If you're house hunting in today’s market, chances are you've come across the building inspection clause in a Sale and Purchase Agreement. It sounds like a safety net, but Kiwis should know it’s not a free out-clause if things go sideways.

In a recent case, Madhava Corp Ltd v Austin, buyers pulled out after a building report flagged issues like cladding wear and water getting in around a dodgy window. The vendor offered a $7,000 discount instead of fixing it, but the buyers walked. The High Court backed them up, saying the defects were serious enough that a reasonable buyer would be concerned.

But here's the catch: the courts apply a strict three-step test. You must (1) get a written report from a qualified inspector, (2) show the issue would worry a fair-minded Kiwi buyer, and (3) give the report and proper notice to the seller if you’re cancelling. Miss any step, and you could be in breach.

Take Strack v Grey - the buyer relied on some casual comments and did a bit of Googling about insulation risks. No formal report, no proper notice, and the buyer ended up in breach, with the sellers reselling for $150k less and looking to the buyer for compensation.

The Bottom Line: Don’t cut corners. Get a qualified inspector, keep a paper trail, and talk to a lawyer before making moves. At Asco Legal, we’ll help you get your conditions right, so you’re covered when it counts.

Buying Property? Don’t Rely Blindly on That Building Clause