One of the trends in the market is for agents to encourage their vendors to get a pest and building report done. Most of the agents use a pest and building inspector of their choice as a means of obtaining a positive outcome. Without knowing the financial arrangements, these pest and building reports are sold by the agent to the prospective buyers.

Leverage has just observed a case whereby a purchaser bought a pest and building report through the agent. The pest and building report was wrong, not outlining some major defects. The pest and building inspector had missed the mould forming under the house and the two bathrooms had leaks. The cost of repairing the damage is in the vicinity of $100,000.

Ultimately, the pest and building inspector will be the person responsible for breaching their duty of care in relation to the incorrect advice. Unfortunately, however, the pest and building report is provided to the vendor and not to the purchaser. This means that it will be difficult for the purchaser to have direct legal action against the pest and building inspector.

An effective litigator would, in these circumstances, sue the agent and the vendor for misleading and deceptive conduct. Section 18 of the Australian Consumer Law states that a person in trade or commerce shall not mislead or deceive or do anything that is likely to mislead and deceive. As noted in previous editions, misleading and deceptive conduct is not necessarily about falsification or fraud, it is simply about being wrong.

The report was sold by the agent as a means of representing the state of the property to the purchaser. The representation was wrong and therefore the agent carries a level of liability. Yes, if the agent were sued, they would cross claim against the pest and building inspector, but this does not remove the cause of action against the agent or the vendor. It is probable that a judge would apportion the blame between the parties, including of course, the pest and building inspector. In what percentage? No one knows. It’s yet to be tested …..

If I were an agent representing a vendor, and I was involved ed with obtaining a pest and building inspection, I would do two things:

  • Indicate to the purchaser that, although you provided this report from a trusted source, you can’t guarantee the contents and the purchaser may wish to obtain their own pest and building report; and
  • Whenever a pest and building report is purchased from the agent, the pest and building report is produced from the offices of the Pest and Building operator and the names changed to reflect the purchaser.

In some ways, we wonder if it is even worth doing this. Pest and building reports are flawed because of the superficial nature of the inspection. The representation itself seems to leave the agent vulnerable. Quite possibly, the risk may well outweigh the reward!

 

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au