November 16, 2009

Re: JUDGMENT AGAINST BRITISH COLUMBIA HOME INSPECTOR

This paper summarizes the case and identifies things home inspectors can learn.

The entire judgment can be seen at http://www.courts.gov.bc.ca/jdb-txt/SC/09/15/2009BCSC1515.htm

History

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

·         Sold in 2006 for ~ $1.1 million.

·         Agent recommended inspector – Fee was $450.

·         Clients say he was negligent in not identifying material defects.

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

·         Repair costs:

o   ~ $54,000 A-frame beams

o   ~ $57,000 stabilization

o   ~ $26,000 engineering

o   ~ $9,000 remove deck

o   ~ $24,000 replace deck

o   ~ $12,000 shore up east deck

o   ~ $9,000 GST

o   ~ $22,000 contingency

o   Total ~ $213,000

o   Less  $20,000 estimated in report

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

o   Decision in favor of client/homebuyer ~ $193,000

·         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 structure 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 off 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.

o   The room apparently was accessible from outside the home by a door, but not from the inside.

o   The Inspector could not open the door; he was not sure why, but assumed he would be able to get to the room from inside.

o   It seems he did not. This limitation was apparently not addressed in the report.

o   The judge felt it was the inspector’s responsibility to inspect the room.

·         The inspector found two rotted beams but was inconsistent between the Discovery discussion and Trial discussion about whether he inspected all the beams in that area, or whether he only inspected these two as a representative sample.

·         The inspector argued at trial that the rot at some of the beams progressed considerably since the inspection. (Trial was 2 ½ years after inspection.) The expert witness’s photos, however, clearly showed the rot less than 3 months after the inspection.

·         The judge was convinced the words “fix-up structural deficiencies” was negligent in that these lulled the client into thinking these were minor issues, and that the recommendation to get an engineer was not clear enough.

·         The inspector did not give written costs, but gave a verbal indication. The judge was persuaded the inspector regularly gave costs by the fact that the contract had a clause saying if costs were given, they were only ballpark.

o   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 than what you put in your report.

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

·         Get your contract into people’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, document the limitation clearly.

·         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 may be also be concealed damage.

·         Make your recommendations clear.

·         Do not use reassuring language to minimize issues.

·         Tell the client about the possible implications of defects.

 What happens when you inspect a house on Monday for one client, and then get a call to inspect the  same house on Thursday for a different client?  Should we tell the second client that we inspected the house before? Should we tell the first client that we are inspecting the house for a different client? Should we say anything to the agent for the second client or the first client?

It’s a difficult situation.

There is probably no perfect answer to this, but we do not say anything. Let me explain why.

If you say something, it may be adversely affecting someone’s negotiating position. If you tell Client 1 that you are about to do an inspection for Client 2, you may be giving Client 1 a heads up that there is competition on the home.

Similarly, Client 2 may have no idea that another inspection has been done and there may be another interested party. Telling Client 2 that you have recently inspected the house may hurt Client 1, because Client 2 now knows something that they do not - there is or may be another interested party.

It is not our place to interfere with the transaction

You have the same problem if you tell Agent 1 that you are going to do an inspection for Agent 2.

We will never know all the circumstances, and may cause some damage.

The other side of the coin is that we have been accused of failing to say something and are greedy in accepting a second fee for the same work.

When we are accused of this, we explain the negotiating sensitivity, mention the fact that we do have to go through the complete inspection and spend the same amount of time with Client 2. It means we cannot be doing another inspection and earning another fee, so we need to charge the same amount. We cannot hand Client 1’s report to Client 2, because the report belongs to Client 1. We have to create a new report. We typically find that different clients have different interests, different plans for the home and different needs, so the two reports are rarely identical.

It’s a difficult situation, but this is where we have landed after 30 years.

I hope this helps.

Alan Carson

The home inspection world has certainly changed over the last two years. After several years of constant growth, everything is different. I’m seeing home inspectors adjust their scope in several different ways.

Most of the inspectors are cutting back in several ways. One of the cost-cutting measures that many have instituted is the elimination of delivering a binder, book or even a folder at the end of the inspection. Many inspectors appreciate the cost effectiveness of delivering reports by e-mail, or posting them on the web. Some inspectors deliver CD-ROMs on site. This is faster and more cost effective than printing. Clients still receive terrific value and great information. The delivery format is less expensive for the inspector and better for the environment - a smaller carbon footprint!

The other thing I am seeing is lots of diversification. People are providing new and different services, both inspection related and non-inspection work. Radon and termite work has always been popular with some home inspectors. Others are beginning to offer these services where appropriate. Many have diversified into mold inspections and specialized inspections of vacant homes. Some will winterize and de-winterize homes. Vacant houses typically have the utilities shut off. High-pressure air is sometimes used to test supply plumbing pipes.

In some areas, home inspectors are performing energy audits and providing related consulting services. Some markets have a lot of homes with synthetic stucco issues (EIFS) and many home inspectors provide investigation and consulting services focusing on this building system.

Tests for natural gas leaks and carbon monoxide spillage are other services offered by some in the home inspection profession.

Some home inspectors are diversifying as litigation consultants, working on construction related disputes. Some people who have previously not provided well, septic and water testing inspection services are branching out into these areas.

New homes have become a focus for some, who provide phase inspections during construction, an inspection at the time of possession or inspections during the warranty period (typically within one year) after the home is completed.

Renovation consulting and problem solving work for homeowners is also on the rise for many in the home inspection profession.

The reality is that home inspectors have a broad and deep knowledge of homes, and are wonderful resource for home and property owners. It will be interesting to see what the future holds for this young profession.

What we have done

In our market, there are significant government grants for energy related home improvements. You have to get an energy audit done to qualify for the government grants. We became a licensed service organization and have been delivering the audits since mid-2008. It has been a real help for us.

We’d like to hear from you!  Maybe you’ve tried or are thinking of trying something different.

·         What have you done differently?

·         Do you promote more?

·         Have you added services?

…or What didn’t work for you?

I’m here in Chicago with a home inspection networking group, or more correctly, a group of friends in the home inspection business. We get together a few times a year to share experiences and ideas. We are from diverse parts of North America by design – we are not competitors.

This time we have folks from Michigan, Nebraska, Ohio, Indiana, Texas, Colorado, Maryland, Virginia Minnesota, Georgia, and Ontario, Canada.

Today we talked a lot about our respective markets, successes and failures, diversification and marketing ideas. Tomorrow we will hear stories from others, look at web possibilities and discuss innovative ways to differentiate our businesses and ourselves.

It’s always stimulating and rewarding, and the opportunity to spend some time together over a few meal s and maybe a drink makes it very special.

It’s good for our businesses and for our well-being.

Canada’s first licensing requirement for home inspectors has recently emerged in British Columbia. More than half of the states in the USA have some form of licensing for home inspectors. Is this licensing of home inspectors a good thing? In my opinion, Yes and No, but mostly No .

Let’s look at what we’re trying to accomplish with licensing. At the highest level, the argument for licensing is consumer protection. At a less noble level, some would say that licensing is a revenue source for government, a competitive edge for some practitioners or a political tool for empire builders.

Let’s stay at the high level. Consumers deserve protection from illegal and unfair business practices. That includes protection from paying for services delivered by unqualified practitioners. Three questions come to mind -

1. Are consumers being adequately protected now?

2. If not, who should provide the protection?

3. Does government licensing work?

1. Are consumers being adequately protected now?

There is no doubt that there are some consumers who are unhappy with their home inspection results. On the other hand, there is no doubt that there are some consumers are unhappy with virtually every product and service available. Are the numbers large enough to warrant licensing or some other type of regulation? We have not seen evidence of that in our market. In our discussion with provincial regulators, they have not indicated a level of consumer concern that would warrant licensing.

When it comes to unhappy clients, home inspection is particularly troublesome, because in our experience over 30 years, many dissatisfied customers had unrealistic expectations of their home inspector. One might argue that this is a communication failing on the part of the inspector - it is up to the inspector to define his or her scope of work. However, this is probably not a performance failing that suggests the need for regulation.

Who should provide the protection?

On the second question about who should provide the protection, there is a strong argument to say that if the profession can regulate itself, that frees the government from the burden of immersing itself an arena in which it has no expertise. Self-regulation has been a good solution in many professions. Does it fall to the home inspection profession to keep its house in order? That makes a lot of sense to me.

Coming back to consumer protection, if home inspectors are adequately insured for their errors and omissions, perhaps that is all that is required.

In Canada, a strong national certification program has been established, with a credible National Occupational Standards document created through a defendable, collaborative process.

3. Does government licensing work?

In some cases licensing probably works just fine. In other cases, we have seen licensing be little more than a fee that generates revenue for government. We have seen weak licensing that floods the market with unqualified practitioners. We have seen overly restrictive licensing that reduces the supply of home inspectors available for consumers. We have seen significant and sometimes dishonest posturing by groups with different interests as licensing is considered. We have seen the clumsy introduction of licensing, and many governments struggle with the issue of grandfathering. We have seen licensing that provides entitlement and opportunity for various market segments with respect to education and training, insurance and so on. In short, it is difficult to get licensing right.

With the possible exception of Texas, we have never seen licensing that provides what we consider a key element in education and certification. That is the concept of internship or apprenticeship. In our opinion, education delivered by classroom or distance education, including online, is essential and can be very good. However, there is no substitute for experience and practice. Every other profession - doctors, lawyers, engineers, architects, accountants etc. have some form of internship. Building trades have apprenticeships. Why would home inspection not have something similar?

Summary

Looking at this, my impression is that there is not a strong immediate need for additional consumer protection in the professional home inspection world, and the argument for licensing is not compelling. Secondly, there are tools and a good foundation in place for meaningful self-regulation. Responsible work within the profession could provide reliable consumer protection at no cost to government or taxpayers. Improvements could be made, and if a strong self-regulatory model were in place, that would reduce the risk for the profession, consumers and government of costly and potentially ineffective licensing.

This is a call to the profession to build such a model. In Canada, the National Certification Authority is a great building block, but there is more work needed. When it comes to licensing, as my colleagues in British Columbia have told me throughout the process, “Be careful what you wish for.”

Here is an article from Newsweek that may be of interest to Canadians in these  uncertain times. Many professional home inspectors in Canada and the United States are struggling, and we look forward to a significant recovery where everyone can focus on, and be compensated appropriately for, providing incredible value to home buyers and homeowners throughout North America.

http://www.newsweek.com/id/183670

      If you’d been in the home inspection business a while, it’s probably happened to you. It can go wrong several ways. The appointment is for Tuesday at 9:00 AM at 26 Birch Ave. You show up on site, and there’s no one there. You wait around, knock on the door, start to look around the outside and begin to wonder. You realize something isn’t right.

Your cell phone rings and it’s the real estate agent, hopping mad. Turns out you’ve got the address wrong and they are all the way across town. The agent and the client are waiting, along with the seller of the home who has booked off work to be there.

That’s bad enough, but this one is even worse: You’ve just started an inspection with a client and agent at 26 Birch Ave., and another client calls, expecting you to be at a different address at exactly the time! What do you do? Did you double book? Did they make a mistake? It doesn’t really matter, it’s bad news either way.

These are no-win situations, the kind you want to avoid. We have been there, done that, and never want to do it again. That’s why we use confirmation e-mails, sent to the client and agent once an inspection is booked. The date, time and address of the inspection are all documented automatically so there is no confusion. You don’t get a second chance to make a first impression.

With our Horizon home inspection report writing software, e-mail is generated automatically, so there’s no need for double entry, and no room to make a transcription error. The appropriate inspector also gets a copy of the confirmation e-mail automatically.

Canada’s first licensing law for home inspectors was passed in January 2009. By March 31, all home inspectors will have to meet the requirements of the National Certification Program for Home and Property Inspectors www.nca-anc.com, requirements of CAHPI-BC, (Canadian Association of Home and Property Inspectors - British Columbia) www.cahpi.bc.ca, or the Applied Science Technologists and Technicians of British Columbia (ASTTBC) www.asttbc.org. All home inspectors will have to carry Errors and Omissions insurance and General Liability insurance. There will be a $100 licensing fee, and home inspectors will have to carry an identification card. There will also be a criminal record check.

Unconfirmed reports indicate that real estate agents will not be allowed to recommend home inspectors. Instead they will send consumers to the Business Practices and Consumer Protection Authority, a non-government, not-for-profit organization. (www.bpcpa.ca) This authority will also handle consumer complaints related to home inspection.

Those who are not a member of any of these organizations may have their credentials assessed by the Business Practices and Consumer Protection Authority at a cost of $250. This option is only available until March 31, 2009, and those who are approved will have to become members of one of the three organizations within two years.

No license is required for commercial property inspections. For more information from the Authority, click here.

Here’s an interesting perspective on a good home inspector from a financial guy.
http://www.financialpost.com/story.html?id=995130

There are some points to take from this:

1. Tools may be useful, but experience is irreplaceable.
2. If you don’t feel the need to impress, that’s impressive.
3. If you communicate with clients like you care, they notice and appreciate.
4. Simple comprehensible language is the only language we should speak.
5. Knowing your limitations is impressive itself.

Sometimes issues are raised in the media that are of considerable concern to our clients.  A lot of times, we don’t have any particular problem with these issues, but need to recognize that our clients may be concerned and need good information.  This may include things like urea formaldehyde foam insulation, vermiculite insulation that contains asbestos, aluminum wiring, radon, knob and tube electrical wiring, and so on.  The way we like to address these issues is to find authoritative sources that can be quoted to refute a media buzz that has created an issue for consumers.  We try not to be dismissive of the issue, but help the client put it in perspective.  In some cases, we don’t believe it’s any problem at all; in other cases, we point out how it can be dealt with easily and inexpensively.