The situation inspectors know all too well. You’re engaged by the vendor to complete a pre-sale inspection.
You carry out the job professionally. You issue your building inspection report, including your standard disclaimers.
The property sells. Then months later, defects come to light. And suddenly, a buyer you’ve never met is bringing a claim against you. This case shows exactly how and why that happens, and why it’s becoming harder to defend against.
Estimated reading time: 6 minutes
What happened
In the matter, Shannon & Anor v Residential Reports Pty Ltd & Anor [2026] ACTSC 66, the inspector was engaged by the vendor to prepare a residential building report ahead of sale.
That report didn’t stay with the vendor. It was shared with prospective buyers as part of the sales process, which is standard practice in many transactions.
The eventual purchasers:
- read the report before buying, and
- relied on it when deciding to proceed
After settlement, they identified defects they believed were either missed or not properly described. They brought claims for negligence and misleading or deceptive conduct. The key issue wasn’t just what was in the report, it was how the report was used.
What the Court focused on
The Court approached the case by looking at how these reports function in the real world, rather than relying on technical arguments about who engaged the inspector. The practical use of the report carried significant weight.
Foreseeability of reliance
The Court made it clear that reliance by purchasers on vendor-commissioned reports is not hypothetical. Inspectors know that these reports are routinely shared with buyers and that they are often used to inform purchasing decisions. In that context, the Court treated buyer reliance as not just possible, but expected.
How the building inspection report presented itself
The report’s tone, structure, and presentation played an important role. It was professionally prepared and read as a clear, authoritative assessment of the property. There was no strong, prominent warning directed at third parties to discourage reliance. As a result, the Court considered that a reasonable buyer could interpret the report as something intended to be relied upon.
The role of disclaimers in building inspection reports
Although disclaimers were included in the building inspection report, they weren’t decisive. The Court examined where they appeared, how clearly they were expressed, and whether they meaningfully addressed the way the report was being used in practice.
The key takeaway was that disclaimers that aren’t prominent or forceful enough will struggle to outweigh the reality of how a report is relied upon during a transaction.
This led the Court to view the report as something a reasonable buyer could rely on when making a purchase decision.
Reliance by the buyer on building inspection report
The buyers didn’t obtain their own independent inspection. Instead, they relied on the vendor-provided report as part of the purchase process. The Court accepted that, in these circumstances, such reliance could be considered reasonable and was not automatically defeated by the presence of disclaimers.
Scope arguments
The inspector argued that the defects fell outside the scope of the inspection or were not reasonably detectable. However, the Court did not treat these arguments as a basis for early dismissal. Instead, it held that these were factual issues that needed to be tested at trial.
This meant the inspector remained exposed to ongoing litigation, with the associated cost, time, and risk.
What this case really means
This decision reflects a broader shift in how courts are approaching building inspection reports.
Where a report forms part of the decision-making process in a property transaction, the inspector is effectively drawn into the risk chain.
The focus is no longer limited to contractual relationships. It extends to how reports are actually used and relied upon in practice.
What inspectors need to take from this
Saying “they’re not my client” is no longer enough if it’s clear that buyers will rely on your report.
The way your report is written matters. If it reads as a complete and confident assessment, it is more likely to be relied on.
Disclaimers need to stand out. They should be easy to see, easy to understand, and clearly say who can and cannot rely on the report.
Vendor reports don’t remove risk, they change it. You may reduce risk with your client, but you increase the chance of third-party claims. Even if you think you can defend a claim, you may still have to go through a full legal process to prove it.
The bottom line on building inspection report for vendors
If a buyer reads your report and uses it to make a decision, a court may hold you responsible for what happens next … even if you never worked for that buyer.
That’s the reality this case highlights.
Where inspectors go from here
As an inspector, it’s important to adapt to focus on writing clear building inspection reports that explain risks, not just findings. Additionally, make sure your disclaimers are visible and direct. It’s all about taking a more careful, risk-based approach to both inspections and reporting.
Those who don’t may find themselves exposed, as courts continue to focus on how reports are used in the real world, not just who paid for them.
Learn from real cases
At Rapid Solutions, we’re focused on educating our clients on how they can make meaningful improvements to their reporting to avoid stressful and expensive incidents like the above. Here are more real cases and resources to learn from:
- When Small Misses Lead to Big Claims: Lessons from a Termite Damage Case
- Case Study: When Missed Water Staining Leads to a Claim
- Case Study: The $140,000 Leaking Shower + What It Teaches About Major Defects
- 3 Steps to Take with Pre-Purchase Pest and Building Inspections
- Keeping Records: How To Do It Efficiently and Why It Matters
- Bodily Injury: This Case Study Teaches Very Important Lessons
- Insurance Case Study: Claims Against Termite Pest Control Businesses
- Case Study: How Not Spotting Termite Damage Led to a $67,500 Settlement (+ How to Avoid It!)
Insurance for building and pest inspectors
Inspection errors can turn into costly claims. Having the right insurance in place can make all the difference. Rapid Solutions provides tailored insurance solutions for building and pest inspectors, including:
- Professional Indemnity Insurance to cover claims related to advice, reports, and inspections
- General Liability Insurance to protect against third-party injury or property damage
- Business Vehicle Insurance designed for work vehicles, with options including Comprehensive, Third Party Fire & Theft or Third Party Property.
- General Property Insurance (also called plant and equipment or tool cover) to protect your tools and equipment from loss or damage.
- Business Pack Options and Workers’ Compensation to bundle and broaden your protection under one insurance partner.
With a deep understanding of the inspection industry, Rapid Solutions helps you choose cover that fits your business and the risks you face. Call us on 1300 309 169 or contact us online to start your quote.