What Happens If Something Breaks Before Settlement in WA?
You’re only days away from settlement when you discover the hot water system has stopped working. Or perhaps you arrive at the final inspection and find a leaking tap, broken oven or worse, damage to the eaves following heavy winter rain. It’s never pleasant for either the seller or the buyer to encounter these issues, but what actually happens if something breaks or a property is damaged before settlement?
The answer depends on what has happened and, importantly, what your contract says. There’s a big difference between a broken appliance and significant fire or storm damage that makes a property uninhabitable. Here’s how each of these situations is generally handled when buying or selling property in Western Australia...
Who is responsible if something breaks before settlement?
Under the standard Joint Form of General Conditions (JFGC) used for most residential property sales in WA, the property generally remains at the seller’s risk until settlement (or until the buyer takes possession, whichever happens first). The JFGC also includes a basic seller warranty relating to the condition of the property, that at possession it will be in the same state and condition it was immediately before the contract date.
However, this doesn’t necessarily mean the seller should or will repair every problem discovered before settlement. This is where your specific Offer and Acceptance (O&A), annexures and special conditions are important.
What if an appliance, plumbing or electrical item breaks?
Let’s start with the smaller (and thankfully, more common) problems. These are typically identified at the final inspection, examples being:
The oven isn’t working.
The hot water system has stopped heating.
An air conditioner won’t turn on.
A tap is leaking.
A toilet isn’t flushing properly.
Many WA contracts include a working order warranty requiring electrical, plumbing and gas fixtures, fittings and appliances to be in working order at settlement. If your contract contains an applicable working order warranty, your settlement agent can raise the issue with the seller’s conveyancer and request that it be repaired. In most cases, this is fairly straightforward. The seller simply arranges the repair and provides a receipt, photo or video confirming it has been completed.
But what if they refuse? Depending on your contract and the circumstances, a relatively minor broken item may not give you the right to delay settlement or withhold some of the seller’s money. Instead, buyers may still need to settle, arrange the repair themselves and seek reimbursement from the seller afterwards. If you can’t reach an agreement, you may need to pursue the amount through the Magistrates Court's minor case process.
That’s why it’s important to speak with your conveyancer rather than simply deciding settlement shouldn’t proceed.
What if the property itself is damaged?
Now imagine something more substantial. Perhaps heavy rain causes water damage to the eaves or ceiling. A tree falls and damages a fence or part of the house. Or a burst pipe causes water damage to cabinetry and flooring. These issues are different from discovering a broken appliance. Depending on the circumstances, the seller may need to arrange repairs to restore the property to the condition required under the contract.
However, property damage doesn’t automatically give a buyer the right to terminate the contract or delay settlement. Your conveyancer will review your contract, considering what happened, the extent of the damage and any specific terms which may apply. They may also advise you to seek independent legal advice. If you discover damage before settlement, take photos and contact your conveyancer straight away.
What if there is major damage before settlement?
At the extreme end of the scale, imagine the property is significantly damaged by a house fire, major storm or another serious event between signing the contract and settlement. The JFGC contains specific provisions dealing with risk and substantial damage. If the property is destroyed or partially damaged to such an extent that it becomes substantially uninhabitable, the contractual position becomes much more serious and rights to terminate the contract may arise.
This is very different from a damaged fence, leaking gutter or broken oven (and thankfully, much less common). Significant damage should be dealt with urgently between the buyer and seller’s conveyancers, with the contract provisions carefully considered before either party takes action. Importantly, there are specific timeframes which must be adhered to with regard to either party terminating the contract, so time is of the essence (JFGC reference: Clause 8).
Minor problem or major damage: what could happen?
What happened? | Example | What could happen next? |
Minor breakdown | The oven or hot water system stops working | The seller may be requested to repair it, if it is covered by the contract |
Property damage | Heavy rain damages section of eaves | The seller may need to repair or restore the damaged section of the property |
Significant damage | A tree causes damage to the house, but the property is still habitable | The seller may need to repair or restore the property. A settlement extension will likely need to be negotiated. |
Major damage | A fire makes the home substantially uninhabitable | The JFGC risk provisions and potential termination rights for both the buyer and seller may apply |
Every situation is different, so don’t assume all defects give buyers the same rights.
Can settlement still go ahead if something is broken?
Yes. In fact, settlement will often still proceed where the issue is relatively minor. A broken appliance doesn’t necessarily give a buyer the right to delay settlement. Similarly, you generally can’t simply decide to hold back $2,000 at settlement because you believe that’s what a repair will cost. In the absence of a mutual agreement, there needs to be a contractual basis for the action taken. Your conveyancer can explain your options and negotiate with the seller’s conveyancer where appropriate.
Why your final inspection is important
This is another reason your final inspection is so important. Buyers are generally entitled to inspect the property within the five business days before settlement, giving you an opportunity to identify any last-minute problems. If you find something wrong, tell the real estate agent and your settlement agent immediately.
If the seller is present and the agent can negotiate an outcome everyone is genuinely happy with there and then, fantastic. Otherwise, take photos or videos where appropriate and speak to your conveyancer to determine what your contract says should happen next, and what your rights are.
What about insurance before settlement?
Sellers should maintain appropriate insurance over the property until settlement. Even though a contract has been signed, the seller still owns the property until settlement takes place. Generally, buyers will need insurance from the date of settlement, or when they take possession of the property (whichever is sooner). However, it is important to speak to your insurer about your coverage, particularly if you are taking prior possession of the property.
FAQ: Something breaking before settlement in WA
What happens if something breaks before settlement?
It depends on what broke and your specific contract. If an applicable working order warranty is included, the seller may be required to repair the item. However, if they are unwilling or unable, often the buyer does not have the right to delay settlement or withhold funds.
Who is responsible for repairs before settlement in WA?
The property generally remains at the seller’s risk until settlement or possession, but responsibility for individual repairs depends on the contract and circumstances.
What if something is broken at the final inspection?
Tell the real estate agent and your settlement agent immediately. Your conveyancer can review the contract and advise what should happen next.
Can settlement be delayed if something is broken?
Not automatically. Minor issues often don’t give a buyer the right to delay settlement or withhold money.
What happens if a house is badly damaged before settlement?
If the property is damaged to the point that it becomes substantially uninhabitable, specific provisions of the JFGC apply and both the buyer and seller may have termination rights.
Something broken before settlement? Raise it early!
Discovering something broken or damaged just before settlement is never ideal, but it doesn’t necessarily mean your settlement is in trouble. The most important thing is to raise the issue with your conveyancer quickly rather than trying to determine yourself what should happen next.
At North Shore Conveyancing, we help buyers and sellers across Perth understand their contractual rights and deal with unexpected issues before settlement. If something has come up during your final inspection or you’re preparing to buy and want your contract reviewed before you sign, contact Katelyn for clear, practical guidance.
