Damage to Your Property Before Settlement
Damage to property before settlement. When buying a property, the last thing on your mind is that it may be damaged when you take possession.
However, what happens if it is? What are your rights as a purchaser?
The answer to these questions can be found in your Contract of Sale.
This article will explore the options available to you in the event that your new property is damaged.
What does the Contract of Sale say about damage to property before settlement?
Every Contract of Sale has a set of what are called General Conditions, which set out the agreement being undertaken between the purchaser and the vendor.
One of these General Conditions explicitly deals with the topic of loss or damage to the property before settlement.
The General Conditions reads as:
24. LOSS OR DAMAGE BEFORE SETTLEMENT
24.1 The vendor carries the risk of loss or damage to the property until settlement.
24.2 The vendor must deliver the property to the purchaser at settlement in the same condition it was in on the day of sale, except for fair wear and tear.
24.3 The purchaser must not delay settlement because one or more of the goods is not in the condition required by general condition 24.2, but may claim compensation from the vendor after settlement.
24.4 The purchaser may nominate an amount not exceeding $5,000 to be held by a stakeholder to be appointed by the parties if the property is not in the condition required by general condition 24.2 at settlement.
24.5 The nominated amount may be deducted from the amount due to the vendor at settlement and paid to the stakeholder, but only if the purchaser also pays an amount equal to the nominated amount to the stakeholder.
24.6 The stakeholder must pay the amounts referred to in general condition 24.5 in accordance with the determination of the dispute, including any order for payment of the costs of the resolution of the dispute.
As set out in 24.2, the requirement from the vendor – or the seller – of the property is to ensure that the property is in the same condition it was in on the day of sale, except for fair wear and tear.
It is worth noting, however, that many contracts include Special Conditions, which are extra conditions inserted into the Contract of Sale.
These Special Conditions can override the General Conditions within the contract, which is why it is so important to ensure that you have any Contract of Sale for a property reviewed by an experienced Melbourne conveyancer BEFORE you sign.
Whilst you should always check the Special Conditions carefully, these General Conditions do set out a clear framework for how the property should be presented to the purchaser at settlement.
What is ‘fair wear and tear’
‘Fair wear and tear’ is a term that is often used in contracts, but what does it actually mean?
Put simply, it is the natural deterioration of a property that occurs as a result of normal use.
Wear refers to damage that occurs as a result of routine usage of the property as well as changes that occur as a result of ageing. Exposure to the environment might potentially cause the property to degrade over time.
Wear and tear does not include dirt, filth, grease, or damage.
Small scuff marks on the lower walls; carpet pile that has flattened due to furniture or foot activity; paint or drapes that have faded due to exposure to the environment – e.g. sunshine – are all examples of wear and tear.
I believe my property has been damaged since the time of purchase. What should I do?
When it comes to damaged property, the onus is typically on the purchaser to prove that the property has been damaged.
This is because the purchaser is typically in a better position to assess the damage that has been done to the property.
In order to prove that your property has been damaged, you will likely need photographic evidence of the damage, as well as a report from a qualified tradesperson outlining the extent of the damage.
This is why it’s important to get a Building Inspection Report conducted by a qualified Building Inspector prior to signing a contract, as well as taking photos during inspections.
If you can’t provide evidence of the damage, the vendor may argue that you are simply trying to get out of buying the property.
This can be a costly and time-consuming process and may result in you having to purchase the property anyway.
It’s therefore important to take steps to protect yourself from this situation by gathering as much evidence as possible.
It should also be noted that as a purchaser, you are buying a property in the condition it is in at the time of sale.
So, if you buy a property with a broken oven, for example, the vendor is under no obligation to fix that oven before settlement, unless it has been otherwise agreed.
In this instance, any agreement of this nature should be included in the Contract of Sale.
Tips from our conveyancers for property purchasers concerned about damaged property
If you are a property purchaser and are unhappy with the state of your property upon settlement, it’s important that you are able to:
- Clearly identify and describe the problem
- Provide proof that the damage occurred after you purchased the property and that the damage is not fair wear and tear
In general, you should be prepared for the vendor to contest your claim.
It is also worth noting that if the vendor does dispute the claim, you will not be entitled to:
- Delay settlement,
- apply for Penalty Interest; and/or
- issue a Default Notice or Rescission Notice
When it comes to withholding funds, pursuant to General Condition 24.4 the Purchaser may nominate to withhold funds not exceeding $5,000.00
This General Condition requires no justification or substantiation of the amount nominated, meaning the purchaser may nominate any amount without substantiating the sum withheld.
In these instances, it is important to work with an experienced and qualified conveyancer who can advise on the proper process with respect to handling these disputes.
If you have any queries about damage to a property you have purchased and need further advice specific to your circumstances, reach out to Tick Box Conveyancing today.
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