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December 2003

Chattels in the House

The risks when purchasing a property

For many clients the most disappointing part of a new house purchase is finding that the chattels in the new house do not function properly. Even worse, some clients carry out a pre-settlement inspection, ascertain that the chattels are not in working order but then find that their lawyer has no ability to force the vendors either to fix those chattels or to reduce the purchase price to take account of that condition.

The Agreement May Not Be of Much Help

In a dispute, the starting point is the terms of the agreement. In the commonly used ADLS agreement, the vendor warrants that on settlement, the chattels are in the ‘state of repair’ as at the date of the agreement (fair wear and tear excepted).

In order for the vendor to have breached that warranty, the purchaser will need to be able to show that the ‘state of repair’ of the chattels on the date of settlement is worse than the ‘state of repair’ of the chattels at the date the agreement was signed. Very few purchasers go through a property and test each element, dishwasher, garage door opener, wall heater, and ceiling fan before they sign the agreement. If the purchaser cannot show that the goods have deteriorated since signing, then the vendor needs only to assert that the chattels are in the same state of repair as at the date of signing, and the purchaser can take no action.

Even if the purchaser can prove the change in condition of the chattels, the sale cannot be held up for that reason. The agreement only creates a right of compensation and the purchaser will need to pursue the vendor in the Disputes Tribunal to recover the costs of repair.

Is There a Way Around The Problem?

There are a number of possible solutions. The purchaser could ensure that the agreement contains an additional clause in which the vendor further warrants that the chattels will be delivered to the purchaser in good repair and working order at settlement. Again, however, a breach of this clause will only allow the purchaser to pursue the vendor in the Disputes Tribunal.

Some solicitors recommend to their clients that they go through the property with a camera. They then test each chattel and take photos of them in working order. If there is deterioration they then have some evidence to take to the Disputes Tribunal to recover the costs of repairing those chattels.

There May Be Other Problems

A further issue arises because of the new Personal Property Securities Act (“PPSA”). A purchaser was recently visited by repossession agents three days after she had purchased the property. The agents came to repossess the stove which was subject to a hire purchase agreement.

If the stove was worth more than $2,000 at the date of its purchase under the HP agreement, regardless of whether or not the purchaser knew of the hire purchase agreement, the agents would have been entitled to repossess it. The purchaser would have had to rely on the vendor’s warranty in the agreement that all electrical installations were free of charges, and could then pursue the vendor in the Disputes Tribunal. 
However, if the stove was worth less than $2000 at the time of purchase and the purchaser had no knowledge of the hire purchase agreement the purchaser would have been protected by the provisions of the PPSA and been able to keep the stove.

Some Advice

If you are purchasing a property, you should discuss these issues with us. You can then see if you can avoid potential problems caused by faulty chattels or undisclosed hire purchase agreements.