purpose of pre settlement inspections

What is the Purpose of a Pre-Settlement Inspection?

Apartment Specialists Podcast No: 97

Summary:

In this podcast, Andrew Murray talks about the importance of Pre-Settlement Inspections and its main purpose in apartment sales. He will also explain the things that a buyer should inspect in a particular apartment before closing the deal. Get all the essential details on this video.

TRANSCRIPTION:

Andrew Murray here from The Apartment Specialists talking about: Apartment Sales and Pre-Settlement Inspections.

Pre-Settlement inspections are very important and they aren’t done properly in the industry in my opinion. What we do is work with every buyer and explain to them the purpose of what a pre-settlement inspection is for.

First of all, it’s virtually to check that there’s no damage that occurred in the apartment since you entered the contract since you last viewed it. If there’s any damage that’s happened since then, the owner or the current owner has to fix that.

For example, if you had known there was an occupier and they were moving furniture out and damaged a wall or ripped up a carpet – that needs to be fixed.

Secondly, if there were tenants in the apartment and they need to be vacated – when they did vacate – there was no damage incurred.

Secondly, it’s to go in the chattels and fixtures. The difference between a chattel is: you can move it around you can take it out of the property. A fixture is something that is attached to the property. You want to be able to go in there and check that everything is in there that you paid for. That is: when you purchase a property you would have been given a chattels list and you want to go in and tick off all those things and make sure they were as when you inspected the apartment.

Thirdly, often there has to be work done. For example: when they sell the apartment the agent in our case we may say. “Look the owner said that they will make sure that the oven is fixed or they’ll make sure that the hole in the wall is fixed”. And that’s for you to inspect the unit and make sure that’s done before settlement.

What a lot of buyers aren’t aware is that you’re only allowed one pre-settlement inspection. That means you’re only allowed to go into the property to inspect it before you settle once. Now, that’s legally and twice or more if work has to be done. That is:  you inspect the unit and then you find that work has to be done so you need to inspect it after that work is done.

Where it gets interesting is, if a purchaser doesn’t get organised and doesn’t do their pre-settlement inspection early enough – they can actually be refused. For example, the vendor has the right to refuse a pre-settlement inspection on the day of settlement. That’s why we always make sure that our purchasers are able to go through and do their pre-settlement inspection a few days before. That gives time for them to notify their solicitor if there’s anything wrong, or if anything needs to be remedied or sorted out.

Another issue that comes up is tenants. Tenants by law have to be given 48 hours notice before you can inspect the apartment. If it isn’t organised properly – that means your inspection can not happen or it can be happening on the day of settlement and you could be under the risk of the tenant saying no and refusing you access. It doesn’t happen very often but you have to make sure your bases are covered.

The thing I must stipulate is a pre-settlement inspection is important – but it’s not about checking how clean the unit is unless you put that into the contract. Because under the warranties that the vendor has when they sell a property it’s got nothing to do with how clean the unit is. If the unit is messy or you want it to be re-cleaned which you should – I’d put a clause in the agreement saying: “Upon settlement the apartment is professionally cleaned or is in a clean and satisfactory manor”.

Another one is, how many purchasers go around that I see and they look at an apartment and they go into contract – but they haven’t checked if the appliances are working? Now, they appear fine, they look fine but at inspection, when you need to check these things. So, there actually should be a pre-purchase inspection or while you are looking at the apartment you want to be checking the appliances and seeing if they work or if they don’t work.

Because if they don’t, when it come so settlement all the vendor has to do is put everything in the apartment in the state it was when – you being the purchaser – came and viewed the apartment. So, you’re actually a little bit liable there – so that’s why we always recommend to put in a clause saying that, “the vendor warrants that all appliances will be in good working order prior to settlement”.

I hope this helps. What I want to go into to is pre-purchase settlement. How we actually look at an apartment when you’re actually going to look at purchasing it – to make sure you’re covered and you don’t get any scary surprises further down the track.

I hope this helps. Cheers.

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Comments (2)

  • Hi Andrew,
    I’m currently in Hong Kong searching for two bedroom apartments in Central for my parents who will be back to Auckland early October for good. We are interested in your trademe listing DYD727. As we are unable to come view the unit at the moment, it would be much appreciated it if you could send us a detailed info sheet and more photos inside and out. Also, we understand that the vendor’s currently asking for 459k and would appreicate it if you could let us know what is the best you can do.
    I could also be reached at my mobile +852 67789678.
    Thank you and best,
    Ann

    • Hi Ann,

      Great to hear from you. No problem. What is your email address? I will send it all too you.
      Two bedroom Auckland City Apartment market above 60m2 is the best apartment category to be purchasing in. Ie it has the most capital gain potential in the future in my opinion due to housing prices getting out of reach of most young New Zealanders.

      If you have any other questions just let me know?

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