Bank’s inspection referral did not expose it to liability for “leaky” house repairs

Lending restrictions,
In early 2018, Joy and Blaine asked the bank for a loan to buy a house with monolithic cladding. The bank said houses with this type of cladding were prone to leaks, so it would need a satisfactory weather-tightness report before approving their loan application. The bank gave the couple the name of a builder who had carried out a weather-tightness inspection for another customer. They hired the builder to inspect the house, submitted his inspection report, received the loan and bought the house.
March 2024

Some months later, they found serious leaks in the house and hired another property inspector. His report identified major problems with the cladding, including inadequate drainage around the windows and incorrect installation of cladding in certain places. The original report not only failed to identify these problems but also included thermal images of a different property. They spent about $300,000 making the house weather-tight. The couple complained to the bank that it had misrepresented the first inspector as an expert and had also failed to notice the deficiencies in his report when approving their lending. They said the bank should contribute to the costs they had incurred. The bank said it was not responsible for these costs, but offered them $4,000 as a gesture of goodwill. They rejected the offer and asked us to investigate.

Our investigation

We found the bank had represented the builder as a weather-tightness specialist who could provide the type of report it required, and that it was correct to characterise him as such an expert. He did not have any specific qualifications in his area of expertise, but the information held by the bank showed that evaluating the weather-tightness of buildings was his primary area of work, and he was regarded as a specialist in the field. The fact he had failed to identify certain problems in his report did not change our view because it is entirely possible for a highly skilled and reliable specialist to carry out sub-standard work. The bank had not guaranteed his work, and it had not breached any duty or obligation to the couple by referring them to him. The bank had given no undertaking that it would review the builder’s report and alert them to any problems it might uncover. Furthermore, it was under no general obligation to warn them about the wisdom of buying the house when it lent to them. We did not consider that the bank's approval of the lending upon receiving the report could be construed as a guarantee that there were no problems with the house, or that the bank had scrutinised the report. The bank had not given any indication of what it would consider a satisfactory report or a satisfactory property condition.


We did not uphold the couple’s complaint. We recommended they accept the bank's offer of $4,000, and they did so.

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