Bruce's Consumer Alert

With the ever-increasing number of lawsuits by recent homebuyers against home inspectors for allegedly performing poor inspections, consumers obviously require more information on how to avoid that. Court action is very expensive and most new homeowners cannot afford to pay the high legal fees required to win their case for compensation.

A recent statement by the American National Association of Certified Home Inspectors (NACHI) indicates: "According to the Foundation of Real Estate Appraisers (FREA), British Columbia has the highest home inspection litigation in all of Canada."

Based on our experience and involvement in attempting to assist recent home buyers get justice to resolve poor home inspections performed by other home inspection companies, here is what we believe is causing litigation.

Firstly, most consumers have no clue exactly what their Inspector is required to or will report to them when hired to examine a home or property for them. Their realtor should be making them aware of the rules (Inspection Standards) that govern inspections by providing them with a copy prior to the inspection, but this rarely happens.

Further, prospective buyers do not understand the differences between the major Home Inspector Associations in this province, nor are they aware of what training is required to be recognized as a professional and competent inspector. Homebuyers often make decisions to hire an inspector based solely on what their realtor tells them or go for the cheapest inspector.

If a consumer was going to have surgery or buy a new car he would pick the best doctor and attempt to get the very best used vehicle by calling on his mechanic, friends who know about cars, or hiring a specialist from the Automobile Association to come into his driveway and test the car. When it comes to spending close to a half a million dollars or more on what will probably be their single most expensive investment, they throw caution to the wind. It's unbelievable. We have advised clients that, if their funds are so limited that they can barely afford the cost of a proper inspection, they may want to reconsider purchasing a home in that price range. Anyone who has owned their own residence realizes that there are a lot of other things to be purchased to maintain the home, such as garden equipment, ladders, the list is endless.

CMHC has recently introduced a programme where first time buyers can purchase a home with virtually no down payment. This places many uninformed consumers in the position of not being able to keep their recently purchased homes if the economy suddenly changes and interest rates rise. Some of us remember when interest rates went from 7% to 21% not too many years ago.

There are only two formally recognized Inspection Associations in the Province of British Columbia. The first is the British Columbia Institute of Property Inspectors (BCIPI), which has been described in the media as a professional organization. Members of that organization must be affiliated with the Applied Science Technologists and Technicians of B.C. (ASTTBC). The ASTTBC organization is mandated under the provincial ASTT Act to grant certification to Home Inspectors. No other inspectors' home inspection association group is permitted to refer to their inspectors as being "certified." ASTTBC has a membership of over 8,000 Technologists, Technicians, and Technical Specialists in B.C.

In order to receive a designation as a "Certified" Home Inspector with ASTTBC, BCIPI members have no choice but to take their home inspection training at the British Columbia Institute of Technology (BCIT). In order to be granted "certification", a BCIPI inspector must take formal recognized training at the college or university level. These training facilities are not directly connected with the Home Inspectors association. Home Inspection training provided outside the influence of an Inspectors association creates, in our view, a more objective and formal examination process. To learn more about this organization, go to your Internet search engine and type in the initials BCIPI.

One of the documents you will want to review first on the BCIPI web page before hiring your inspector is their Standards of Inspection. This document dictates the responsibilities of the inspectors in performing their inspections. More will be said about those "rules" of inspection later.

The second Home Inspector Association in B.C. is the Canadian Association of Home and Property Inspectors (CAHPI). They have been described as being more of a trade organization as opposed to a professional group. One of the major differences between the BCIPI group above and CAHPI is in their methods of receiving training and accreditation.

For example, BCIPI inspectors must attend BCIT for inspection training and pass the Institute's exams. Their individual home inspectors association has no influence over the process.

CAHPI inspectors conversely can arrange to take correspondence courses from any source they can find. The CAHPI group does, however, offer correspondence courses through an out of province Inspection Company, for which they charge a fee for exams. Providing the CAHPI property inspector writes and passes their exam and performs five inspections to the satisfaction of the CAHPI executive, they can perform inspections. The question consumers should be asking themselves here is: Would they hire a doctor who has only completed his first five operations, regardless of his examination marks? Fast tracking inspectors is a risky business. To become a good inspector requires many years of on site inspections, learning from each error or omission. Obviously under the CAHPI policy, a consumer must be very careful to select an inspector who has completed more than five inspections, regardless of how much insurance they purport to have.

On the matter of "Certification", only BCIPI members can legally use the designation "certified" inspector. The legislative right to do this flows from the powers granted to the Applied Science Technologist & Technicians under the provincial ASTT Act.

The CAHPI use the term "Registered" RHI to denote an inspector that has successfully completed 250 inspections under their program. The term "Registered" was granted by the British Columbia Registrar of Companies and is more to do with a job protection title.

To gain more insight into that organization, search the Internet under the initials CAHPI.

While in the CAHPI site, review what they refer to as their Standards of Practice. BCIPI calls their similar regulations "Standard of Inspections". There are subtle differences between the two associations rules for inspection, but they both essentially set out what the inspector is obliged to inspect and what he/she is "Not required" to inspect.

There lies the problem, which results in many lawsuits against inspectors. Homebuyers ASSUME that their inspector is going to check all the perimeter drains, check for buried oil tanks, and report asbestos, mold conditions, or many other items uninformed buyers would expect that a home inspector would review. But take a closer look at those Standards of Practice.

Under the CAHPI Section 13 General Limitations and Exclusions, you will see that their inspectors are "Not" required to note "Wood destroying organisms" and "Environmental hazards" such as buried oil tanks. A recent Court case in Kamloops was brought by buyers who accused their CAHPI Pillar to Post inspector of not reporting known termite problems in the home they purchased.

Oil tanks are a real problem in older areas of Vancouver because there are thousands of them buried in Vancouver yards. If they leak, considerable cost can be realized for cleanup. They are the responsibility of the current homeowner to get rid of once they are decommissioned, but many realtors try to pass off this cost to a new buyer. This goes against the City of Vancouver's Fire By-Law (No. 8191, sec. 4.10.3) and Sewer and Watercourse By-Law (No. 8093, sec. 5.3). City Bulletin 2001-001-EV dated January 17, 2001, states: "Oil tanks which will not be reused or have been out of service for two years shall be removed." A tank removal permit must be obtained from the Fire Prevention Department.

Further, Inspectors are not required to offer "warranties or guarantees of any kind". They only inspect areas that are "readily accessible", which means that if the homeowner has placed boxes or other items in front of a heating unit, for example, the inspector is not obliged to inspect the furnace.

Under the CAHPI Glossary of Italicized Terms you will see the words "Representative Number". This simply means that when an inspector enters a room, for example, they are not required to check all the windows, doors, electrical outlets found therein. This allows them to complete their inspection much quicker and go to another inspection job elsewhere.

This method of only doing random checking can also apply to reviewing the condition of outside perimeter drains. The inspector may not have to check any under their inspection requirements or choose to test only one out of four. Even a homebuyer with limited knowledge would realize that if an inspector only checked one out of four similar items in a house, there is a very good chance that one or more of those other items may be defective.

The problem created by accepting quick and limited checklist type inspection reports is compounded when too many buyers hire the cheapest inspector recommended by their realtor. The Vancouver Better Business Bureau recommends against accepting checklist reports because they provide insufficient information. Buyers fail to realize that all too often many realtors' main interest is in making a quick sale. Unprofessional realtors sometimes convince their clients that exhaustive testing is time consuming and unnecessary. From time to time we hear from buyers that the realtor told them three other inspectors checked the house out already, so everything must be okay. If they checked a little further they might find that one or more of those inspectors may be on the selling realtor's preferred inspectors list. That should set off alarm bells to an alert purchaser. We recommend that buyers go to the Better Business Bureau of Mainland B.C. at www.bbbvan.org and search under "Buyer's Tips". Enter the word "home inspection" for more information.

The Courts and Better Business Bureau suggest that a prospective buyer who hires an inspector recommended by a realtor who will profit from the sale of the property is a fool. "Buyer Beware" they will say. For more information on this, contact the Vancouver Better Business Bureau at (604) 682-2711 or go to their web site.

In January 2003 the Provincial Court of B.C. in the case of Brownjohn v. Pillar to Post (Home Inspections) made some interesting statements. The Court's Reasons For Judgment made the following points concerning how an inspection should proceed, comments on Pillar to Post reporting methods and what was the value to the consumer relying on the CAHPI Standards of Practice of assuring them of getting a thorough inspection.

The Court in part referred to the CAHPI Pillar to Post inspector's report as being an "awkwardly formatted document" of "relatively small print." It contained a number of paragraphs that protected the inspector from any useful legal action against him and it offered the homebuyer no protection. One of the most revealing statements of how poorly these limited inspections are for a home purchaser were revealed when the Court stated: "One imagines that persons wanting useful and reliable advice about their prospective home purchase might be discouraged from retaining inspectors if they really understood that the inspector was doing everything possible to ensure he could not be held accountable for the way in which he did his work."

In our view what the Court has said is, "Why even bother hiring an inspector who provides such limited work and concentrates more on protecting themselves against just about any mistake?"

The type of report the Court was reviewing in this case is commonly known as a Check List. They consist of nothing more than a number of pages with small check boxes where the inspector ticks off what he supposedly inspected. Checklist reporting allows the inspector to complete his work quickly and move on to another inspection job. There is very little room for written comments and the remaining pages are full of disclaimers limiting the home purchaser from attacking the inspector if something goes wrong. Unprofessional realtors recommend inspectors who use this type of reporting system because their limited capacity to provide useful and full information to the new home buyer is less of a threat to the real estate deal crumbling. Limited information in reports also raises fewer concerns with the true condition of the house, thereby preventing the purchaser from reopening up the contract for negotiation.

If the home purchaser errs in not reading the inspector's contract and later wants to sue the inspector for doing a poor inspection, their lawyer will immediately draw their attention to the wording in the inspector's contract, which places a Limitation On Liability. The next question he will ask is: "Why did you sign that contract in the first place?" Typical wording in Check List Reports reads as follows: "Inspector's Liability for mistakes or omissions in this inspector's report is limited to a refund of the fee paid for this inspection and report."

In short, this clause means that if the inspector missed anything in his/her inspection, regardless of whether it was a fifty dollar or a hundred thousand dollar problem for the new home buyer, all the new homeowner could expect to receive in compensation for the inspector's mistakes would be the ($300 or $500, etc.) fee they initially paid for the inspector's work. Our advice is to not sign any contract that limits your ability for compensation to only the fee paid for the inspection. To make matters worse, some inspection companies ask the home buyer to pay an additional $600.00 to receive extended liability protection from faults generated by the inspector.

The question that still puzzles independent inspectors is: "Why would any person willing to spend hundreds of thousands of dollars on buying a home risk it all to not read and understand what type of inspection they were going to receive from the inspector they hired and know what protection they could expect in compensation if something serious was missed?"

The answer in part, we believe, is that buyers initially are so enthralled with the home that they don't want to hear any bad reports about it. We overheard one realtor saying to a client that the fact that the inspector had found that the perimeter drains on the house were defective was not a big deal. He could find someone to fix the problem much cheaper than the inspector had suggested it could cost to remove all of the landscaping, tear up sidewalks, and remove the deck to replace the drainage tiles in the ground. The realtor in fact was making light of a very serious problem, which could cause water to enter the basement at some point in time. The time to negotiate deficiencies is before you remove your subjects. When we later encouraged our client to take independent quotes on replacement of the drainage system, they realized that it was a very expensive undertaking (in excess of $20,000). They chose to walk away from the house and within two weeks purchased another home with fewer problems.

After the Reasons for Judgment were released by the Court on the Pillar to Post Home Inspection case the Real Estate Council prepared a short bulletin called "Legally Speaking" for release to real estate agents in the province. (For a copy of that document, see the "Interesting Articles" section.) This notice did not bring out all the important facts but it points out that, if consumers expect to get a thorough inspection of the home they want to purchase for only a few hundred dollars, they are in for a big surprise. The Court commented: "The home inspection was not being used as an assurance of the structural integrity of this building. To do that for $200 would be a fool's errand, in my view."

It is the old story that you get what you pay for in life. If you want a cheap car, you pay less money. If you need the best lawyer or doctor to save you from disaster, you will have to pay more.

Too often realtors interested more in making a quick sale will refer the prospective homebuyer to three or four hand picked inspectors. They will promote these inspectors as being qualified, but at the same time say that their fees are low. Any fool should know the two don't mix. Because of recent complaints, even the Real Estate Council is beginning to realize that realtors referring inspectors leads to Court action.

The last problem we detect is that many realtors will recommend a home inspector to their client but they don't believe they have any duty to point out to the buyer that they had better make sure they get the "Standard of Practice" or rules and conditions under which the inspector will do his job. If the buyer believes for a second that the inspector is going to do a complete inspection of the home, they are misguided. When realtors don't alert buyers to the fact that there are inspection standards to be followed, and ensure that they are produced before the inspection, concerns arise. We have brought to the attention of the Real Estate Council of B.C. the fact that we rarely see evidence of realtors ensuring that their clients receive these standards prior to the inspection. Their response was that there is nothing in their Act that forces them to compel realtors to warn buyers that inspections of this type are very limited in nature. So change the Act, we say, and provide consumers with more protection.

The realtor should ensure that their client receives those inspection procedures from the inspector prior to him starting his work. This is one of the points that came out in the above Court case. The Pillar to Post inspector called as his witness a CAHPI inspector who stated that the "recommended approach" before starting the inspection was to "provide the contract (Inspection standards) to the realtor in advance and subsequently reviewing with the client the limitations of the home inspection process." By going over the document that the inspector will be guided by while doing his inspection, the buyer will know straightaway whether the inspector will check all the outside drains, comment on the possible presence of a buried oil tank on the property, discovery of mold or asbestos, whether he will actually go up onto the roof, or many other things. If the buyer was alerted before the inspection by the inspector or realtor that certain things would not be covered, then the buyer would have the opportunity to call in an expert to address their concerns. Most homebuyers would be amazed at just how many items or systems an inspector is not obliged to comment on without calling in an expert.

So why don't all realtors who recommend inspectors to their buyers ensure that the Inspection Standards are presented up front to the buyer and discussed before proceeding the inspection? Our view is very much in line with what the Court said and that is that, if the buyer realized that all they would get back from the inspector if something was missed regardless of the seriousness of the error was what they paid for the inspection and further that most inspections of this type don't report much, then they would not hire the inspector in the first place. Most home inspections are nothing more than a quick glance at the condition of the home. The realtors need the inspection, in many cases, so that the deal can be concluded, the mortgage let, and their commission paid. This is all understandable, but we have observed too many situations where our clients are rushed into making quick decisions.

So how can a buyer avoid a lawsuit and get the type of inspection that will provide sufficient information to make an informed condition on whether to purchase the house or not? Here are the five steps we recommend.

1. Never hire a home inspector steered to you by your realtor, regardless of how well you know that realtor. This is supported by the Better Business Bureau. Business is Business and you must select your own consultant to work in your best interest. It is well known in North American realty circles that inspectors who take referrals from realtors don't always reveal all the faults with a home. NBC Television did a show "Hiring home Inspectors" on this very subject. A commentary from that reads as follows. "While some inspectors give objective complete inspections, others may fear if they speak too openly about the flaws in a home they will anger the realtor, and never get another referral." One would think that it should be obvious to buyers that, if a realtor recommends an inspector, there must be a reason for it.

A thorough inspection will always make the realtor work harder to sell the home, but negotiation is part of their job. There is increasing evidence that the public is fed up with paying what they perceive to be unrealistically high real estate fees. Go to our Table of Contents, "Interesting Articles" section, and read the editorial entitled "Home Sales Guru Predicts Demise of Real Estate Industry". We receive too many complaints about realtors not doing much for their clients. They fail to assist with understanding the process, do not ensure that the home is ready for inspection, or seem more preoccupied with rushing the client into making a hasty decision. This detached behaviour takes away from the good work being performed by professional realtors.

2. Hire an Independent Inspector who does not take referrals from realtors. By that we mean an inspector who does not hand out brochures or solicit business in any way from either the realtor(s) or their company. If you see Inspectors' brochures in a realtor's office, be on guard. Try and find a friend who has hired an inspector before and was satisfied with their services and the fact that their report showed the house they purchased was representative of what the inspector's report stated the previous year. Ask your lawyer or credit union for assistance but be aware of large agencies such as Canada Mortgage and Housing (CMHC) that promote only one group of home inspectors. CMHC is in the business of selling homes and lending money and have come under criticism in recent years for not informing consumers of leaky condo buildings. See the "Interesting Articles" section for CBC News "Vancouver condo owners say CMHC knew about leaks."

3. Don't be swayed by a fancy webpage or a big Yellow Pages ad. Our investigations over the years have shown that the largest ads tend to generate the most complaints. Oftentimes, consumers are misled about the experience of an inspector. The person they most often speak with on the telephone is not actually the inspector who appears on site to do the work. Some large inspection companies hire inexperienced inspectors and pay them a low fee for doing the inspection. The company pockets the rest of the money. These junior inspectors take the inspection work to gain experience so they can receive certification.

4. Don't be overly concerned about paying more for a thorough inspection. It's amazing, but the first question a lot of callers who have no place to go for assistance ask is: "How much?" They forgot the important issues such as the training of the inspector, how much of the house and property are actually inspected, what type of report will they receive, or if they can provide any references of satisfied clients. Aside from concentrating too much on cost, they get hung up on whether or not the inspector is insured or how long they have been in business.

Although these are good questions, the first thing consumers must know is that all inspectors' insurance companies, instruct inspectors to clam up if something goes wrong. If the inspector tries to help out too much with resolving the dispute, the insurance company looks at this as an admission of quilt by the inspector. If something goes wrong after the inspector has tried to be helpful in resolving the issue, the insurance carrier will refuse legal protection for the inspector. To rely on a home inspector's insurance company to pay for your mistake in signing an inspector's contract with limitations will be difficult. This is something a lawyer will continually remind you of.

We have represented many clients who have received bad home inspections from other inspection companies. They may have a good case for compensation from the Courts at first glance, but once they are told by their lawyers that it will take them approximately three years to get their dispute before a Judge and thousands of dollars to get the case started, they often give up. In most cases, buyers with grievances against their inspectors cannot afford to pursue their cases through the Courts. It is also unrealistic to expect an inspectors' association to provide the disgruntled homebuyer with any degree of comfort. For example, most consumers would agree that it would be helpful and in the interest of promoting good relations if the inspector's association would send a representative to their home to review what the buyer believes the inspector either failed to report on or downplayed the importance of. Presently, the only home inspection association that will send out a representative to conduct further investigations is the BCIPI. The CAHPI association does not permit their inspectors to review another inspector's work on site.

The difference in price between a thorough inspection by an Independent Inspector who provides a typewritten report with photographs of the home's deficiencies and a checklist report prepared by a realtor referred inspector is not significant. The value received, however, in additional information is very useful. Even if the vendor refuses to move on their price because of the discovery of more defects than were originally reported, your will have much more information about the home if you choose to purchase it. This will reduce the risk of sudden and unexpected financial demands on your wallet. At least, you will be going into your problem house with "your eyes open". To risk getting a bad home inspection on a half million dollar house by limiting yourself to the cheapest possible inspector is foolhardy.

5. Ensure that the realtor you hire is willing to negotiate on your behalf if your inspector's report reveals many unreported defects that will cost you money to repair. We always tell our clients that the real cost of the home is what they offered to the vendor plus what it will cost to put it in serviceable condition. Regardless of whether the buyer negotiates for compensation now or decides to fix the problem in the future, they will have to pay for those repairs. It's better to deal with the problem at the stage when you have some negotiating power, than leave it to some future date when material and labour costs to fix the problem are unknown. Some realtors advertise themselves as being "the negotiators". Our experience has shown that there are very few of these out there but, like good home inspectors, they are hard to find but available. Although we do not take direct referrals from realtors, we would not hesitate to identify to our clients those realtors who, in our view, have impressed us with their abilities to do a professional job for their customer and, at the same time, not interfere with our work.

A common phrase used by realtors who don't care about striking a reasonable deal, after being presented with the buyer's comprehensive inspection report, is: "Well, we are not selling you a new house." If you hear your realtor saying those words, you are in trouble. If possible, at this point you may consider hiring a more professional realtor to represent your interests. They are available, but you have to seek them out.

We recommend that you read carefully how the realtor has described the home in their listing. If it says something like: "Nice home on the west side, with a large deck for entertainment, great back yard, and a rental suite available", then you should expect to find those things to be in good condition and legal.

The second form you should review is the Property Disclosure Statement (PDS) prepared by the vendor. In the listing, the realtor should describe the home and property accurately. With respect to the PDS, it gives the homeowner the opportunity to be honest and divulge those things and services in the home and property that are defective. If the inspector's investigation reveals that the realtor has promoted the home to more than it is, and the homeowner has neglected to report obvious deficiencies, then the house you placed your offer on is not the same. This can be very disappointing for some buyers, because they begin to realize that person(s) may have deceived them. We often see this when a realtor presents a house as being recently painted, and we find that much of the rotted wood has been concealed with filler and painted over.

We had a recent example where the deck was described as being large and a wonderful entertainment area. The deck, in fact, was built without a permit from the City of Vancouver, did not meet the safety requirements of the Building Code, and was found to be rotting underneath. The media has reported numerous decks that have collapsed in recent years, with deaths resulting. Decks carry a huge legal liability and must be constructed to handle large groups of people and the activities that come with that during the summer months. That and a few other unreported items listed in the Independent Inspector's report enabled our client to receive $14,000 off their original offer. You can see why many realtors do not want anything more than checklist type inspections from their preferred, hand picked home inspectors.