In a recent case, two people were interested in a property in the North Shore which had been previously renovated by an owner-builder. Before the property was sold, the Council inspected the property to see whether an occupation certificate could be issued. Upon inspection, the Council did not identify any defects. It then issued an occupation certificate and the purchasers bought the property.
The contract for sale of this property included a clause which stated that the purchasers were buying the property subject to any defects. It also stated that the purchasers were relying on their own inquiries and inspections rather than statements made by the vendor regarding defects. After the purchase was completed, some defects became apparent.
The purchasers sued both the council and the owner-builder for potential losses resulting from having a house without evidence of compliance. The Court ultimately decided that the Council did not owe a duty of care to the purchasers as an occupation certificate does not certify that building work does not, or is not, likely to contain latent defects or that the work complies with the development consent. The Court said that the when certifying the property, the Council merely goes through a checklist to see if a certificate can be issued. The Court also said that the purchasers were not vulnerable to the Council’s conduct because the parties could have negotiated the purchase price down to safeguard from any loss that might result from potential defects.
This case serves as a reminder for purchasers who wish to buy from owner-builders to get a very comprehensive building inspection report to clarify any doubts as to the property’s condition for use. An occupation certificate unfortunately does not indemnify the purchaser if later defects are discovered.