What Rights Do You Have Against a Building Inspector?

The term "building inspector" covers two very different professionals in Australian property law, each operating under a distinct legal framework and each attracting different types of liability when things go wrong. The first is the pre-purchase building inspector, the private professional you commission before buying a property to assess its condition. The second is the private certifier or building certifier, the government-authorised professional who certifies that construction work complies with applicable building codes and standards.

Both types of inspector owe legal obligations to the people who rely on their work. When those obligations are not met when a pre-purchase inspector misses significant defects, or when a certifier approves non-compliant work, the consequences for property owners can be financially serious. Remedying a defect that should have been caught before purchase or that should never have been certified in the first place can cost tens or hundreds of thousands of dollars.

Two significant recent decisions, one from the High Court of Australia, one from the ACT Supreme Court clarify the scope of liability in each context. Both carry practical lessons for property owners, prospective purchasers, and anyone dealing with the aftermath of an inadequate inspection.

Pre-Purchase Building Inspectors: The Common Law Framework

When a prospective purchaser commissions a pre-purchase building inspection, they are engaging a private professional under a contract for services. The inspector's task is to assess the visible and accessible condition of the property and report on any defects identified in accordance with the relevant Australian Standard.

The governing standard for pre-purchase building inspections in Australia is AS 4349.1 — Inspection of Buildings. That standard prescribes a visual, non-invasive inspection of accessible areas of the property. The inspector is required to identify major defects, form a general impression of the property's condition, and note any limitations on the inspection such as areas that could not be accessed on the day. The inspector is explicitly not required to open walls, lift floor coverings, or access areas that are unsafe or physically inaccessible.

Against that framework, two legal foundations support claims against a pre-purchase inspector who fails in their duty.

Negligence. An inspector who prepares a pre-purchase report owes the commissioning party a duty of care to exercise reasonable skill and diligence. That duty arises both from the contractual relationship and from the general principles of negligence in Australian law. If a competent inspector, conducting a proper visual inspection in accordance with AS 4349.1, should have identified a defect that was within the scope of the inspection, and the failure to identify it caused the purchaser financial loss, for example, by proceeding with a purchase they would not have made or at a price they would not have paid a claim in negligence may be available.

Consumer protection law. The Australian Consumer Law (ACL), contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth), provides additional avenues. An inspector who makes representations about the completeness or quality of their inspection that prove to be misleading or deceptive may be liable under the ACL's prohibition on misleading and deceptive conduct. The ACL also prohibits unfair contract terms and protects consumers with implied guarantees of fitness for purpose and due care and skill in the supply of services.

When Disclaimers Do Not Protect Inspectors: Shannon v Residential Reports

One of the most consistent features of pre-purchase building inspection reports is the disclaimer. Reports routinely exclude liability for defects hidden behind walls, under floor coverings, or in areas that were inaccessible on the day of inspection. Some go further, seeking to cap the inspector's total liability at the fee paid for the report. Purchasers who discover significant defects after the purchase is complete are often told, in effect, that the disclaimer means there is no claim to make.

The ACT Supreme Court's decision in Shannon & Anor v Residential Reports Pty Ltd [2026] ACTSC 66 demonstrates that disclaimers do not automatically shield inspectors from liability. In that case, a building and pest inspection was conducted on a residential property before purchase. The report contained carefully worded exclusions. After settlement, significant termite damage was discovered. The inspector argued that the defect was excluded by the terms of the report.

The Court found against the inspector. Despite the exclusion clauses, the termite damage was reasonably detectable using non-invasive methods of the kind required by the applicable Australian Standard. A competent inspector conducting a proper inspection should have identified it. The disclaimer did not operate to exclude liability for a failure to carry out the inspection in accordance with the standard to which the inspector was professionally bound.

The decision is consistent with the position under the Australian Consumer Law. A term in a standard-form consumer contract that seeks to exclude liability for a failure to provide services with due care and skill may constitute an unfair contract term and be of no effect. A disclaimer cannot, in substance, permit an inspector to carry out a substandard inspection and then avoid the consequences. The exclusion clauses that legitimately protect inspectors are those that identify genuinely inaccessible areas, weather limitations on the day, or specialist matters that fall outside the scope of a standard visual inspection not those that attempt to exclude liability for detectable defects that a competent inspector simply failed to report.

Private Certifiers and the Statutory Framework

A private certifier occupies a fundamentally different position from a pre-purchase inspector. Where the pre-purchase inspector is a professional retained by a buyer to provide private advice, a private certifier is an authorised professional whose function is quasi-governmental: to assess whether construction work complies with applicable building standards and regulations and to issue certificates that formally record that compliance.

In NSW, private certifiers operate under the Environmental Planning and Assessment Act 1979 (NSW) and associated regulations. Their certification carries legal force: an occupation certificate issued by a private certifier signals that a building is fit for its intended use. When a certifier issues a certificate for work that does not comply with building standards, the consequences can be severe and the certifier's liability significant.

The liability of certifiers for defective building work has been considered by NSW courts on a number of occasions. Where a certifier has failed to inspect work adequately and has issued a certificate for non-compliant construction, courts have found that the certifier owed a duty of care to subsequent owners of the property, not merely to the builder or developer who engaged them. The economic loss suffered by a purchaser who buys a property relying on the validity of a compliance certificate may fall within the scope of that duty.

The DBP Act and the Expanded Framework of Liability

For building work in NSW, the most significant recent development in the law of building defects is the enactment of the Design and Building Practitioners Act 2020 (NSW) (the DBP Act), which came into force on 11 June 2020 and operates retrospectively.

Section 37 of the DBP Act imposes a statutory duty of care on any person who carries out construction work to take reasonable care to avoid economic loss caused by defects in or related to the building arising from that work. The duty is owed to each owner of the land, and it extends to subsequent owners as well as the original contracting party. A subsequent purchaser who discovers latent defects in a property may bring a claim under section 37 against the original builder or developer, even if they were never in a contractual relationship with those parties.

The High Court of Australia's decision in Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49, handed down on 11 December 2024, has decisively expanded the practical reach of this duty. The case arose from defects in a residential apartment complex in North Sydney. The owners corporation brought a claim against both the developer (Madarina) and the head contractor (Pafburn). The builder and developer sought to rely on the proportionate liability regime under Part 4 of the Civil Liability Act 2002 (NSW) — the mechanism that ordinarily allows a defendant to limit their liability to their proportionate share of the fault, rather than bearing the full loss.

In a majority 4:3 decision, the High Court held that the proportionate liability provisions of the Civil Liability Act do not apply to claims for breach of the statutory duty under section 37 of the DBP Act. The duty is non-delegable. A developer or head contractor who delegates construction work to subcontractors cannot use that delegation as a basis to apportion liability away from themselves. They remain fully liable for economic loss caused by defects in the building, whether or not they personally performed the work in which the defect arose.

The consequence of this ruling for property owners, particularly owners corporations bringing claims for defects in strata buildings is significant. A single claim against the developer or head contractor can recover the full cost of remediation, without the need to identify and pursue each subcontractor separately. The developer and head contractor bear the full risk of subcontractor failure, and they must look to cross-claims against those parties if they wish to recover a contribution.

The Limitation Period: Act Promptly

Claims under the DBP Act must be brought within ten years of the completion of the construction work. Given that defects in buildings sometimes take years to become apparent through water ingress, structural movement, or gradual deterioration property owners should be alert to the fact that the limitation clock runs from completion of construction, not from the date the defect was discovered. An owner who purchases a property ten years after construction is completed and discovers defects shortly after purchase may find that the limitation period has already expired or is about to expire.

For pre-purchase inspection claims, the limitation period under the Limitation Act 1969 (NSW) is generally six years from the date on which the cause of action accrued which, in the context of a negligent inspection, is typically the date on which the purchaser suffered loss by completing the purchase in reliance on the deficient report. Again, prompt legal advice is essential to ensure a potential claim is not time-barred before it is properly assessed.

Practical Steps for Property Owners

For a purchaser who discovers significant defects after completing a property purchase, whether or not a pre-purchase inspection was conducted, the immediate steps are the same. Obtain a second expert assessment of the defect, documenting its nature, extent, and probable cause. Obtain a written quote for rectification from a licensed contractor. Preserve all original documentation: the pre-purchase inspection report, the contract of sale, any representations made by the vendor or the agent, and any subsequent communications about the defect.

Where a pre-purchase inspector is potentially at fault, it is also worth checking whether the inspector holds current professional indemnity insurance, a requirement for most licensed inspectors. A claim against an uninsured inspector, or against an inspector operating through a company with limited assets, may have limited practical value even if legally sound. Professional indemnity insurance is the mechanism by which the inspector's liability is practically enforceable.

For owners of newer properties, particularly apartments built or significantly renovated within the past ten years, the DBP Act provides a powerful additional avenue that did not exist before 2020. The Pafburn decision has strengthened that avenue considerably by removing the builder's and developer's ability to dilute their liability through proportionate fault allocation. Owners, corporations and individual owners dealing with latent defects should take specific advice about whether their circumstances fall within the reach of section 37.

Shire Legal is a boutique law firm based in Miranda, NSW, specialising in property, business and estates law. This post is intended as general legal information only and does not constitute legal advice. You should seek advice specific to your circumstances, including about applicable limitation periods, before taking any action.