Let the home buyer beware: conveyancing steps to remember

Follow your head not your heart when buying your dream home.

That is the effect of a recent decision1 in which the High Court slashed the claim of a couple who bought a multi-million dollar property despite clear evidence that it had leaky building issues.

We explain the Court's thinking and set out the steps purchasers should take to avoid finding themselves in a similar predicament.

The purchase

The house was purchased in April 2009, by which time leaky building issues were well-known. The plaintiff purchasers chose to proceed despite the fact that:

the house was offered at a mortgagee sale with none of the usual vendor warranties in the sale and purchase agreement the style of construction was such the house was at a high risk of containing weathertightness defects (stucco cladding, flat roofs, no eaves and a number of enclosed balconies) the house had earlier been completely re-clad without Council sign-off (something apparent from the Council file) there were obvious signs the house leaked, which the purchaser saw during an open home (a musty smell, timber framing in visibly poor condition and rusty steel beams) the purchasers asked about weathertightness issues during the open home and said the house seemed "risky" and "dodgy", and the purchasers had obtained independent legal advice but had taken none of the further steps the Court inferred they should have taken. Almost immediately after they settled, the purchasers obtained expert weathertightness reports all of which listed numerous defects in the way the house had been built. Those defects were visible at the time of purchase and required extensive repairs.

How the court saw it

Weighing up these factors, the Court decided that the purchasers were largely the authors of their own misfortune and had been careless in the way they went about the purchase. For that reason, the Court reduced by 70% the damages to which they would otherwise have been entitled.

An important factor influencing the Court was the plaintiffs' attitude towards the purchase. It seems that this property was their "dream home" and they decided to take a "calculated risk" in purchasing it despite the obvious warning signs.

The Court did not accept that the circumstances of the mortgagee sale, which provided limited opportunity to carry out proper investigations, excused the plaintiffs from taking steps to protect themselves. They always had the option of simply not buying the house if they felt it was...