Picture this – you advertised your property for sale, endured countless open houses and inspections, and finally, someone offered you a price which you accepted, contracts exchanged, and now the packing begins before you move out on settlement.
You could be forgiven for thinking that there is no longer a point to mowing the lawn, weeding the garden and throwing chlorine in the pool. But you may have a fight on your hands when the purchaser conducts their final inspection and sees an unkempt garden and green swimming pool. The purchaser may refuse to settle the purchase until the lawn is mowed and the pool is cleaned.
In the leading case of Perptual v Lindlirum  VSC 182, the Victorian Supreme Court held that a minor deterioration in the property will not entitle the purchaser to delay settlement – it is arguable that it’s “fair wear and tear” (e.g. green swimming pool because of climate and nature conditions). Furthermore, any deterioration that is considered minor may only entitle the purchaser to claim for the value of any such deterioration (e.g. the cost of repair).
It would only be in the case of substantial damage (e.g. a tree falling onto the house, or damage by fire) that a vendor could be considered in breach of contract, and required to fix any damage prior to settlement. Substantial damage is defined in Part 4 of the Conveyancing Act 1919 (NSW) as damage which “renders the land materially different from that which the purchaser contracted to buy”. Section 66L gives the purchaser the power to rescind (that is, pull out of) the contract if the land is substantially damaged after exchange, and before risk in the property transfers from the vendor.
The leading case under section 66L is Bakhos v Fenner and Anor  NSWSC 641 – the subject property was substantially damaged by fire between exchange and completion, and the purchaser sought to rescind the contract as a result of the damage. Expert evidence suggested that there was no structural damage, and indeed, the property’s insurer approved repair work to the property.
Bryson AJ stated:
“Whilst there was obviously considerable damage to furniture and carpets, my concern is not with any movable property but with the structure of the property itself and nay fixtures which might fall within the meaning of “the land” within section 66J(2). In my judgment the fire damage to the house was not such that … the land was “substantially damaged”. In reaching this conclusion I have regard to the nature of the property and the amount of the price …
In the context, the damage caused by the fire was, in my judgment, of slight significance and did not render the land materially different from that which the plaintiff contracted to buy.”
The Court ordered that the purchaser was not entitled to rescind the contract. Rather, the vendor was entitled to accept the purchaser’s conduct as a repudiation of the contract, which the vendor accepted, and therefore giving the vendor a valid right to terminate the contract and seek damages.
Contact Shire Legal if you have any questions regarding the conveyancing process.