The seller has almost no ability to push back if the process is followed correctly.
The building report condition under clause 9.4 of the ADLS Agreement for Sale and Purchase is one of the most powerful protections available to a purchaser.
The condition operates in the purchaser's favour — meaning the purchaser controls the outcome.
The seller cannot override it, challenge the findings, or force the purchaser to accept the property if the report is unsatisfactory.
But this protection only works if the process is followed correctly.
If the purchaser or their building inspector cuts corners, the seller has grounds to push back.
Get the process right, and the purchaser holds all the cards.
The building report condition must be indicated on the front page of the agreement.
If it is not ticked, there is no condition.
This sounds obvious, but it gets missed — particularly in fast- moving multi-offer situations where the agent is pushing for a clean offer.
The report must be prepared by a suitably qualified building inspector.
It must be prepared in good faith, in accordance with accepted principles and methods, and it must be in writing.
This is not optional — it is a contractual requirement under clause 9.4(2).
A report from an unqualified person, or a report that is not in writing, gives the seller grounds to challenge the condition.
Use a proper building inspector every time.
The seller must allow the building inspector to inspect the property at all reasonable times upon reasonable notice.
The seller cannot refuse access — subject to the rights of any tenants.
If the property is tenanted, reasonable notice to the tenant is required, but the seller still has an obligation to facilitate access.
The building inspector may not carry out any invasive testing without the seller's prior written consent.
This is the one area where the seller has a say.
If the inspector wants to cut into walls, lift flooring, or drill test holes, the seller must agree in writing first.
Without that written consent, the inspector is limited to a visual, non-invasive assessment.
Once the report is received, the purchaser decides whether it is satisfactory — on the basis of an objective assessment.
This is the key phrase.
The test is objective, not subjective.
The purchaser cannot use the building report condition to cancel the agreement because they changed their mind about the colour of the walls.
But if the report identifies genuine building defects, moisture issues, structural concerns, or code compliance problems, the purchaser is entitled to say the report is unsatisfactory and avoid the agreement.
Before the building report date, the purchaser must either confirm the condition is satisfied (the report is acceptable and they are proceeding) or avoid the agreement under clause 9.10(5) because the report is unsatisfactory.
If the purchaser avoids the agreement, they must provide the seller with a copy of the building inspector's report immediately upon request.
This is what makes the building report condition so powerful for purchasers:
The only leverage the seller has is on invasive testing (which requires their written consent) and on process — if the purchaser fails to follow the correct process, the seller may have grounds to argue the condition has not been properly invoked.
The building report condition fails to protect the purchaser when:
Every one of these failures is avoidable.
The purchaser's lawyer should be checking each of these points before the condition date arrives.
When your client has a building report condition in their agreement, they are in a strong position.
The condition is designed to protect them, and the seller has very limited ability to push back — provided the process is followed correctly.
The purchaser's lawyer manages this process: ensuring the condition is properly recorded, the inspector is qualified, the report is obtained within the deadline, and the purchaser's decision is communicated before the condition date expires.
If the report comes back with issues, the purchaser can negotiate a price reduction, request repairs, or walk away entirely.
The building report condition is not just a safety net — it is a negotiation tool.
And when the process is followed correctly, it is almost entirely in the purchaser's control.
This newsletter summarises clause 9.4 of the ADLS Agreement for Sale and Purchase of Real Estate (Eleventh Edition 2019(2)). Specific legal advice should be obtained for individual transactions.
✔ The building report condition operates in the purchaser's favour — the purchaser controls the outcome, not the seller.
✔ The report must be by a suitably qualified inspector, in good faith, in accordance with accepted principles, and in writing.
✔ The purchaser decides if the report is satisfactory on the basis of an objective assessment — the seller cannot override this.
✔ The seller's only leverage is on invasive testing (requires their written consent) and on process failures by the purchaser.
✔ Follow the process correctly and the purchaser holds all the cards.
Cut corners and the protection falls apart.
