Can You Rely On A Pre-Purchase Building And Pest Inspection Report?

June 24, 2019 Madsen Law

The Garretts bought a one-hundred-year-old country cottage in Victoria.  They engaged a Registered Builder to prepare a pre-purchase inspection report. Not long after settlement, the Garretts found significant termite damage and major structural problems.  The Garretts sued the Building and Pest Inspector.

The Garretts’ claim was for $344,528.00 in damages (essentially the cost to demolish and replace the home).  The Garretts’ claimed damages for two reasons.  The first was that the building and pest inspection report and the Builder’s website was misleading and deceptive.  The second was the Building Inspector didn’t carry out the inspection with due care and skill (i.e. a negligence claim).

The Garretts’ claimed the website was misleading because it claimed:

  • The Builder (Mr Ford) was more thorough than others (there was a video on the website showing how thorough Mr Ford was and how he had uncovered hidden problems in the past).
  • Secondly, he claimed that his pre-purchase inspection was to “roadworthy the property before you buy it”; and
  • Lastly, he claimed he used superior technology which his competitors did not.

The Court found that:

  • The representation about roadworthying the property before purchase was misleading because all the report did was describe what Mr Ford was able to see (i.e. visible defects);
  • The representation about the thoroughness was also misleading because the inspection was based on accessibility and only covered those things which could be seen.
  • The website was misleading also because of his claims about finding hidden problems, getting into all nooks and crannies.  Those representations gave the impression that a very thorough report would be prepared, but instead, the report was limited to what Mr Ford could access and see.
  • The representation about a high level of technology was also misleading because the only equipment used was a moisture meter.

The Court found that the representations on the website were misleading, but the loss suffered was limited to paying for a report (i.e. $500.00) which was far more limited than they were led to believe.  However, the Court rejected the argument that the report itself was misleading.  The report was very clear that it was limited to a visible inspection of accessible areas only.  The report raised the possibility of termites being found in the future and also raised the issue of the sloping floorboards for further inspection, but the Buyers failed to heed these warnings about the limitations in the report.

There were numerous serious structural problems and termite damage.  Despite this, the Building Inspector was not found to have acted without due care and skill, because the report made it clear that it was a visual inspection only and he would not be moving furniture to gain access.

Some Takeaway Points from this Case:

  1. You get what you pay for: 

A pre-purchase building and pest inspection will often contain limitations and disclaimers because it is based only on what is visible.  It is dangerous to expect such a report to do more than that;

2. Pay for what you need: 

A more thorough (invasive) report should be considered if the property is occupied and heavily furnished, or if you have any doubts about the structural integrity of the home.