The dangers of relying on vendor building inspection reports in a hot market

A boom not seen in over a decade! While the rest of Australia’s capitals experience a downturn in the property market, Darwin remains the only capital city to record monthly growth rising 1.2%.[1] The Top End’s current property market is surging to record breaking increases, upwards of more than 15% for the medium dwelling value across Greater Darwin. This movement is a welcomed throwback to the 2012 INPEX mining boom.[2] It is no surprise the current market is attracting an influx of eager local and interstate purchasers looking to snap up a deal and what better way to ‘smooth’ the deal than with a vendor building inspection report saving you time and money. A cautionary tale …    

In the Northern Territory, the doctrine of caveat emptor is the prevailing doctrine for the purchase of land.  A purchaser of real estate in the Northern Territory will often enter a contract which is subject to the results of any number of searches and/or inspections.  It is incumbent on purchasers to undertake all appropriate searches and/or inspections in respect of the property prior to the transfer of the property completing. At the forefront of inspections and due diligence on real property are building inspection reports.  

Under the Agents Licensing Act 1979, a real estate agent must use the approved contract by the Law Society Northern Territory when exchanging for the sale and purchase of residential property. The approved contract effectively provides for an ability of purchasers to negotiate concessions on a purchase price arising from defects uncovered in building inspection reports. They are paramount to addressing the buyer beware concept.  There are two distinctions on building inspection reports provided for in the approved contract:

• Condition Report – this report is to be undertaken by a consulting structural engineer, registered builder or building consultant in respect of the condition of structural improvements upon the property and best practice dictates it complies with AS 4349.1-2007.
• Building Status Report – this report is to be undertaken by a registered building certifier, consulting structural engineer, registered builder or building consultant on the compliance of the structural improvements situated on the property with all relevant laws and Building Codes.

These building inspection reports, when obtained by a purchaser and where the building inspector is engaged in accordance with scope outlined above, provide a valuable and informative picture on the ability to lawfully occupy the property. They also showcase defects in the property which may carry over on any subsequent sale. In addition, a prospective purchaser will be well informed on remediating any cosmetic issues within the property which may be comparatively minor compared to any uncovered structural issues. Importantly, the findings can be relied upon by the purchaser and may serve as a legitimate and reasonable means to request a vendor to decrease their contracted sale price. A fully informed purchaser proceeds with the contract with their hand on heart knowing full well the value in their purchase.  On the other hand, where a vendor building inspection report is presented to a purchaser at a property showing hosted by a selling agent, there can be several shortcomings to consider.    

1.      No legal contract between the building inspector and the purchaser

When the vendor engages a building inspector to carry out a building inspection report, the building inspector has a duty of care to the vendor. The duty of care to a third-party purchaser is diminished by the fact the inspector may not be aware a proposed purchaser will consider the report. In general, a duty of care is owed only if a defendant ought to reasonably foresee that its conduct may be likely to cause loss or damage to the plaintiff or a class of persons to which the plaintiff belongs.

It is reasonably foreseeable that providing an inaccurate or deficient building inspection report may cause loss or damage to purchaser. However, the duty of care owed will be largely determinative on the engagement terms struck up between the vendor and the building inspector. The purchaser is removed and has no say in that process.  

2.      The vendor is trying to make a sale

A vendor and their engaged selling agent are focused on obtaining a favourable result to facilitate a sale. Many vendors and their agents typically have preferred building inspectors who may be less inclined to flag issues or thoroughly undertake reporting. Their scope of engagement may sit outside what the approved contract calls for or be below usual reporting standards i.e. limited to the dwelling and exclude such things as sheds, fences or decking areas. Further, limitations may be extended by the virtue of what a vendor is willing to pay for the report.  Relevantly, building inspection report costs will be increased if accessing certain areas of the property calls for specialised equipment or, from a timing point of view, is outside the usual scope. Consequently, roof condition, attics, insulation integrity, antennas and solar installations can often be left out of thorough reporting. This impacts on the completeness of the ultimate report and its reliability.  Reports with an abundance of carve outs will often mean defects go undetected. This can have serious implications for a purchaser if they seek to rely on such building inspection report findings.    

3.      Consumer law protections are unlikely to help      

In circumstances where a building inspector is engaged by and exclusively supplying a building inspection report to a vendor, the only party entitled to enforce consumer protection laws against the building inspector is the vendor. Under Australian Consumer Laws, a proposed purchaser would need to demonstrate a building inspector made representations to them in respect of findings in a building inspection report if the purchaser wanted to rely on protections the services by the building inspector were rendered with due care and skill to or prove a misleading and deceptive conduct claim.

4.      An independent building inspection report is your best protection

Ultimately, vendor supplied building reports, or recommended inspectors should be cautioned for a substituted independently engaged building inspector when undertaking due diligence on real property. Obtaining an independent building inspection report allows a purchaser to make informed decisions based on an assessment in accordance with best practice and, if need be, tailored to their own interests. Independent building inspections provide for a reliable, unbiased and accurate assessment of the subject matter at hand.

In all, the modest cost of obtaining independent building inspection reports is the most prudent investment to understanding value and any potential remedial costs in real property along with avoiding costly disputes. It also backs the investment in the purchase with a sound understanding on what any subsequent buyer may uncover in a future sale. 

Sparke Helmore’s dedicated property team can assist in your residential, pastoral or commercial property needs. For advice tailored to your circumstances, please contact a member of our property team or the Darwin office.

[1] Northern Territory Government, Department of Treasury and Finance, Housing (Web Page, 2026) Housing - Northern Territory Economy

[2] PropTrack, PropTrack Home Price Index (Web page, 2026) PropTrack Home Price Index | PropTrack