In short: information from a seller or their real estate agent can help, but you may not be able to rely on it. Defects disclosed before you make an offer could limit your right to claim compensation or cancel, and vendor-supplied reports may be out of date and can usually only be relied on by whoever commissioned them. Get your own report, or ask the inspector to re-address it to you.
- Agent disclosures: check carefully what is disclosed before you offer, and get advice on conditions covering any known defects.
- Sellers: if a buyer cancels and tells you about defects they found, you must disclose them to later buyers.
- Vendor reports: check the date and the disclaimer before relying on one.
Can you rely on them?
The general rule of thumb when you buy a property is that the more information you can find out about the property, the better. Sometimes, the information you are interested in will be offered by the seller or their real estate agent. Can you rely as much on information obtained from these parties as you could using a third party? And how does the information provided by the seller or their agent affect your rights under the contract for sale and purchase?
Real estate agent disclosures
Disclosures brought to your attention by real estate agents are usually presented in a form of acknowledgement that you may be asked to sign as part of submitting an offer to buy a property. These include defects that the seller is aware of and that they have a legal obligation to tell you about.
It is important to check carefully whether any defects in respect of a property you are buying are disclosed to you before you make your offer; known defects could limit your right to claim compensation or cancel the agreement.
You should be mindful of any disclosures that are made to you and where you think further investigation is required. You should investigate the full extent of that defect or how a defect could affect your ownership or your ability to complete the agreement. Make sure you get advice on including terms and conditions specific to those defects.
A common example of a pre-contract disclosure might be of a conservatory built without the relevant consents or permits. Important things to consider are whether you can get insurance that your lender is satisfied with considering what is now a known defect. The way clauses are drafted is important to reserve your right to cancel the agreement if the defect impacts on your ability to get insurance or bank lending.
When your buyer informs you of defects
If you are selling a property, and your buyer cancels due to defects that they have discovered due to their own due diligence investigation and disclose these to you, you have an obligation to all subsequent prospective buyers to disclose that defect. You should consider the risk of this carefully in deciding whether to obtain a copy of the building report from your buyer if they cancel.
If the defects are minor, it may be useful to get these fixed; this is likely to assist you with any subsequent attempts to sell your property.
Other disclosures
Other disclosures from an agent can include advising that they are related to the seller or making you aware of some other connection (a work or business connection or interest) that they may have.
Vendor-supplied reports
Sometimes, to assist in the sale of their property, the seller will already have specialist reports and make these available to prospective purchasers to expedite the due diligence process.
In some cases, these may be reports that they have obtained from a prior purchaser who cancelled the agreement. You should check the date on any reports that are provided as sellers who have been marketing their properties for extended periods may be providing outdated data. Small or minor defects picked up six months ago may have worsened since the report was prepared.
You should also check the disclaimers in the reports as any reliance on the report or the right to go back to the relevant inspector is reserved for the people who commission the report. Where this is the case, you will not have any contractual right of compensation against an inspector who overlooked something that would have meant you may not have bought the property or that you incurred significant costs to fix.
If it’s important that you rely on a report, you should obtain your own report or ask that the inspector re-addresses the report to you; there may be a fee for this.
When you are looking to buy a property, satisfying yourself in all aspects of your due diligence is crucial to ensure you don’t wind up with a lemon.
To best use and account for information that you obtain before you make an offer, talk with us about ways you can incorporate these into the agreement for sale and purchase. This will help protect your interests and guard against any unknown surprises that might be lurking beneath the surface.
Talk to our property team in Whangārei – get in touch.
This article first appeared in Property Speaking. Read more of our newsletters.
DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are the views of the authors individually and do not necessarily reflect the view of this firm. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit being given to the source. Editor: Adrienne Olsen. E: adrienne@adroite.co.nz. M: 029 286 3650
Content Copyright © NZ LAW Limited, 2025.
