Understanding the Importance of Home Inspection Agreements

HOME INSPECTION AGREEMENTS: Why They Matter & Where You Can Get One

Ben Garrison National Program Manager Joe Denneler, Esq. Chief Officer for Claims & Risk Management www.eiipro.com jdenneler@icmtpa.com bgarrison@elitemga.com

Introduction Pre-Inspection Agreements Purpose Basic contract principles Critical clauses Liquidated damages clauses Arbitration clauses

Purpose Proper agreement preparation protects you while giving your clients excellent service Symmetry among your documents eliminates ambiguity Adherence to state regulations prevents consumer protection claims

Purpose Sets out the understanding between you and your clients Lets your clients know what you will do and what you will not do Protects you from litigation or affords you defenses against liability

Basic contract principles Must be easy to read Must not be unconscionable Must inform the consumer of any important provisions and set them apart from the rest of the language set them apart from the rest of the language

Basic contract principles Timing is everything Send your pre-inspection agreement to your client or client's representative, by mail, facsimile or email AT LEAST one business day BEFORE the home inspection Get the pre-inspection agreement signed BEFORE the start of the home inspection

Basic contract principles Writing for your target audience The level of confusion over the meanings of words during litigation The average American reads at a 7th to 8th grade reading level Using trade terms and nomenclature

Basic contract principles Your target audience

Critical clauses Basic information The price of the home inspection A description of the systems and components that will be inspected as part of the home inspection The full name and address of the clients The address of the home to be inspecte The date and time of the home inspection

Critical clauses Statutory & regulatory requirements Provide key definitions Required disclaimers Standards of practice Exclusions Ability to use other defensive clauses such as arbitration, liquidated damages, etc.

Critical clauses Communicating the scope Defines the services being offered Provides the standards being used by the inspector Provides the key definitions

Critical clauses Communicating the scope 3. The Company agrees to perform a limited visual inspection of the systems and components included in the inspection as they exist at the time of the inspection and for which a fee has been agreed upon. Home Inspectors, including the Company, are governed by the rules in the New Jersey Administrative Code contained at N.J.A.C. 13:40-15 and the licensee shall comply with these rules. Failure to comply with these rules may subject the licensee to discipline.

Critical clauses Communicating the scope Don t double up unless your state specifically references association standards as the appropriate SoPs The laws of your state are primary, association standards are secondary

Critical clauses Defining what will be in the inspection report The Client and the Company agree the Company, and its inspector(s), will prepare a written Home Inspection Report which shall include the following: (a) A report on any system or component inspected that, in the professional opinion of the inspector, is significantly deficient;. (b) The inspector's recommendation to repair or monitor deficiencies reported under paragraph (a) of this subsection;. (c) A list of any systems or components that were designated for inspection in the standards of practice adopted by the board but that were not inspected; and (d) The reason a system or component listed under paragraph (c) of this subsection was not inspected.

Critical clauses General exclusions Disclosure of what you will not do Limitations caused by visual inspection Safety issues for inspectors Life expectancy of systems & components Causes of conditions or deficiencies

Critical clauses General exclusions Future conditions Operating costs Code compliance Market value Destructive testing

Critical clauses General exclusions 2. LIMITATIONS, EXCEPTIONS, AND EXCLUSIONS The Inspection includes only those systems and components expressly and specifically identified in the Inspection Report. Any area which is concealed from view or inaccessible because of soil, building components, personal property, weather or any other thing, as well as those areas or items which are excluded by the ASHI Standards of Practice, and/or by agreement of the parties is excluded from this Inspection. The following are examples of systems and conditions which are not included in the Inspection: recreational equipment, such as swimming pools, ponds, fountains, saunas, spas, hot tubs, steam rooms, and playground equipment; public or private water or septic systems, except as to functional flow; security bars or other safety equipment; elevators, lifts, dumbwaiters, automatic gates; thermostatic controls and time clocks; unique or technically complex systems or components, radiant or steam heating systems, any gas leaks; portable or freestanding appliances, and gas appliances such as barbecues, fireplaces, fire pits, heaters and lamps; personal property; survey, boundaries, easements or rights of way; compliance with manufacturer s installation instructions; system or component recalls; and any items specifically noted as not inspected in the Inspection Report, unless otherwise agreed and an additional fee paid. Although the Company may point out some of these items during the Inspection or offer maintenance suggestions as a courtesy to the Client, they shall not be considered part of the Inspection or the Inspection Report.

Critical clauses General exclusions 8. The Client understands that the inspection does not include the removal of drywall, paneling, suspended ceiling tiles, insulation, carpeting, moving of furniture or other items. The Company cannot and will not render an opinion as to the condition of any systems or components of the Property that are concealed by walls, drywall, paneling, suspended ceiling tiles, insulation, carpeting, furniture or any other items stored in or on the property at the time of the inspection.

Critical clauses Environmental exclusions 11. The Client specifically acknowledges that this home inspection an environmental survey and is not intended to detect, identify, disclose or report on the presence of any actual or potential environmental concerns or hazards in the air, water, soil or building materials. Such environmental concerns and hazards include, but are not limited to: asbestos, radon, lead, urea formaldehyde, mold, mildew, fungus, odors, noise, toxic or flammable chemicals, water or air quality, PCBs or other toxins, electromagnetic fields, underground storage tanks, proximity to toxic waste sites, carbon monoxide, the presence of or any hazards associated with the use or placement of Chinese drywall at the Property, or any other environmental or health hazards, unless otherwise agreed to and an additional fee paid. home inspection is not

Critical clauses Environmental exclusions 10. The Company is not required to determine the presence or absence of all manner of biological activity, such as insects, birds, pets, mammals or plants, and their consequent physical damage, toxicity, odors, waste products, and noxiousness.

Critical clauses Specific exclusions 12. The Client understands that this home inspection intended to discover or disclose whether any system or component of the Property has been affected by the illegal manufacture, distribution, storage, possession or sale of any controlled dangerous substances, including, but not limited to, methamphetamines, and including any and all chemicals, tools or household fixtures or appliances used to facilitate such illegal activities, and the Client further understands that the Company cannot determine whether any environmental hazards exist at the Property resulting from any activities related to any controlled dangerous substances. home inspection is not

Critical clauses Timely notice of alleged defective conditions 15. The Client agrees that any claim for failure of the Company to fulfill its obligations under this Agreement shall be made in writing to the Company upon discovery. Client also agrees to allow the Company ten (10) days to come to the Property to inspect and evaluate any condition complained of by the Client to the Company and not to make or allow others to make any alteration to the claimed condition until the Company has had the opportunity to inspect and evaluate the claimed condition, except in case of emergency.

Liquidated damages Generally used to limit the damages for breach to the cost of the inspection Sometimes created by statute Different applications in different states Usually not allowed in cases of gross negligence or intentional acts

Arbitration clauses Arbitration pros Can be a deterrent to lawsuits Less time away from your job Less imposing Takes away the possibility of a runaway verdict

Arbitration clauses Arbitration cons Effectiveness in multi-party litigation Decision made by 1 instead of 12 Can cost as much as litigation Splitting the baby decisions No appeal