Technical Article #1 - Steve Love Presentation Notes

In March 2005, I was called to an inspection in Baldwin, Ontario. Nice home, long ranch style bungalow, about 15 years old.

I showed up, knocked on the door, presented my card and started looking around. At this point the agent was waiting in his car for the clients to show up.

Later, I knocked on the door again and asked to come inside. I requested use of the kitchen table. I took the contract / limitations forms out of the Home Reference Book and laid them out on the table, and put my standard "thank-you" letter on the table for the vendor.

While I was updating my notes, the doorbell rang and the agent, who was now accompanied by one of the clients, asked to come in. I could see that the vendor was getting visibly upset with the whole process.

I met Mrs. Client, and it was becoming apparent that things with the vendor were not going to go well. The agent suggested that we set up things in the basement, instead of the kitchen table.

We moved to the basement and the client’s husband, who had just arrived, joined us.

We huddled around an old basement table and I presented the Home Reference Book, and then wrapped up with the contract / limitations form. I left the forms with the client and explained that I was going to carry on with my "first pass", and that I would leave them the paperwork to review.

I carried on.

When I was finished, I took the clients around on our "second pass". As a group, we went around the inside, however Mrs. Client chose not to come outside.

The vendor was ready to melt down at this point and decided to go for a walk. The agent asked if I would mind coming to the local coffee shop to go over things again. This was not normal practice for us, but it seemed reasonable and it was clear that it would be best if we could all get away from the vendors.

We all met at the coffee shop. We discussed our "findings" Some of the key findings that were noted:

• prior leak repair evidence noted on the front wall in the basement
• basement stains noted but tested dry today
• second sump pump pit installed but no sump pump
• battery back up system for the main sump pump appeared to be in poor repair
• client was asked to investigate the potential of a "high water table" based on the findings and location of the property
• client was asked to consider a " camera inspection " of the footing drains because of the prior repair evidence
• the client was asked to inquire/ investigate any prior basement dampness history with the vendor
• several other notes, not related to the claim

The agent told us he inquired with the vendor while we were looking at the stains in the basement. He claimed the vendor said no history of leakage.

June came, and it brought a rain storm that made the news when it basically flooded Barrie, Ontario. This property was not in Barrie, but the storm covered the same area as this property.

The next day, I received a call from the purchaser that he had recently moved in and after the rain storm, his basement flooded. I asked if he had had the footing drain investigated yet. He said no. I gave him a number of a local drain plumber. I didn't hear another word.

In July 2005, I received "the letter.” The client had hired a lawyer and was naming us in a lawsuit for a $100,000.00 in damages, and because of our “extreme negligence,” they were requesting an additional $25,000.00 in punitive damages. They wanted a reply from us, and if we didn't reply he would proceed with court proceedings.

I handed the letter in to the insurer who quickly assigned a lawyer to our claim. The lawyers advice? “Sit and wait.”

The lawyer on the other side decided to call me directly. He wanted to know if I had received his letter. I didn't give any info out, but said “yes.”

The next communication came in the form of court papers. It named me, my company name, the vendors, both real estate agents, their brokers and the Town of Georgina.

The papers claimed that after an engineering firm was brought in to investigate, they found high water table conditions and discovered that the footing drains were missing the cloth wrap in some areas. They also found that the aggregate around the footing drains and under the slab was the wrong size for use in a high water table area. They also noted the footing drains were plugged as a result of the missing cloth wrap.

Their proposed solution was to remove the interior concrete slab, install new footing drains, and put the vendors in a hotel for an extended period of time.

I was then called in to meet the lawyer who would be defending me. I brought a copy of the notes, a copy of the Home Reference Book and a notepad. I met the lawyer and asked if he had ever done a home inspection claim before. He showed me a large pile on his desk of active home inspection claims and told me that he was well-versed with our Standards of Practice.

We talked for three hours. He had some key questions. The clients had an obviously European last name and he was concerned that they might be new Canadians with poor English. I assured him that this was not the case. He questioned the contract and its presentation.

The key points discussed were:

• the contract had been removed from the Book and presented to the clients
• the contract was clean, simple and used bold print in key areas
• the contract had been explained to the client, line for line (I explained I knew this for sure because I put hatch marks and circles beside each line after I explain them, every time.)
  · the Limited Liability clause (the lawyer just about fell over with excitement when he saw this, it made his day)
• the explanation of the $1,000.00 or the fee (which put an even bigger smile on his face)
• only Mrs. Client’s name was on the contract and only she had signed it. I explained it was common for the husband to request the wife to fill in the paperwork. The lawyer was not happy about that. The last line of the contract did not permit "use or reliance of this report", and he felt this was not as good as being identified on the contract, but would clearly help our cause.

The lawyer liked our report. He found it very professional, clean and easy to use. He asked if the client had read the contract before the inspection. I said “no,” but it was posted on our web site, and had been at the time that the inspection was booked. He started to smile again.. He asked how long they had to read the contract, etc.

In late August 2005, I received word that because of my claim, my Errors and Omissions insurance would not be renewed. Three days later, they re-examined my case and decided they would renew.

In early September, the clients’ lawyer must have read the Limitations page and quickly requested that we come out to investigate the property, prior to any repairs being done. I contacted the lawyer, and he said if I was comfortable to do so, go out and take notes. I suggested that I would bring a witness (another home inspector) and a camera. He liked that thought.

We did the revisit at the house and the client presented a "friend" who was really a contractor in disguise. Things went pretty well, but I began to sense that the contractor was the source of all the problems. We did note, and the client agreed, that after they had the drains inspected and cleaned of the silt that was plugging them, everything starting working again and there was no more water entry.

I was called into discovery hearings.

I was asked if I started the inspection without my clients. I explained that everyone had seen the house except me. I got there early to confirm that the house was what the agent had claimed (size etc.). I explained that there had been occasions where the agent had given us the wrong information about the house and our price estimate needed to be adjusted. I also explained that I like to get in the home to create the best / most comfortable environment in which to present the contract. I explained that trying to present the contract outside in the cold was not the best environment. The other lawyers in the room were nodding their heads with what seemed to be a sense of a "reasonable approach" on my part.

It was clear that they were counting on this point. Our lawyer told me that you could hear the silence in the room when we presented a reasonable response to our contract presentation and starting time. I was ready for the question because of the meetings we had, and was expecting them to find certain weaknesses with our approach. They clearly wanted to invalidate the contract and get away from the Limited Liability clause.

My anticipation of the questions, the contract, the report and the simplicity of the report were really starting to show benefits in the discovery hearing room.

My findings had basically nailed everything they were claiming. The client's defence then became that I did not tell him to "read the report". That in itself was funny because in "The Bottom Line" section, I wrote "Please read all notes".

I suspect the other lawyer had been painted a different picture of everything, I think he was even surprised by some of the findings. The Town was clinging onto the small point of "absolute statue of limitations" . They claimed that the drains were inspected after 15 years had lapsed. Their claim was "no liability" because even if they were at fault, it was past this magical 15 year mark.

The vendors finally confessed that they had a tiny leak but nothing like that which our clients were claiming.

They requested that $80,000.00 be split amongst the parties. No one agreed. They then asked that $7,000.00 be split. They still said no, but the Realtors’ lawyers and our lawyer thought it was time to split the difference and move on. ($3,750.00 each). My deductible was $ 3,000.00!

Things I did right:

• I had the contract posted on our web.
• I used a well designed, simple contract.
• I took the contact out of the book ( big point) to present it.
• I made little notes that confirms each line was explained.
• I not only showed the clients the problems but wrote the recommendations down.
• My presentation in the discovery hearings was clear and organized.
• I brought any items of potential concern to the front page.
• I used the Limited Liability contract.(This is a big point, it was enough to make them think about how far to go with things.)
• I brought a witness to the revisit.
• I operated within a set of industry accepted standards.
• I used all the risk reduction knowledge and suggestions from the HRB meetings.
• I gave the clients an hour to read the contract.
• I made notes after the inspection recording key items of the inspection, such as who attended, etc.

Things I did wrong:

• I did not get both names and signatures on the contract. If you’re not on the contract, I don't have a contract with you.
• I did not go for a revisit after I received the first call (in June), before the contractor got there.
• I started early. Although my explanation seemed to make sense to everyone, it still presented a potential risk area.
• I did not fax or e-mail a copy of the contract ahead of time.

Steven Love
McKenzie - Taylor & Associates Ltd.

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