Pity the poor home buyer who has survey after survey done on houses and doesn't win at auction. Many spend thousands of dollars on Land Information Memorandums (LIMs) from councils and building reports/surveys.
It's good business for the building report industry, especially unscrupulous providers who sell the same report over and over to people wanting information on the same address.
"Sometimes purchasers have paid for a LIM and building report for more than one property," says lawyer Tony Steindle of Steindle Williams Legal.
It can tempting, but dangerous in that situation, to buy without a LIM or survey, or to choose a cheaper report from an unqualified inspector charging $250 to $500 for a report, instead of the $1000 or more a licensed surveyor charges.
"Obviously (reports) can be costly, but at the same time, the risk of wasting money needs to be offset against the consequences of not having a legal remedy," says Steindle.
The answer could be vendors supplying LIMs and reports to anyone interested in buying the property. It is starting to happen and Steindle estimates that vendors or agents are supplying this information in up to 50 per cent of sales by auction.
Steindle recommends his vendor clients put together a home information pack, especially with modern or monolithically clad homes. In some cases agents are supplying purchasers with building reports.
I tell my clients who are vendors that this potentially increases the number of purchasers as a purchaser may not want to incur substantial costs where they may not be successful at auction.
Like anything, however, it's not as simple as it appears. There is no guarantee with a vendor or agent-supplied report that the home will be free of defects, especially when it comes to weathertight issues. And some vendors shop around for favourable reports, says Steindle.
Despite recommending vendors get reports, Steindle tells his buyer clients not to accept these reports as gospel.
"The downside of this, with the LIM and building report, is that although this can give the purchaser some comfort, it will not give them a legal remedy if the LIM report is incorrect or if the building inspector gets it wrong," says Steindle. "If a LIM report or building report is not addressed to you as a purchaser, you have no right to recover any losses suffered."
Case in point was a home owner who sought advice from Steindle. The client had purchased an apartment and chose to accept the agent-supplied building report.
"A few years later a building survey found significant weather tightness issues," says Steindle. "Our client could not recover their losses as the report was addressed to their vendor. If they had their own report they could have recovered some losses."
As the consequences of building issues can be so significant, Steindle encourages all purchasers to get their own building report.
A compromise is to get the building report addressed to 'the purchaser'.
The Home Owners & Buyers Association of New Zealand (HOBANZ) is working on a solution it believes could solve the problem by upending the current model where buyers typically pay for multiple reports.
Under the new model, vendors would order a report from a licensed surveyor registered with HOBANZ. The vendor would pay $1500 up front, but would be rebated for every potential buyer who wants access to the report.
Potential buyers of the property could access the report for $200 a pop with up to 50 per cent of the initial cost paid by the vendor refunded. HOBANZ, a not-for-profit organisation, hopes to launch the service next year. It's looking at options that could include LIMs and information from council files in one package as well as survey reports.
The system, says association president John Gray, would be designed to protect both the vendor and the purchaser and make the sale process quicker and easier by selling with full disclosure.
The advantage would be that the report will be from an accredited registered building surveyor who is a New Zealand Institute of Building Surveyors (NZIBS) member. The surveyor will not be working for the vendor, buyer, or agent and would have "pedigree" and insurance.
The $200 paid by the buyers would get them a quality report, says Gray, and legal redress. Too often at present, he adds, reports are provided by unqualified "pretenders" who have simply set themselves up as property inspectors, but are not professional surveyors.
HOBANZ has dealt with many cases where home buyers have bought a lemon based on a report provided by an unqualified building inspector.
"Buyers don't realise that building inspection is unlicensed and it is an uncontrolled activity," says Gray. "You could start a shell company for $45, order a thermal imaging camera for $700, download the New Zealand Residential Property Inspection Standard for the production of these reports, self-certify and call yourself a property inspector.
"There is a large number of pretenders doing pre purchase reports. We we are seeing people's lives destroyed by this."
In one case, says Gray, a young Auckland couple who relied on a report provided by the vendor's real estate agent found that their Balmoral home required $200,000 of work that wasn't outlined in the report.
They expected it to require some work, but they were provided a report prepared by a builder that didn't disclose he wasn't approved as a pre-purchase inspector.
"The report was provided by an agent and it looked comprehensive." However it didn't mention that the home needed significant structural work to the roofing trusses and foundations. "The vendor paid for the report and sold the property to the first schmuck who came along," says Gray.
Surveyor William Hursthouse of the NZIBS cites the "Edwards vs Cull" court court case where Associate Judge Roger Bell said that building inspection firm Dwell Healthy Homes had become part of the sales force rather than a dispassionate expert. This type of case shows that not all building reports can be relied upon.
In that case, says Buddle Findlay partner Daniel Kelleher, the real estate agency Unlimited Potential encouraged a vendor to commission a building report from Dwell Healthy Homes, that was subsequently used to market the home. The report gave a strong indication there were no weathertight issues and was included in the marketing campaign. The buyers, despite reservations, were convinced by the Dwell report to buy the St Heliers bay property, only to find out they faced a $750,000 bill to make it weathertight.
Gray has also seen cases where a building report obtained by the vendor has been altered before being given to potential buyers.
As a result of the Edwards vs Cull case, Kelleher recommends that if a vendor commissions a building report to be made available to potential purchasers of a property, the vendor and the real estate agent should not endorse the building report's findings to encourage a sale. "The building report should be offered as an independent report that purchasers can consider when deciding whether or not to purchase the property. The vendor and agent should make no further comment on any report."