A pre-settlement defect inspection is a final assessment of a property carried out before settlement and handover. It identifies unfinished work, construction faults, and non-compliance with contractual specifications or building standards. In Australia, buyers of new builds and off-the-plan properties have the right to conduct this inspection to confirm the property matches the agreed plans and meets the requirements of the National Construction Code (NCC). The inspection typically costs between $300 and $800 depending on the property type, and it should be arranged within the final week before the settlement date.
This guide is written for home buyers, property investors, and anyone purchasing a new or recently constructed property in Australia. It explains the purpose and process of a pre-settlement defect inspection, your legal rights, a detailed checklist of what to look for, and the steps to take if defects are found.
What Is a Pre-Settlement Defect Inspection?
A pre-settlement defect inspection is a walkthrough carried out shortly before the settlement date to verify that the property is in the condition specified in the contract of sale. For new builds and off-the-plan purchases, this means checking that all construction work has been completed, that finishes match the specifications, and that the property complies with the NCC and relevant Australian Standards.
The inspection covers everything from structural elements like walls, ceilings, and floors through to fixtures, fittings, and services such as plumbing, electrical, and HVAC systems. It is your last opportunity to identify and raise issues before ownership transfers and final payment is made.
Unlike a routine maintenance check, a pre-settlement defect inspection specifically focuses on whether the builder or developer has delivered the property to the standard promised in the contract. This includes checking for:
- Unfinished or incomplete work
- Poor workmanship or cosmetic defects
- Non-compliance with building plans and specifications
- Faulty fixtures, fittings, and appliances
- Damage that has occurred during or after construction
How It Differs from a Standard Building Inspection
It is common for buyers to confuse a pre-settlement defect inspection with a standard pre-purchase building inspection. While both involve examining a property for defects, they serve different purposes and are conducted at different stages.
A pre-purchase building inspection is typically ordered before exchanging contracts. It assesses the overall condition of an existing property, including structural integrity, pest damage, and safety hazards. It follows Australian Standard AS 4349.1.
A pre-settlement defect inspection, on the other hand, is conducted after contracts have been exchanged but before settlement. It focuses on contract compliance, ensuring the builder has delivered what was promised. For new builds, this means comparing the finished property against the approved plans, specifications, and any variations agreed during construction.
| Feature | Pre-Purchase Building Inspection | Pre-Settlement Defect Inspection |
|---|---|---|
| Timing | Before signing the contract | After contract, before settlement |
| Primary Focus | Overall property condition | Contract compliance and workmanship |
| Applicable Standard | AS 4349.1 | NCC, contract specifications |
| Common Property Type | Established homes | New builds, off-the-plan |
| Who Requests It | Prospective buyer | Buyer before settlement |
| Outcome | Informs purchase decision | Confirms readiness for handover |
When to Schedule the Inspection
The inspection should be arranged within the final week before the scheduled settlement date. This timing gives you enough opportunity to identify defects while still allowing time to raise issues with the builder or developer before settlement proceeds.
For off-the-plan apartments, the developer will typically offer a formal inspection window. Make sure you attend this inspection and, if possible, bring a professional inspector with you. If the developer provides only a short notice period, request additional time if needed.
Do not leave the inspection until the day of settlement. If defects are found on settlement day, you may not have sufficient time to negotiate repairs or compensation before the transaction completes.
Some key timing considerations include:
- Book the inspection at least 5 to 7 days before settlement
- Allow 1 to 3 hours for a thorough walkthrough depending on property size
- Request the inspection during daylight hours so natural light reveals surface defects
- Confirm that all construction work is complete before the inspection takes place
Your Legal Rights in Australia
Australian property buyers are protected by a range of federal and state laws when it comes to building quality and settlement. Understanding these protections helps you hold builders and developers accountable for defective work.
Australian Consumer Law (ACL)
Under the Australian Consumer Law, building services must be provided with due care and skill, be fit for their intended purpose, and meet any specified requirements. If a new property has defects that breach these guarantees, the buyer may be entitled to a remedy including repair, replacement, or compensation.
State-Specific Legislation
Each state and territory has its own building legislation that provides further protections:
- NSW: The Home Building Act 1989 requires builders to provide statutory warranties covering major defects for six years and minor defects for two years from the date of completion. NSW Fair Trading oversees compliance.
- Victoria: The Domestic Building Contracts Act 1995 provides warranty periods of ten years for structural defects and six years for non-structural defects. The Victorian Building Authority (VBA) regulates the industry.
- Queensland: The Queensland Building and Construction Commission Act 1991 mandates warranty periods of six years and six months for structural defects and six months for non-structural defects. The QBCC handles complaints.
- South Australia: The Building Work Contractors Act 1995 provides five-year warranty coverage for structural defects.
- ACT: The Building Act 2004 provides statutory warranties and consumer protections overseen by ACT Planning and Land Authority.
Statutory Building Warranties
Builders in Australia are required by law to provide statutory warranties on residential building work. These warranties cover both major (structural) and minor (non-structural) defects for defined periods after completion. The warranty periods vary by state, as outlined above.
| State | Structural Defect Warranty | Non-Structural Defect Warranty |
|---|---|---|
| NSW | 6 years | 2 years |
| Victoria | 10 years | 6 years |
| Queensland | 6 years 6 months | 6 months |
| South Australia | 5 years | Varies |
| ACT | 6 years | 2 years |
Your Right to a Final Inspection
Most building contracts in Australia include a clause allowing the buyer to conduct a final inspection before settlement. Even if the contract does not explicitly mention it, you have the right to verify that the property is in the agreed condition. For further detail on builder obligations in pre-settlement inspections, refer to our dedicated guide.
Pre-Settlement Defect Inspection Checklist
A thorough pre-settlement defect inspection should cover every area of the property. The following checklist outlines the key items to examine in each zone.
Walls, Ceilings, and Floors
- Check walls for cracks, dents, uneven surfaces, and paint defects
- Inspect ceilings for cracks, stains, sagging, and uneven cornices
- Examine floor surfaces for scratches, chips, uneven tiles, and gaps
- Test that skirting boards are straight, properly fixed, and free of gaps
- Verify that all paintwork is even, without drips, missed spots, or roller marks
Doors and Windows
- Open and close every door to check for smooth operation
- Verify that all locks, handles, and latches work correctly
- Check windows for smooth opening and closing, secure seals, and clean glass
- Inspect flyscreen condition and fit
- Look for gaps around frames that could allow drafts or water ingress
Plumbing
- Turn on all taps and check for adequate water pressure and hot water delivery
- Flush all toilets and check for leaks at the base and cistern
- Run showers and check for leaks, drainage speed, and waterproofing around the base
- Check under sinks for leaking pipes or connections
- Inspect the hot water system for proper installation and operation
Electrical
- Test all power points with a device or plug-in tester
- Switch on every light and check for flickering or non-functioning fixtures
- Test the safety switch (RCD) at the switchboard
- Check that the switchboard is labelled and accessible
- Verify that smoke alarms are installed and operational
HVAC and Ventilation
- Test the air conditioning system in both heating and cooling modes
- Check that exhaust fans in bathrooms and the kitchen are operational
- Verify that ducted systems deliver airflow to all vents
- Check for unusual noises from the HVAC unit
Kitchen
- Open and close all cupboard doors and drawers to check alignment
- Inspect benchtops for chips, scratches, and join quality
- Test all appliances including the oven, cooktop, rangehood, and dishwasher
- Check the sink and tapware for leaks and water flow
- Verify splashback installation is complete and sealed
Bathrooms and Laundry
- Check tiling for cracks, chips, uneven grout, and lippage
- Test waterproofing by running water and checking for leaks below
- Verify that all towel rails, toilet roll holders, and accessories are secure
- Inspect silicone seals around the bath, shower, and vanity
- Check laundry taps and drainage connections
Exterior and Landscaping
- Walk the perimeter and check external walls for cracks, stains, and render defects
- Inspect the driveway and paths for cracks and poor drainage
- Check fences and gates for stability and correct installation
- Verify that landscaping, turf, and garden beds match contract specifications
- Inspect gutters, downpipes, and stormwater drainage connections
For apartment-specific guidance, see our checklist for apartment pre-settlement inspections.
Who Should Conduct the Inspection
While you can conduct the inspection yourself, engaging a professional building inspector is strongly recommended. Licensed inspectors have the training and equipment to identify hidden defects that a layperson may miss, such as waterproofing failures, structural movement, and non-compliant electrical work.
A professional inspector will provide a detailed written report with photographs documenting every defect found. This report serves as formal evidence if you need to negotiate repairs with the builder or pursue a claim.
Pros
- Identifies hidden defects using specialised tools
- Provides a formal report with photographic evidence
- Understands NCC requirements and Australian Standards
- Report can be used as evidence in disputes
Cons
- Limited ability to detect concealed defects
- No formal report for dispute resolution
- May miss compliance issues with building codes
- Difficult to assess structural and waterproofing concerns
If you are purchasing a new build, it is worth investing in an independent inspector who is not connected to the builder or developer. This ensures objectivity and avoids any conflict of interest.
What to Do if Defects Are Found
Finding defects during a pre-settlement inspection does not mean you have to walk away from the purchase. In most cases, defects can be resolved through negotiation. Here is the process to follow:
Document Every Defect
Take clear photographs and videos of each defect. Note the location, type, and severity. If you have engaged a professional inspector, their report will serve as your primary documentation.
Notify the Builder or Developer in Writing
Send a formal written notice listing all defects. Include the inspection report and photographs. Set a reasonable timeframe for the builder to respond and propose a rectification plan.
Negotiate Repairs or Compensation
In many cases, the builder will agree to fix the defects before settlement. For minor issues, you may negotiate a financial adjustment to the purchase price or a retention amount held in escrow until repairs are completed.
Consider Delaying Settlement
If major defects are found that affect the habitability or safety of the property, you may have grounds to delay settlement. Seek legal advice before taking this step, as delaying settlement without proper justification can have financial consequences.
Use an Escrow or Retention Account
An escrow or retention account allows a portion of the purchase price to be held by a third party until the builder completes the agreed repairs. This protects the buyer while still allowing settlement to proceed.
Arrange a Follow-Up Inspection
After the builder has completed rectification work, arrange a follow-up inspection to confirm all defects have been properly addressed. Do not release any held funds until you are satisfied with the outcome.
For more detail on resolving disputes during the pre-settlement process, see our guide on pre-settlement disputes and resolution.
Cost of a Pre-Settlement Defect Inspection
The cost of a pre-settlement defect inspection in Australia varies depending on the property type, size, and location. As a general guide:
| Property Type | Typical Cost Range (AUD) | Inspection Duration |
|---|---|---|
| Apartment or unit | $300 to $500 | 1 to 1.5 hours |
| Townhouse | $400 to $600 | 1.5 to 2 hours |
| Standard house | $500 to $700 | 2 to 3 hours |
| Large or luxury home | $600 to $800+ | 3 to 4 hours |
The cost of the inspection is a small price compared to the potential expense of rectifying defects after settlement. Identifying a single significant defect, such as a waterproofing failure or structural crack, can save you thousands of dollars in future repair costs. For more on common issues found in pre-settlement inspections, refer to our detailed guide.
Frequently Asked Questions
QWhat is the purpose of a pre-settlement defect inspection?
The purpose is to confirm that the property meets the agreed contractual specifications and building standards before ownership transfers.
A pre-settlement defect inspection gives you the opportunity to identify any unfinished work, poor workmanship, faulty fixtures, or non-compliance issues before making the final payment. For new builds, the inspection compares the finished property against the approved plans and any agreed variations. It is your last chance to raise defects with the builder and negotiate repairs or compensation before settlement completes. Without this inspection, you may inherit problems that become costly and difficult to resolve after handover.
QWho pays for repairs identified in the inspection?
The builder or developer is generally responsible for rectifying defects identified during a pre-settlement defect inspection.
If the property is a new build, the builder is contractually obligated to deliver the property in accordance with the agreed plans, specifications, and relevant building codes. Any defects that represent a departure from these standards are the builder's responsibility to fix. In some cases, the buyer and builder may agree to a financial adjustment instead of physical repairs. If the builder disputes liability, the matter may need to be referred to the relevant state tribunal or fair trading body for resolution. The buyer typically pays for the inspection itself.
QIs it necessary to hire a professional inspector?
It is highly recommended, though not legally required.
A professional building inspector has the training, experience, and equipment to detect defects that most buyers would miss. This includes issues behind walls, under floors, and within concealed services. A licensed inspector also understands the NCC and Australian Standards, so they can identify compliance issues that a layperson would not recognise. The formal inspection report they provide, complete with photographs and detailed descriptions, serves as evidence if you need to negotiate with the builder or pursue a formal complaint. The cost of hiring a professional is small compared to the risk of missing a significant defect.
QWhat happens if the builder refuses to fix defects?
If the builder refuses to rectify defects, you have several options available under Australian law.
You can lodge a formal complaint with the relevant state regulator, such as NSW Fair Trading, the VBA in Victoria, or the QBCC in Queensland. These bodies can investigate and, in some cases, issue rectification orders against the builder. You may also pursue a claim through the relevant state tribunal, such as NCAT in New South Wales or VCAT in Victoria. If the builder holds home warranty insurance, you may be able to make a claim under that policy. Seeking legal advice early in the process is recommended so you understand your rights and the most effective course of action.
QAre there legal consequences for builders who fail to meet contract terms?
Yes, builders who fail to deliver a property in accordance with the contract and building standards can face legal consequences.
Under Australian Consumer Law, building services must be provided with due care and skill. A failure to meet this standard can result in orders to rectify the defects, pay compensation, or both. State-specific legislation imposes additional penalties. In NSW, the Home Building Act 1989 allows consumers to pursue claims through the NSW Civil and Administrative Tribunal. Builders who repeatedly fail to meet standards may face disciplinary action, fines, or loss of their licence. In serious cases involving safety risks, authorities may issue stop-work orders or prosecute the builder.
QHow long do buyers have to report defects after settlement?
The timeframe depends on the type of defect and the state in which the property is located.
Statutory warranty periods provide a window during which you can report defects to the builder after completion. In NSW, you have six years for major defects and two years for minor defects. In Victoria, the periods are ten years for structural and six years for non-structural defects. In Queensland, you have six years and six months for structural defects and just six months for non-structural defects. It is always best to identify and report defects as early as possible, as delays can make it harder to prove the defect was present at the time of handover. Conducting a thorough pre-settlement defect inspection is the most effective way to catch issues before the warranty clock starts.
QWhat is covered under the statutory building warranty in Australia?
Statutory building warranties cover both major (structural) and minor (non-structural) defects in residential building work.
Major defects include issues that affect the structural integrity of the building, such as foundation failures, load-bearing wall defects, and roofing defects that allow water penetration. Minor defects include cosmetic issues, faulty fixtures, poor paintwork, and non-structural cracks. The warranty also covers non-compliance with the NCC and relevant Australian Standards. It is worth noting that normal wear and tear, damage caused by the homeowner, and issues arising from lack of maintenance are generally not covered. Each state defines warranty coverage slightly differently, so check the legislation that applies in your jurisdiction.
QCan I delay settlement if major defects are found?
In some circumstances, yes, but you should seek legal advice before doing so.
If the defects are serious enough that they affect the habitability, safety, or value of the property, you may have grounds to delay settlement until they are rectified. This is more likely to be accepted for major structural defects or significant non-compliance issues. However, delaying settlement without proper legal justification can put you in breach of contract, potentially resulting in penalty interest or loss of your deposit. Always consult a property lawyer or conveyancer before deciding to delay. In many cases, negotiating a retention or escrow arrangement is a more practical solution that allows settlement to proceed while protecting your interests.
QWhat is the difference between a pre-settlement inspection and a building inspection?
A pre-settlement inspection focuses on contract compliance before handover, while a building inspection assesses the overall condition of a property before purchase.
A building inspection, also called a pre-purchase inspection, is typically arranged before you sign the contract. It evaluates the property for structural defects, pest damage, safety hazards, and maintenance issues. It follows AS 4349.1 and is common for established homes. A pre-settlement inspection happens after the contract is signed but before settlement. It checks that the builder has completed all work to the agreed standard and that the property matches the plans and specifications. It is most common for new builds and off-the-plan purchases. Both inspections serve different purposes, and in many cases it is worthwhile to have both conducted at the appropriate stages.
QHow much does a pre-settlement defect inspection cost in Australia?
A pre-settlement defect inspection typically costs between $300 and $800 in Australia, depending on the property type and size.
For a standard apartment, expect to pay between $300 and $500. Townhouses generally cost $400 to $600, while a standard house inspection ranges from $500 to $700. Larger or more complex properties may cost $800 or more. The price usually includes a detailed written report with photographs documenting all identified defects. Some inspectors offer a follow-up inspection at a reduced rate to verify that rectification work has been completed. Given that a single undetected defect could cost thousands to repair, the inspection fee represents good value and a sound investment in the quality of your new home.
Key Takeaways
- A pre-settlement defect inspection is your final opportunity to check that a property meets contract specifications and building standards before settlement
- The inspection should be booked within the final week before settlement, allowing time to raise issues with the builder
- Australian Consumer Law and state-specific building legislation provide strong protections for buyers of new properties
- Statutory building warranties cover structural defects for between five and ten years depending on the state, and non-structural defects for two to six years
- A detailed checklist covering walls, ceilings, floors, doors, windows, plumbing, electrical, HVAC, kitchen, bathrooms, and exterior areas should be followed
- Hiring a professional licensed building inspector is strongly recommended for identifying hidden defects and compliance issues
- If defects are found, document them thoroughly and notify the builder in writing with a reasonable rectification timeframe
- Escrow or retention accounts can protect your interests while allowing settlement to proceed
References and Resources
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