with this legislation.
What is AML about? AML is the government’s response to international pressure to help combat money laundering and the financing of terrorist organisations. All your professional agents must now have evidence of your identity.
Evidence: If you are buying a property in your individual capacity, we must have a copy of your passport or driver licence, as well as a copy of a bank statement, rates notice or utility bill that proves you live where you say you do. Depending on the circumstances, we may ask about the source of your funds for purchase (see below).
If you are purchasing on behalf of a company, we need the above documents (ID and address verification) for each director and each shareholder, and your company address.
If you are buying for a trust, we need the above information for the settlors, the appointers, each trustee and any named beneficiary, and your trust address.
For both trusts and companies, we must know the funding source for the purchase and where the funds are currently held.
Source of funds for the purchase: If you are using funds from a previous property you have sold to fund this purchase, we may have to ask to see your sale agreement. If you are using an investment or savings from working, we may ask for a bank statement, your employment agreement or to see a set of financial statements. If you have received a monetary gift or an inheritance, we may ask to see the deed of gift or the deceased’s will.
Why should we comply? Under AML, if you don’t provide us with the above information, or we believe that your transaction is suspicious for other reasons, we must file a report with the Commissioner of Police. If we don’t do this, we could be fined up to $5,000,000 and/or be sent to jail.
Complying with AML has added a huge layer of compliance to any property purchase. Irritating as it can be, particularly if you have been a client of ours for years, we must obey the law. If you would like to talk more with us on AML, don’t hesitate to ask us.
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