Home Inspectors can be liable for a faulty home inspection

Sunday, April 15th, 2012


Janice Mucalov, LL.B.

When representing home buyers, REALTORS® may well be asked about home inspections and perhaps also to recommend a home inspector. So REALTORS® should be aware of a 2009 court decision on home inspector liability and of the recent system for regulating home inspections in BC, which introduced licensing and insurance requirements to better protect buyers.

First, the court case. In November, 2009, a home inspector was found liable in negligence and ordered to pay substantial remedial costs to a couple who bought a home in North Vancouver.

The couple bought the house in 2006 for almost $1.1 million. The purchase was conditional on an inspection report. At the recommendation of their real estate agent, they hired an architect and his home inspection business to do an inspection and provide a report. He spent about 30 minutes inspecting the roof and exterior of the house in addition to inspecting the inside. He was paid $450 for his services.


The inspector filled in a good part of his printed report form before meeting with the buyers to discuss his findings. He noted some problems with two structural timber beams on the house’s west side and also some settlement of the house, but he didn’t inspect any other western beams or the eastern beams. He gave the buyers an estimate of about $20,000 to fix the rotten west side structural beams and stabilize the house. The buyers asked him whether they should go ahead with the purchase in light of his findings, and were told it was okay to do so.

After the couple moved in, they discovered that the structural and settlement problems were far worse than they thought and they hired an engineer. The actual restoration costs were tagged at almost $213,000. They sued the sellers, their real estate agent, the inspector and the District of North Vancouver. Before trial, they settled with the sellers and discontinued their lawsuit against everyone else except the home inspector.


In court, the inspector pointed out that his contract with the buyers wasn’t a guarantee and limited his liability to the $450 cost of the home inspection report. But the buyers didn’t read the contract before signing and he didn’t draw their attention to these clauses. Also, the main purpose of hiring the inspector was to rely on his advice, decided the court, and if the buyers couldn’t rely on his report and what he said, they wouldn’t have hired him.


The judge ultimately decided the home inspector was negligent for not inspecting all the structural beams, many of which were rotten, and because he didn’t tell the buyers they should hire a geotechnical engineer to examine the beams. His repair estimate was “woefully inadequate” and led the buyers to believe the house problems were relatively minor. He was liable to pay damages to the buyers of almost $193,000 (the agreed repair cost less his estimate).


Now, the new home inspection scheme. In March, 2009, BC home inspectors were mandated to undergo licensing and carry insurance in case of lawsuits from clients. It isn’t clear whether the home inspector in this court case was insured and whether the buyers there were able to recover on their judgment in full. But if buyers now hire a licensed and insured home inspector (which they should in most cases), they should now have the added protection of such insurance. This should help avoid the risk of a home inspector being unable to pay a judgment (making the decision a mere “paper judgment” without meaningful recovery) – at least for up to $1 million, which is the minimum insurance inspectors must maintain.

There are a couple of things worth highlighting for REALTORS® when acting for a buyer. You should make the buyers aware of the licensing and insurance scheme and recommend that they make sure any inspector they hire is properly licensed and insured. And if asked for a recommendation, REALTORS® should try to only recommend a reputable and experienced inspector (or inspectors), who REALTORS® know to be properly licensed and insured. These steps will help protect you if things go wrong (as happened in the 2009 court case) and there is a lawsuit, which could quite possibly include a claim against you as the buyers’ agent, suggesting negligence on the REALTORS® part.

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