Judgment Against British Columbia Home Inspector

October 21, 2016

This paper summarizes a recent court case in Canada and suggests how home inspectors might benefit from knowing about it. It is not intended to be legal advice or to infer that other courts would find the same; rather it presents an opportunity for us to learn how one judge perceived a home inspector’s responsibilities.

HISTORY

• House built in 1960s on a steep lot with 1980s addition.

• Sold in 2006 for ~ $1.1 million.

• Agent recommended inspector.

• Clients say the inspector was negligent in not identifying material defects.

• Inspector denies negligence and also relies on limit of liability in contract.

Repair costs:

~ $54,000 A-frame beams
~ $57,000 stabilization
~ $26,000 engineering
~ $9,000 remove deck
~ $24,000 replace deck
~ $12,000 shore up east deck
~ $9,000 GST
~ $22,000 contingency
– Total ~ $213,000
Less $20,000 estimated in report

Net claim ~ $193,000 plus interest and costs.

Decision in favour of client/homebuyer ~ $193,000.

FACTORS

• Clients apparently did not attend the entire inspection – arrived at end.

• Contract signed after inspection and report was written, before presentation to client.

• Signed by one client but not other (different last name).
• Contract included a clause limiting liability to the fee.

• Apparently client remembered being told by inspector that there were major and significant structural problems.

• Client also remembered being told that there was nothing that should impede them from buying the home.

• Report summary indicated structural problems – rating halfway between below average and average.

       – Structure page of report indicated settlement (moderate and ongoing?) and

       – Soil erosion as problems,

       – Recommendation to check with professional engineering/pest control contractor or ________ for          complete information (This was checked on pre-printed form with no other markings.)

• Testimony by an expert witness (with a home inspection background) indicated the inspector should have examined more structural members after finding some that were damaged.

• The expert witness also indicated that while the inspector recommended an engineer do further evaluation, he did not clearly present the significance of the problems and should have recommended a geotechnical review.

• It was alleged that the inspector verbally indicated the cost of the repairs would be in the order of $15,000.

• The expert witness said if the inspector did indicate $15,000, that amount appeared to be insufficient.

• The contract says the Standards of Practice and Code of Ethics were attached, but the judge did not find evidence that they were included.

• The judge says either way, meeting the Standards might still result in a negligent report.

• There was a room with access to rotted beams not identified by the inspector.

       – Cost estimates, if provided, are “ballpark” estimates only and are not intended to be relied        upon by any person for accuracy. The CLIENT should obtain written bids from qualified licensed        contractors in order to determine the possible cost of repairs.

       – The judge believed the inspector was inconsistent between Discovery and Trial about whether        he gave costs for the settlement of the building due to the lot slope.

• The client indicated he asked the inspector three times whether there was anything that should keep him from buying the house. The inspector apparently said, “No” and later said, “You can go ahead, there is no problem.” The inspector said he did not remember this conversation, but did not deny it. The judge found that significant.

• The judge did not accept the limitation of liability clause, saying the inspector made recommendations about the advisability of buying the home, although the contract said that was not the intent of the inspection or report. If the inspector goes beyond what is required, he is bound by those statements.

       – The clients were rushed in signing the report, although they were intelligent, experienced,        university-educated people.

       – The judge said the inspector should have drawn the clients’ attention to the onerous terms        of the limitations of liability clause.

       – The report and contract were separate documents, and the judge found nothing incorporating        the report into the contract.

LEARNINGS

• Don’t advise clients whether or not they should buy the home.

• Don’t say things that are different from what you put in your report.

• Don’t offer opinions on things outside the scope of work.

• Get your contract into client’s hands before the inspection and give them a chance to read it and ask questions.

• Include a copy of the contract with the report.

• If you have a limitation of liability clause, understand this is an onerous and unexpected clause. Draw the client’s attention to it.

• If you cannot get access to an area, clearly document the limitation.

• If you find damage during sampling, point out that there may be additional damage and recommend further evaluation as needed.

• Make your client aware that where surface damage is visible, there also may be be concealed damage.

• Make your recommendations clear.

• Don’t use reassuring language to minimize issues.

• Do tell the client about the possible implications of defects.

View a copy of the case file here.