I can't be exact on this, but up until about 10 years ago, survey reports were often and regularly obtained when a solicitor acted for a buyer of a residential property. Their importance, or more accurately - their requirement, is something that has waned over the years.
In the context of when buying a residential property, the type of survey report obtained, is ordinarily an identification survey. In almost all cases, the survey report usually will:
- confirm whether the property described in the contract is the same as that which a buyer has inspected and intends to buy;
- indicate the location of buildings and improvements on the land relative to the property's boundaries - surprisingly, many people don't realise that fences are rarely a reliable guide to these - a little more on this below;
- identify or confirm easements shown on the title;
- show whether there are encroachments by or upon the property;
- state whether the buildings comply with any restrictions on use of the land imposed on the title.
As an identification survey usually concerns the improvements on a property, in general it's not common to obtain a survey of vacant land unless you have particular concerns.
In my experience, the main reasons a buyer looks to avoid obtaining a survey include: the costs; delay caused in exchanging contracts, thus increasing the gazumping risk; the unlikelihood of obtaining one before the cooling-off period expires; confidence about the state of the building and the existing disclosures already in the contract; or a combination of all of these and the stress resulting from them.
An identification survey for a regular urban residential property can cost somewhere in the region of $450 to $600, not an insignificant cost.
In past years, by far the main reason why a buyer obtained a survey report was because their lender required it. If a buyer required borrowed funds to purchase a property, the funds weren't available before all the lender's requirements were met. These days, it's rare for a lender to include the requirement of a survey. I don't really know why that is; I can make an educated guess but perhaps if someone working or acting for a lender can enlighten us, that'll be welcome. These days, on the few occasions where a client's lender does require a survey, it qualifies this by stating it's only required "... if available". I haven't yet met borrower who was voluntarily prepared to spend the money for a survey where this was only reason for obtaining one!
Except where a survey is actually required by their lender, most buyers will make up their mind on whether to obtain one based on the advice of their solicitor or conveyancer. In an ideal world, such as where costs and delays are not an issue, a survey would be obtained in every purchase of a residential property; realistically however, a buyer will usually be guided by the professional advice they obtain. That advice will consider the particular circumstances to assess whether a survey is warranted.
Unless advised to obtain one, most buyers, especially when trying to convince themselves of a reason to minimise costs will almost always decide that their circumstances don't warrant a survey. I say "almost", because I can't recall a situation in recent years where a client refused to obtain a survey against strong advice.
Whilst the obtaining of surveys in conveyancing transactions may have reduced over the years, the importance of obtaining one certainly hasn't. A survey report identifying a defect or a problem before a buyer commits to a purchase contract, could save that buyer thousands of dollars rectifying those problems - assuming they can be rectified - avoid costly litigation and, importantly, avoid a whole lot of stress.
Real world examples. Some years ago, in the days before government grants, I was acting for a young and very excited first home buyer. From memory, the vendor was an estates trustee company. The suburban Sydney property was vacant for several years - the elderly owner having moved out into aged care, before dying some years later. The property was old, but in very good condition.
I asked my client to identify the block as shown on the deposited plan in the contract. On that plan, one side of the land splayed out at an angle. She said the property was actually a rectangular shape, but she was describing what the fencing on the property indicated. She instructed me to obtain a survey.
The survey showed that at one corner, the legal boundary was 7 metres beyond the fence! It turned out that the neighbour, when replacing an old fence originally on the correct boundary, had the new fence erected so as to gain him the 7 metres of land! I presume in the belief that it didn't matter, after all, his neighbour's house had been vacant for years; maybe he thought no one would notice! Despite the co-operation of the vendor and the law supporting my client had she purchased, she declined to buy it. It was simply a case of not wanting to deal with the stress.
A farmer on the outskirts of Sydney retired. He farmed for years his block consisting of several hectares. The old family home was located on the same block in a far corner, fronting the road. It had an old fence surrounding it, separating the home and its front and back yards from the farm. The farmer had just subdivided the farm into several very large lots. The part where the old home stood was also subdivided onto its own new regularly sized lot; my client was informed of all this by the agent. After inspecting the property, my client signed the contract and the agent exchanged contracts.
After consulting me and on my advice, my client obtained an urgent survey. It showed that the legal boundary of the lot on which the old home stood, was about 2 metres inside the fence lines! Apart from now making the back yard tiny, it also meant my client was buying well over 100 sq metres less land than he thought he was!
Not only did my client rescind the contract, but he managed to easily recover the 0.25% deposit that normally he would have had to forfeit, after we pointed out the misleading and deceptive conduct of the agent. What soured the whole episode for my client, was when queried the agent earlier insisted that the boundaries were on the fenceline and that a survey was a waste of money. When subsequently confronted with the survey, the agent's response to my client was a dismissive "you win some, you lose some"!
In an upcoming post, I'll be describing two cases where things went wrong after a survey was obtained.
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