Selling your home can be stressful—especially if a deal falls through because a potential buyer was not satisfied with a building inspection report they obtained. This begs the question – if a vendor has received a copy of a negative report, do they have to disclose a copy of that report to future buyers?
What Does the Law Actually Say?
The Law Association/REINZ Agreement for Sale and Purchase (the contract most Kiwis use when buying or selling property), includes at clause 7.1 an obligation on the vendor to disclose certain information to the buyer. Clause 7.1 can be summarised as follows:
The vendor must disclose in writing to the purchaser any notice or demand, or details of any known requisition or outstanding requirement, which directly or indirectly affects the property. Failure to do so can give a right to compensation.
If a Builder’s Report Finds Problems, Do I Have to Tell the Next Buyer?
Courts have taken a narrow view of the Law Association disclosure warranty. In Kaitaia Timber Co Ltd v Alternative Enterprises Ltd, the High Court confirmed that the disclosure obligation is limited to formal notices or demands from authorities — not private builder’s reports. There, the court said:
“…In general, under an agreement for sale and purchase a vendor is not required to disclose all information known to him that may be relevant to the purchaser’s decision whether to buy, for how much and on what terms. It is not a contract requiring utmost good faith. That idea is normally referred to as caveat emptor [let the buyer beware].
Singh v Rutherford later reinforced that approach. Unless an authority has issued a notice, a vendor does not generally breach Clause 7.1 by failing to disclose issues that have been raised only in a private report.
When Might You Need to Disclose?
There are some situations where you do need to speak up:
Unconsented Work you have carried out: If the builder’s report uncovers renovations or building work that didn’t get the right council sign-off, you may be breaching other vendor warranties in the agreement if you don’t disclose or fix it. If the work was done by a previous owner, you are generally not required to disclose it under clause 7.1, though misrepresentation rules may still apply.
If You’re Asked Directly: Take care. If a buyer (or their agent) asks you about previous failed sales or known problems, you must answer honestly. You must not misrepresent the property, as this could give rise to a significant claim against you. Silence can also amount to misrepresentation if your answer is misleading or only partially true.
Your Real Estate Agent’s Duties: Agents have more stringent legal obligations than a vendor has, as set out under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. Even if you as the vendor don’t have to disclose an issue under the standard agreement, your agent may still be obliged to disclose any known defect or potential defect. This means that if a prior building inspection discovered a hidden defect in the building, an agent may have to disclose this to future buyers—even if you don’t have a contractual obligation to do so.
Vendors should be aware that instructing an agent not to disclose a known defect may put the agent in breach of their statutory duties.
Top Tips for Sellers
Be Straightforward: If someone asks why a sale fell through or whether a builder found issues, give a truthful, neutral answer. Avoid downplaying or re-labelling the reason for the cancelled sale — misleading statements can create liability. A simple factual explanation is usually safest.
Check Your Warranties: Look over any builder’s reports and see if they mention things like unconsented work or missing (or defective) chattels, systems or devices —these might trigger other disclosure obligations. If in doubt, seek legal advice before signing the next agreement.
Consider repairs, and consider disclosure: A negative builders report isn’t always the end of the world, although it can obviously affect price. Consider whether you can repair defects, or whether you can simply negotiate a reduction in the purchase price, in consideration for those defects.
The Bottom Line
A Vendor doesn’t have to tell every new buyer about issues found in previous builder’s reports—unless there’s been an official notice or they have been asked directly. A real estate agent may, however, be obliged to disclose any defects identified in a previous report.
Always, always be mindful of misleading statements. Misrepresentation can lead to a claim for compensation/damages from the purchaser.
If a defect identified in the old report is serious, well‑known, or likely to affect a buyer’s decision, obtaining legal advice before re‑marketing the property is strongly recommended.
Not sure what you need to disclose? Get in touch with the team at Foley Douglas—we’re here to help!
