Puzzle Finance Blog

Avoid a house of horrors

It pays to be prepared to ensure moving in is a pleasure, not a pain.

It's here at last: the day that new home or investment property you signed up for months ago becomes yours. But what if you open the door and discover that what you thought you were getting and what you have been left by the vendor are two different things?

Holes in the garden where once there were roses; a space in the backyard where a $20,000 shed stood, or where a folding clothes line rested; a dishwasher-sized gap in the kitchen; basic ceiling lamps where fans with central lights had wafted summer breezes - these are all the subject of disputes that agents and lawyers say were avoidable if everything was spelt out in the first place.

''Full disclosure is a much better way,'' says Nelson Alexander partner Tom Roberts, who has heard ''horror stories'' of fireplaces being pulled out and missing dishwashers.

''Most of it is small stuff, but it is often the small things that cause people the most angst,'' says property lawyer Andrew Whitelaw, who had a client refusing to settle because the grass was too long.

Mr Whitelaw, of TressCox Lawyers, also had a client spend $3000 fighting about whether settlement included a $600 lawnmower - an example of one of the key causes of acrimony in settlements, relationship breakdown.

''The conditions in the Real Estate Institute of Victoria/Law Institute of Victoria contract say that at the time of settlement the property has to be in the same condition as at the time of sale,'' he says. Fair wear and tear is allowed. So if a buyer finds things missing, the issue is usually whether they were included in the first place.

''You have the right to inspect the property up to seven days before settlement. I recommend you do it as close to the settlement as possible,'' he says.

But finding the dishwasher gone or the satellite dish missing - cases Mr Whitelaw has dealt with - are not grounds to refuse payment.

''It is a legal obligation to settle,'' he says. ''If they don't settle, the vendor can issue a notice under the contract requiring the purchaser to settle within 14 days.'' The vendor can then repossess the property and keep the buyer's deposit.

But that does not mean nothing can be done, says REIV president Trevor Booth. Each party can pay an amount up to $5000 to be held by a stakeholder, usually a third-party lawyer, until the dispute is determined. Or an amount can be deducted at settlement to compensate the buyer for whatever the vendor has incorrectly taken.

But if you pay in full, trying for recompense after settlement can be tricky and may require court action.

''It is good agency practice when an agent lists a property for sale, one of the things they need to be very clear about is the items that will be staying on the property and to be quite clear if there are items that would [normally] stay with the property that the vendor wants to take,'' Mr Booth says.

Mr Roberts says that is Nelson Alexander's policy, and it is also the agency's policy to remind buyers they have the right to a final inspection.

Lists are the key, Mr Whitelaw says. ''At the time of the contract being signed it is up to the purchaser to list all the things they want in the contract and the vendor to list what they don't want in. The vendors' list can be as long as you want to make it. Otherwise the purchaser can consider those things included.''

Minimising settlement woes
  • Record the condition of the property and its fixtures before signing the contract or soon afterwards. Property lawyer Andrew Whitelaw recommends taking photographs.
  • Conduct a final inspection as close as possible to settlement, preferably the day before. By settlement morning, cheques may have been drawn.
  • Make sure the contract includes a list of exclusions.
  • Don't make assumptions. You may assume it is included, but the vendor may not, or vice versa.
  • Vendors should ensure their agent tells buyers what is included and what is not. Buyers should be given this information by the agent at the first inspection - if not, ask.
In the eye of the beholder

What is a fixture and what is a fitting?  Disputes about just that are quite common, says property lawyer Andrew Whitelaw.  ‘‘The vendor, in selling, thinks their possessions are coming with them and the purchaser walks in and assumes they are staying.’’

Mr Whitelaw says, ‘‘If you have to do something for something to be removed then arguably it was fixed at the time.’’ So a table and chairs are not a fixture — unless they are bolted to a patio.
Dishwashers are plumbed in so, usually, are  fixtures, but fridges are not. But some modern fridges are plumbed in so may have to stay unless excluded.

A case about whether a television antenna was a fixture made it to the Supreme Court and now satellite dishes are commonly disputed, Mr Whitelaw says.  ‘‘Is that staying or going? These are the things that need to be nutted out at the time of signing.’’

Also commonly disputed: sheds, light fittings, surround-sound systems, ceiling fans, garden plants, fireplaces

Posted by Sue Green - Domain on 8th July, 2012 | Comments | Trackbacks

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