Essential Tips for Vendors and Purchasers: What Colcroft Holdings v Meadows Teaches Us

Summary of the Case:

• Mr Meadows purchased a house on Waiheke Island from Colcroft Holdings Limited (CHL).
• Mr Meadows found water damage before the sale was finalised and wanted a more invasive inspection, which CHL refused.
• This led to the cancellation of the sale and a court case.
• Ultimately, the judge found that Mr Meadows was not entitled to invasive testing and that CHL validly cancelled the agreement.

Lessons learnt:

• Inspection Rights:
  • Buyers can inspect the property before finalising the sale, but this usually means a visual inspection only.
  • Invasive inspections (like drilling into walls) are not typically allowed unless specifically agreed upon.
• Claims for Compensation:
  • If you find a problem with the property, you must notify the seller before the settlement date.
  • Your notice should explain the issue and estimate the cost to fix it as accurately as possible.
• Seller’s Obligations:
  • Sellers must allow reasonable access for inspections but are not required to permit invasive testing.
  • Sellers need to provide enough information for buyers to assess the property’s condition.
• Tips for Buyers:
  • Do Your Homework: Inspect the property thoroughly and document any issues you find.
  • Understand Your Rights: Know what kind of inspections you can do and what information you can request from the seller.
  • Communicate Clearly: If you find a problem, notify the seller promptly and provide a detailed estimate of the repair costs.
  • Be Prepared: Understand that some inspections might be limited to visual checks unless otherwise agreed.

Importance of following the agreement:
Under the terms of the agreement, Mr Meadows had other options without insisting on an invasive inspection. If Mr Meadows had taken the below approach, it could have facilitated a smoother resolution without resorting to court action:

• provided a genuine pre-estimate of his loss based on his visual inspection of the damage.
• made his claim under clause 10 of the agreement, before the settlement date or within a reasonable time after discovering the issue.
• gone through the compensation provisions of the agreement.

This case highlights the importance of clear communication and thorough inspections when buying property. Most importantly, please reach out to us as early in the buying process as possible. We are here to help.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.