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NZIBS Guidance Note No. 4 – PGN004.2016 (March 2016)

Residential Property Inspections

PURPOSE

To provide guidance to NZIBS Registered Members (Members) about the processes and potential issues surrounding pre-purchase and pre-sale inspections and reports on residential property (residential property inspections).

To gain consistency in approach, noting steps which the Member should be aware of and follow as a standard practice.

This Guide is not a replacement for the NZIBS part-module on pre-purchase inspections and

associated modular education and continued professional development (CPD). Any building surveyor

choosing to carry out residential property inspections should have adequate knowledge and

experience to undertake this work, or they should work under the guidance and direction of a

Member with such knowledge and experience.

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SCOPE

For Members (and those Transitional members in NZIBS modular training) who are engaged (or planning to engage) in residential property inspections.

LIMITATIONS

This document is not intended to be an instruction manual or a detailed prescriptive step by step process that has to be followed in every respect by Members. The Institute’s intention is to provide a guide to the key principles and components that should be considered and included in a typical residential property inspection.

Accordingly, this Guide is not intended to identify or cover issues relating to whether the land and buildings meet all regulatory or other legal conditions which might affect them, such as might be relevant to compliances, boundaries, special planning/heritage status or whether any guarantees or warranties relating to buildings remain in existence. Special enquiry is likely to be required for establishing these matters as they would not be part of a typical residential property inspection.

Each Member is required to abide by the Institute’s Rules and Regulations when performing their work. Members should also assess the level of education and experience, professional indemnity insurance cover and resources necessary for each commission. It is important that Members do not work outside their area of expertise.

LEGAL DISCLAIMER

This Guide has been prepared solely for use by Members and their firms. No other person or entity is entitled to use it or rely on any of the information in it.

While all reasonable endeavours have been used to ensure the Guide is accurate and sufficient for its intended purpose, neither the Institute nor any member of its Executive Committee assume any legal liability in relation to its contents. All Members and their firms by using this Guide will be deemed to have accepted this disclaimer.

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Table of Contents

1 DEFINITION OF A RESIDENTIAL PROPERTY INSPECTION ................................................. 4

2 LEGAL RISKS IN PRE-PURCHASE/PRE-SALE INSPECTIONS ............................................... 4

3 CONFLICT OF INTEREST ............................................................................................................. 6

4 EXCLUSIONS FROM SCOPE AND LIMITATIONS .................................................................... 6

5 RECOMMENDED REFERENCES ................................................................................................. 7

6 OTHER RELEVANT DOCUMENTS.............................................................................................. 8

7 RECOMMENDED EQUIPMENT ................................................................................................... 9

8 HEALTH & SAFETY ....................................................................................................................... 9

9 SITE INSPECTION ........................................................................................................................ 10

10 CONDUCT ONSITE ...................................................................................................................... 12

11 COUNCIL FILES ........................................................................................................................... 12

12 THE REPORT ................................................................................................................................. 13

13 COMMUNICATING THE INFORMATION ................................................................................ 14

14 DEALING WITH COMPLAINTS ................................................................................................. 14

15 RECORD KEEPING....................................................................................................................... 15

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1 DEFINITION OF A RESIDENTIAL PROPERTY INSPECTION

This Guide adopts the definition used in NZS 4306:2005 Residential Property Inspection, namely:

“A non-invasive visual inspection of a residential building carried out in accordance with [Section] 2.3”.

NZS 4306:2005 provides requirements for the visual inspection of residential buildings, and for the preparation of the appropriate property inspection reports. Members need to meet those requirements unless the client agrees otherwise prior to engagement and is properly informed on the differences to expect.

This Guide is intended to be supplementary to NZS 4306:2005.

2 LEGAL RISKS IN PRE-PURCHASE/PRE-SALE INSPECTIONS

In carrying out residential property inspections, you are required under standard engagement agreements and at common law to meet the performance standard of a competent building surveyor exercising reasonable skill and care.

Pre-purchase inspections

In carrying out pre-purchase inspections, you are commonly exposed to liability for:

Failing to identify significant defects, significant maintenance requirements and notable gradual deterioration where these things would be apparent to a competent building surveyor.

Failing to warn or warn sufficiently about the extent or the possible extent of the defects, maintenance requirements and gradual deterioration identified, where these warnings would be given by a competent building surveyor.

Failing to warn or warn sufficiently about the consequences or potential consequences if the defects, maintenance requirements and gradual deterioration identified are not repaired or rectified expeditiously.

Failing to advise or advise sufficiently of the need for further investigation of the defects or gradual deterioration identified in order for the extent of the problems to be properly assessed.

A surveyor has a legal duty to advise of the need to investigate further and clearly explain the current or likely future risk of each significant defect identified. Only identifying a significant defect or risk is not sufficient.

A “significant defect” is defined in NZS 4306:2005 as a defect or fault which requires substantial

repairs or urgent attention and rectification. Whether or not a defect should be regarded as

significant depends to a large extent upon the age and type of building being inspected.

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Pre-sale inspections

In carrying out pre-sale inspections, you are exposed to additional legal risks. Pre-sale reports are normally undertaken for the vendor, or on their behalf, prior to and for the assistance with the sales process. They carry additional risks such as:

Your terms and conditions of engagement will not apply to prospective purchasers who are provided with your report by your vendor client, even though the report may be commissioned by the vendor with the intention that purchasers can rely on it.

When vendors provide your pre-sale report to purchasers they are making a representation about the condition of the property based on your report. If defects are found later which were not identified, or for example were understated, the purchaser may have grounds to make a claim against the vendor for misrepresentation, who in turn may well claim against you. If you knew or should reasonably have known that the report would be provided to prospective purchasers, the purchaser may well also have a claim against you.

We recommend you obtain specific legal advice before providing pre-sale reports so you

more fully understand your risks.

Reducing legal risk

You can reduce legal risk by have good systems in place such as:

In-house guidance to surveyors on how to clearly communicate negative findings and highlight those risk features to clients. It is difficult to fully communicate risk when the pre-purchase surveyor is undertaking a visual inspection and is unlikely to have the opportunity to fully investigate the building further by way of invasive investigation and testing.

Reporting templates that:

o Cover all required aspects and that are updated when new information comes to hand that helps inform your client, or to reduce potential liability.

o Include appropriate references to the scope and the Terms and Conditions of engagement, and contain appropriate disclaimers. It is recommended this aspect of the template be reviewed by a lawyer.

Recording evidence of your inspection processes – photos and descriptions.

Providing information in your reports on what you did and did not do.

Ensuring you have adequate levels of professional indemnity insurance in place to cover your risk, and discussing issues of concern as appropriate with your broker or insurer and/or lawyer.

Note; NZS 4306:2005 states that professional indemnity insurance is among the matters which

terms and conditions of engagement need to “cover”. However, the Standard does not explain

what is meant by “cover”. Members need to be aware that any disclosure of insurance details

to the client in any form of documentation or discussion may be in conflict with the terms of

your insurance policy, and specific advice should be obtained from your insurer or lawyer before

making any disclosure.

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Ensuring you have agreed scopes of service and Terms and Conditions in writing before commencing. This should be in the form of a signed consulting agreement that has been vetted and approved by a lawyer familiar with the terms of your professional indemnity insurance.

3 CONFLICT OF INTEREST

A conflict of interest is anything that impedes, or might be reasonably perceived to impede an

individual or company’s ability to act impartially and in the best interest of a client.

Avoid conflicts of interest – declare any potential personal or professional conflicts of interest

to relevant parties before accepting an instruction. Only then act once the prior informed

consent has been obtained in writing. Issues relating to conflicts or potential conflicts can be

difficult ones. If you are in any doubt about your position, you should seek guidance from the

Institute or obtain legal advice.

Act with integrity and honesty in all your dealings – you need to follow NZIBS Regulation 02 –

Code of Ethics and in addition we recommend you follow NZIBS Guidance Note – Ethics.

4 EXCLUSIONS FROM SCOPE AND LIMITATIONS

Exclusions and limitations should be noted both in your Terms and Conditions before reaching agreement and then repeated in your report. They include:

Risks that are expressly excluded in your Professional Indemnity (PI) policy. As stated above, your standard consulting agreement should be reviewed and approved by a lawyer familiar with the terms of your professional indemnity insurance.

The exclusion of any third party use of the report unless you have expressly agreed to this use e.g. where you have agreed to pre-sale/vendor reports being released to prospective purchasers (but note the recommendation in Section 2 above to obtain specific legal advice before providing pre-sale reports).

Weathertightness investigations (as these need to be invasive).

Issues relating to structural stability (as these need structural engineering advice).

Issues relating to ground stability (as these need geotechnical engineering advice).

Specialist trade/industry areas e.g. electrical, plumbing, gas, drainage.

The items listed in NZS 4306:2004 (sections 1.3, 3.3).

Any areas not accessible due to health and safety restrictions or not able to be accessed.

Advice on design or any repair or remediation or cost of repairs (as these are specialist areas).

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5 RECOMMENDED REFERENCES

The following documents provide key references to how the bulk of the New Zealand housing

stock is constructed. The surveyor requires knowledge of these documents including the

aspects mentioned below.

NZS 4306:2005 Residential Property Inspection which provides standard requirements for the visual inspection of residential buildings and for the preparation of the appropriate property inspection reports.

If you do not fully or partly follow the Standard, this should be explained to a prospective client prior to engagement, then clearly stated in your Terms and Conditions of engagement and repeated in your report.

NZS 3604 Timber Framed Buildings and its basic principles such as the “scope” of the document and what types of buildings it covers. Note:

The versions - 1978, 1981, 1984, 1990, 1999, 2011.

General knowledge on terminology, methods of construction described in the standard and the basic principles of the construction methods.

Identify where it is evident from a visual inspection, when alternative construction methods and materials to NZS3604 have been used in the construction and apply appropriate philosophies. For example; consider design suitability for straw bale construction; concrete masonry or tilt slab construction.

The Building Acts 1991 and 2004 (BA2004), and amendments, including the schedules that list works which could be done without a building consent. The following are with reference to BA2004:

Purpose & Principles of the Act (Sec 3 & 4)

Requirements to comply with the Building Code (Sec 16 – 25A)

Building Consents (Sec 40 – 51)

Code Compliance Certificates & Certificates of Acceptances (Sec 91 – 99A)

Alterations to Existing Buildings (Sec 112)

Code Compliance requirements; Change of Use (Sec 115)

Insanitary buildings (Sec 123 – 125)

Notices to Fix (Sec 163 – 168)

Schedule 1 Building work for which building consent not required (Part 1 – 3)

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Building Code and Acceptable Solutions to the Building Code. You may wish to reference parts of your inspection against the following Building Code clauses:

B1 - Structure

B2 – Durability

C1 – Fire Safety

D1- Access Routes

E1 – Surface water

E2 – External moisture

E3 – Internal moisture

F4 – Safety from falling

G5 – Interior Environment

G4 – Ventilation

G12 – Water Supplies

G13 – Foul Water

MBIE Guides on repairing and rebuilding houses affected by the Canterbury earthquakes which is useful generally when considering seismically damaged structures: These guides are available on the Ministry of Business Innovation & Employment – MBIE website. Note that since first available in 2010, they have been frequently updated, so check for updates.

Department of Building and Housing (now part of MBIE) - Guide to the Diagnosis of Leaky Buildings which is a useful publication for understanding weathertightness investigation and reporting, but only the visual inspection aspects have any application to the residential property inspections covered in this Guide.

6 OTHER RELEVANT DOCUMENTS

BRANZ Bulletin 423 Pre Purchase Inspections Feb. 2002 – superseded by Bulletin 559 April 2013

AS4349.1-2007 Inspections of Buildings – Pre Purchase Inspections – Residential Inspections (Australian Standard®), this version supersedes AS4349.1 - 1995.

RICS Consumer Guide October 2013 – Details three reports that are available from RICS members that range from a basic condition report for home buyers and sellers (pre purchase and pre sale) to a full investigative building survey to identify hidden defects.

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7 RECOMMENDED EQUIPMENT

Appropriate safety equipment

Ladder

Hose for water testing (drains when

they appear blocked).

Torches - large torch for roof & floor

space & small clip on torch for

cupboard inspection

Large screwdriver or probe for testing

insect damage or timber decay

Telescopic inspection mirror

Moisture meter with scan/resistance

modes

Digital camera

Extension pole and mount for camera

Floor level measuring device

Tape measure or digital laser measurer

Angle/slope/level measuring device

Note: This list is not an exhaustive list of equipment required in all situations and additional equipment maybe

required. Additional requirements relating to Health & Safety requirements dealing with heights, asbestos and

other such hazards may be required.

8 HEALTH & SAFETY

You need to have regard to current legislative requirements – it is important to keep up to date.

“Doing nothing is not an option”

Falling from Height

Walking on the roof of a building is not considered safe (even less than 3m) without specific safety equipment such as scaffolding or edge protection. Only when this is not achievable can the use of a fall restraint or safety nets, airbags be considered. Therefore, where possible inspections need to be done from the ground or from a ladder placed on the ground and against the building in a safe manner.

Guidelines for working at heights:

o Short duration work at height needs to be considered the same way as any other activity at height.

o Appropriate fall prevention controls need to be put in place, regardless of the time duration of the task.

o Short duration work means work that lasts minutes rather than hours. It may not be reasonably practicable to provide full edge protection for short duration work, but it still needs to be considered during the assessment of hazards and should not be discounted.

Before and when using ladders you need to consider the relevant risks.

See factsheets and guidance notes from WorkSafe - http://www.business.govt.nz/worksafe/information-guidance/national-programmes/preventing-falls-from-height-in-construction/factsheets-bulletins-and-alerts

Confined Spaces

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Roof spaces and floor voids have limited entries and exits. They are potential harmful air environments (asbestos fibres, toxic moulds, sharp objects, risk of falling, entrapment).

Other Risks

Dogs,

Children,

Slip/falling from sloping or stepped ground heights,

U.V. Rays – sunburn, eye damage (glare from buildings),

Meth-lab in the dwelling – dangerous tenants or occupiers, equipment and toxic fumes and residues.

Be alert to potentially harmful materials being on the property and making owners aware of

this – i.e. presence of asbestos, moulds and lead paints. Information on these is on the

WorkSafe website.

9 SITE INSPECTION

General guidance:

Your senses, experience and mind are your best tools. Checklists are recommended as a reminder, but not necessarily as an inspection guide. Taking good photos and good record keeping is extremely important.

When inspecting the inside, if a potential defect is noted on an exterior wall, or on a ceiling under a roof, make a reminder note to check the outside in the same location.

Use heavy foot-falls on the inside to differentiate concrete ground floors from suspended timber floors which may be isolated and not obvious and consequently poorly ventilated. Subfloor vents which are completely absent are easily missed.

When inspecting the outside, before leaving site undertake a ‘check inspection’ by walking around the house in the opposite direction.

Before leaving site refer to your checklist to verify all relevant issues have been inspected.

NZS 4306:2005 Residential Property Inspection:

Section 2.1 includes the requirement to identify significant defects.

It states that it is not necessary to report on each item - inspectors can choose to report on an “exceptions or information basis” i.e. listing significant defects only.

Section 2.2 lists the areas for inspection necessary for completion of the report.

It states that the inspector shall consider matters such as instability, weathertightness (see Appendix A of the Standard) and the standard of workmanship.

It states that the person requesting the report shall provide reasonable access and also identify any accessory units and ancillary spaces.

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Section 2.2 also notes that a survey on a particular unit in a multi-unit building has limitations due to there potentially being issues concerning common property and potential related liabilities. A client should be made aware of this and advised to seek appropriate professional advice.

The section also provides a list of things that are not normally covered by the inspection.

Other than the visual inspections, there are also the requirements within section 2.2 and section 2.3 for physical checking of wastes and water supply pipes. Physical testing of applying water to shower screens where possible is also required.

Additional items not covered by NZS4306:2005:

Floor level survey. This may be required to determine the level of the ground floor to assist with identifying settlement and subsidence. Useful information is provided in “MBIE – Repairing and rebuilding houses affected by the Canterbury earthquakes” for the assessment of floor levels. Also check door and window openings for evidence of settlement.

Common issues with particular dwelling. Be aware of (and if not, undertake a desktop study on) the typical problem attributes of the type and age of dwelling and report on whether these exist. For example:

o 1900’s – 1960’s villas and bungalows – borer, decayed piles, asbestos, lack of insulation, lathe and plaster prone to cracks from settlement, failing mortar in chimneys, sagging framing members, structural alterations.

o Art Deco from 1930’s – weather-tightness issues, decayed framing and piles, lack of insulation, borer, lathe and plaster prone to cracks from settlement, asbestos, lead paints, structural alterations.

o State housing 1930s – 1950’s – borer, native dry wood termite, untreated pine, lathe and plaster prone to cracks from settlement, failing mortar in chimneys, sagging framing members, lead, structural alterations.

o 1970’s – 1980’s - New Zealand style & architectural – durability issues such as ‘Weatherside’, ‘Dux Quest’, monolithic cladding related issues (leaky building syndrome).

o 1990’s – 2004 (particularly) – leaky building issues including enclosed decks and balustrades, untreated timber, flat membrane lined roofs and internal gutters.

Identify weathertightness risks. Additional to section 2.2.3 and Appendix A of NZS4306:2005 that require you to consider weathertightness risk, you must also provide information of the potential issues surrounding the weathertightness risks that you have identified such as the likely extent of leaks, potential hidden damage, and the need for specific weathertightness testing to determine the required remedial work. This includes explaining the risk of decayed timber concealed within the walls of a building that has such risks and that further invasive weathertightness inspections are required by a specialist weathertightness assessor.

Local conditions. Ensure you have adequate knowledge of the environment you are working in. For example, consider coastal exposure, wind exposure, effects of gases within areas of Rotorua, effects of historical earthquake activity.

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10 CONDUCT ONSITE

Never enter a private building without authority. You must have authority from the owner or their representative or agent. It may come down to having to provide proof that authority was provided to you. Maintain your record of authority.

Be aware of the requirements for access and locking the house when complete.

Remove your shoes as appropriate when inspecting inside. Slip-ons are a good idea.

Always be polite to occupants.

Never enter into an argument.

Leave immediately if requested by the occupant or owner or if there is danger.

Do not view, move or touch personal items.

Leave everything as it was prior to the site inspection.

Notify the owner or agent/representative of any damage caused during the inspection.

Do not leave doors and access hatches open for animals or children to enter or exit.

11 COUNCIL FILES

When to view Council files:

You may choose to accept an instruction to check the property files or you may prefer to include a property file inspection in your scope of work. Property file inspection is not required by NZS 4306:2005.

It is often useful to view the property file to gain a better understanding of the issues you may be faced with. This will be time and cost dependent so you may need to discuss any implications with your client first.

What to inspect and what to comment on:

Areas within your brief in accordance with the scope of your engagement agreement (provided they are areas within your expertise).

Changes in significant components such as cladding, foundations, roofs and ground levels.

Design aspects that appear problematic and are consistent with the onsite construction methods e.g. incorrect flashing design, ground level heights, non-durable materials.

Issues that were raised by the Council inspector to be rectified but there is no evidence that this happened.

Additions and alterations that are apparent and would normally require a building consent and subsequent Code Compliance Certificate (or in the case where the building work is pre-1992; a building permit and Council sign-off).

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Limitations with Council files

Drawings and specifications may not be available or held at the Council for viewing due to the age of the property – some files may have been lost, destroyed or kept confidential.

Information on the drawings and specifications and the building consent information may be incorrect or not applicable. For example, it is not unusual to find that the cladding or the floor plan layout that is detailed on the drawings and specifications is different to what is currently on the building as it may have been built differently or changed without the Council knowing.

Relevant information can be missed.

Time delays in obtaining the property files falling outside the pre-purchase report timeframes.

Be sure to state the purpose of viewing the files and detail the type of information that was researched, otherwise liability could arise from issues relating to matters that were not researched, but were also not excluded from the scope of the Council file inspection. Examples of the type of issues that may arise:

o Non-compliance of the building with the plans and or the Building Code that the client would expect you to identify.

o Issues with matters outside the scope such as town planning and engineering matters.

12 THE REPORT

NZS4306:2005 Residential Property Inspection - Section 1.1 (Scope) requires the report to cover:

Significant defects,

Particular attributes,

Gradual deterioration,

Significant maintenance required.

Section 3 of NZS4306:2005 outlines the basic content requirements which include:

Details on any area or item not inspected, with the reasons which prevented an inspection and if appropriate a recommendation for further investigations.

A summary which includes an opinion on the overall condition.

A list of significant faults or defects.

Advice on further inspections needed.

A certificate in the form of Appendix B.

Section 3.3 provides for limitations and conditions in the report including the exclusion of certain items and a requirement that any terms and conditions specific to the inspection or the inspector be stated in the report.

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13 COMMUNICATING THE INFORMATION

The report must be in layperson’s language so anyone can understand your findings and

conclusions.

Explain in your report:

Where is the defect (location).

What is the defect (description of the problem).

What is likely to be required to fix the defect (explain the likely extent of repairs and urgency).

What is likely to happen if the defect is not fixed (the likely consequences).

State if further investigations are required (on possible hidden damage, or to identify the extent of identified damage or other associated problems).

Avoid using brand names

There is a likelihood you will not reference the correct product and the consequences of that

may be:

You could be discredited by reviewers of the report.

You waste your client and the supplier’s time and embarrass yourself if the wrong supplier is called to site to inspect the product.

You refer to the incorrect specifications relating to the product.

You do not allow yourself to consider other products that could be problematic.

14 DEALING WITH COMPLAINTS

Be responsive and do not fail to return calls.

Listen carefully to the problem and make sure you understand it.

Do not admit any liability (insurance issue).

Discuss the problem (amicably) and take notes on all key aspects.

Inform your insurer where there is the prospect of a claim in accordance with the notification obligations in your Professional Indemnity (PI) policy. If in doubt as to whether to notify, obtain advice from your broker or lawyer. As a general rule it is better to err on the cautious side and to notify.

Investigate the problem if this is appropriate and agreed with your PI insurer.

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15 RECORD KEEPING

Photos:

Typically a significant number of photos can be taken for your records and not to be included in your report.

Photos that reflect the inspection well, - i.e. that show showers, drains, taps, sinks being tested, roof spaces, floor voids, each room, close-up for detail and further back for general views.

Include items or areas that could be prone to problems, but not necessarily showing any signs at the time of inspection (e.g. showers, concealed or internal gutters, high exposure to the elements, foundations, retaining walls, under bench plumbing, hot water cylinders).

Documents to retain:

Copies of original report and any amended versions.

Terms and Conditions of engagement.

Job sheets, enquiry notes, special requests.

Details on time, date, persons requesting service.

Retention of records – 10 years is commonly accepted as a reasonable and appropriate

period.