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You are nearly there. The contract is signed, the loan is lined up, and you are counting down to getting the keys. Then the final check throws up something ugly: water across the timber floor, a smashed back window, storm damage to the roof, or a split system that worked on auction day and now does nothing.
The short answer: In Victoria, the seller is generally expected to hand over the property in the same condition as when it was sold, and buyers can inspect during the week before settlement. If the dwelling is so badly damaged that it is unfit to live in, section 34 of the Sale of Land Act 1962 lets the buyer rescind by written notice within 14 days after becoming aware of the damage. For lesser damage, the usual path is repairs, a negotiated adjustment, or a short delay before settlement.
Who is responsible if the property is damaged before settlement in Melbourne?
The seller usually carries the risk up to settlement under the standard Victorian position. You are meant to receive the property in the same condition as it was on the day of sale, allowing for fair wear and tear.
A bit of dust or minor ageing is one thing. A fresh ceiling leak, a broken oven that was working when you bought, or new storm damage is another.
This is why the pre-settlement inspection matters so much. It is not a formality. It is your best chance to spot trouble while you still have bargaining power.
What changed in the September 2025 contract update?
The September 2025 REIV and LIV contract update removed an older shortcut for minor damage. Under the earlier standard form, there was a contractual mechanism that could allow up to $5,000 of the price to be withheld at settlement for minor loss or damage. That automatic hold back is gone from the updated form.
Your rights did not disappear, though the process is less tidy. For minor or moderate damage, your conveyancer now usually needs to negotiate a practical outcome with the seller’s solicitor rather than relying on a built in retention.
That may still mean repairs before settlement, an agreed credit, or wording added through special conditions in a contract of sale. Do not assume there is an automatic pot of money waiting for you on settlement day.
Can I cancel the contract if the property is badly damaged before settlement?
Yes, though only in a fairly narrow class of cases. Section 34 of the Sale of Land Act 1962 applies where a dwelling house is so destroyed or damaged that it is unfit for occupation as a dwelling house before you become entitled to possession or rents and profits.
That threshold is high. A cracked tile roof with some water ingress may be serious, though not enough to end the deal. A kitchen fire, major flooding, or a tree through the bedrooms is much closer to the statutory line.
Timing matters too. The buyer must give written notice to rescind within 14 days after becoming aware of the destruction or damage. If section 34 may apply, your conveyancer needs to assess it straight away.
What if the damage is serious but the house is still liveable?
This is where most disputes sit. The home is still standing and probably can be occupied, but it is not what you agreed to buy.
When that happens, the usual choices are practical ones:
- ask for repairs before settlement
- negotiate a price adjustment or agreed allowance
- agree to a short extension so repairs can be done
- settle on clear written terms about what happens next
Which path makes sense depends on the size of the problem, how close settlement is, and how cooperative the seller is.
Be careful about refusing to settle without advice. A buyer who simply digs in without a proper legal basis can end up exposed to penalty interest for late settlement or a default notice.
What should I look for at the final inspection?
Look for anything that has changed since the day of sale, and anything the contract says must be there at settlement. In Victoria, buyers can inspect at a reasonable time during the week before settlement, so use that right properly.
Take the contract and walk through the property slowly. Check:
- ceilings, walls, and floors for fresh leaks, cracks, stains, or damage
- taps, toilets, showers, drains, and hot water
- light switches, power points, oven, cooktop, heating, cooling, and appliances
- garage doors, remotes, intercoms, alarms, and keys
- fences, sheds, balconies, and outdoor structures
- every fixture and fitting included in the contract
Photos help. If you have photos from your first inspection, compare room by room.
If the seller leaves the property damaged, dirty, or full of unwanted items on handover, the practical response is much the same as what to do if the seller leaves damage or rubbish on settlement day: document it, tell your conveyancer, and deal with it through the contract rather than through the agent in the driveway.
Should I still arrange insurance before settlement?
Usually, yes. Consumer Affairs Victoria says the seller’s insurance may cover the property up to settlement, and lenders often recommend that buyers arrange building insurance from the date the seller signs the contract. That protects the lender’s interest and gives you another layer of cover if something goes badly wrong in the gap.
This catches first home buyers off guard. They hear that the seller carries the risk and assume insurance can wait until the keys are in hand. The trouble is that legal responsibility and insurance cover do not always line up neatly in practice.
For houses, many buyers arrange their own building cover as soon as the contract is in place. For apartments and townhouses, the insurance picture can be more mixed because the owners corporation may insure parts of the building. It is worth checking early, not the afternoon before settlement.
What should I do the moment I find damage before settlement?
Move quickly and keep it orderly.
- Take photos and video straight away.
- Write down what you found and when you found it.
- Send everything to your conveyancer immediately.
- Get repair quotes if that can be done quickly.
- Do not agree on the spot to settle anyway.
- Do not rely on a verbal promise from the agent.
Once settlement happens your bargaining position can shrink sharply.
What about delayed settlement while repairs are sorted?
A short delay can be sensible where the problem is real and the fix is close. Say a storm hits a day before settlement and the seller books urgent roof repairs and make safe works. In that sort of case, a brief extension may be far better than settling into a wet house or starting a fight neither side wants.
Still, delay needs to be managed properly. Who is in default, whether interest runs, and what notices need to be served all depend on the contract and the facts. If the issue drifts beyond a simple repair timeline, it can start to look more like a wider delayed settlement problem, including the issues covered in vendor delays settlement.
The key is to get the arrangement in writing. Casual promises around settlement week have a habit of changing once everyone is under pressure.
Common Melbourne examples buyers actually face
Common examples include a burst hose flooding a vacant apartment, storm damage to fencing or roofing, missing fixtures, broken appliances, or fresh leaks that were not there on the day of sale. These cases rarely solve themselves. The buyers who get the best outcome are usually the ones who inspect carefully, keep clear evidence, and involve their conveyancer early.
Frequently Asked Questions
What happens if a property is damaged before settlement in Victoria?
In Victoria, the seller is generally expected to hand over the property in the same condition as when it was sold, and the buyer can inspect during the week before settlement. If damage is found, the usual options are repair, a negotiated adjustment, or a short delay. If the dwelling is so badly damaged that it is unfit to occupy, section 34 of the Sale of Land Act 1962 may let the buyer rescind.
Can I cancel a contract if the property is damaged before settlement?
Yes, though only where the dwelling is so destroyed or damaged that it is unfit for occupation as a dwelling house. The buyer must give written notice within 14 days after becoming aware of the damage. For damage below that threshold, the deal is more often managed through repairs, compensation, or a settlement extension.
Who pays for property damage before settlement in Melbourne?
In the standard Victorian position, the seller bears that responsibility until settlement and must hand over the property in the same condition as when sold, allowing for fair wear and tear. If new damage appears before settlement, the seller is usually the party expected to repair it or reach some other proper resolution.
Has the new contract changed my rights for property damage before settlement?
The September 2025 update removed the old contractual mechanism that allowed up to $5,000 to be withheld for minor damage under the earlier standard form. That means minor damage disputes are now less automatic to manage at settlement. Your statutory right under section 34 still remains where the damage makes the dwelling unfit to occupy.
Should I get building insurance before settlement in Melbourne?
Many buyers do, and many lenders expect it from the date the seller signs the contract. That is sensible because legal risk and insurance cover do not always line up neatly in practice. Getting the cover sorted early can help avoid nasty gaps between contract and settlement.
What should I check at a pre-settlement inspection in Melbourne?
Check that the property is in the same condition as on the day of sale and that every included fixture and fitting is still there and working. Run taps, test appliances, look for leaks, check keys and remotes, and inspect outdoor areas as well as the inside. Take photos so there is a clear record if anything has changed.
Can I delay settlement if the property is damaged?
Sometimes, yes. A short delay may be agreed so repairs can be carried out or the parties can document an adjustment properly. Whether interest applies, who is at fault, and what notices may be needed depends on the contract and the facts, so get legal advice before refusing to complete.
Need help before settlement day?
This is general information only, so get advice on your own contract before acting.
At Pearson Chambers Conveyancing, we help Melbourne buyers sort these issues out early, clearly, and without the usual drama. We can review the contract, assess whether section 34 is in play, push for repairs or an adjustment, and guide you through the next step in plain English.
If you are buying in Melbourne and want tailored guidance, contact Pearson Chambers Conveyancing for a complimentary Section 32 contract review.