A property inspection is often a critical component in a real estate transaction, as it enhances a buyer’s knowledge about the physical condition of the property. For that reason, it is quite common for buyers to insist on having a property inspection clause in a Contract of Purchase and Sale. But what happens if the property is damaged during the inspection? Who is responsible? The answer is: it depends.
As a professional REALTOR®, you need to inform your buyer clients about the risks of not including an inspection clause. Indeed, a failure to do so likely contravenes multiple provisions in CREA’s Standards of Business Practice, including, for example, Article 3 (Primary Duty to Client), Article 4 (Discovery of Facts) and Article 10 (Outside Professional Advice).
Realtors who act for sellers also have duties relating to property inspections, and a failure to execute those duties could similarly contravene the rules.
Things to consider as a buyer’s agent:
When discussing a property inspection with a buyer client, you should recommend using a licensed property inspector. This is because, in addition to having specific training and qualifications, licensed inspectors are legally required to maintain the following insurance coverage:
- $1 million occurrence/limited/aggregate professional liability (E&O) coverage.
- $1 million occurrence/limited/aggregate general liability coverage.
- Coverage for common issues to home inspection in BC including water ingress.
Buyer agents also need to inform clients about the risks of not using a licensed inspector.
Setting aside the potential damage during an inspection issue for a moment, one risk is that an unlicensed person may lack the skills to do a proper inspection. In that respect, if something serious is overlooked, it could end up being very costly for the buyer.
Furthermore, the buyer might have limited recourse for dealing with mistakes, because unlike a licensed professional, an unlicensed person is not required to have liability insurance. Of course, the buyer could still sue someone who is uninsured. But that’s also a risk, because without insurance, the unlicensed person may lack the means to compensate for the loss.
Now let’s go back to damage during an inspection. Much like a scenario in which an unlicensed person makes a critical error, if property damage is caused by an unlicensed person, your buyer client could ultimately be responsible. In fact, that could even be the case in the absence of an indemnity clause, because the seller may still decide to sue the buyer.
Things to consider as a listing agent:
If you are the listing agent, you have a duty to protect the interests of the seller. With that in mind, it is obviously in a seller’s interest to ensure that no damage occurs during a property inspection. Therefore, to help ensure that things go smoothly, a listing agent should always try to be present at a property inspection. Otherwise, if something goes wrong and you were not there, the seller could try to pin the blame on you.
Having said that, something could go wrong regardless. But by attending, you can at least attempt to mitigate any potential problems. Moreover, it will demonstrate your commitment to protecting the interests of your client.
There are, however, times when a listing agent will have a legitimate reason for not being able to attend a property inspection. In that situation, the listing agent should try to find a Realtor colleague who can attend the inspection on their behalf. This is especially important if the buyer is unrepresented – you don’t want an inspection to happen with no agents present. On the other hand, if the buyer is represented, the listing agent should insist that the buyer agent (or their colleague Realtor) be present at the inspection to protect the buyer’s interests.
Final thought:
Buyer and seller agents have certain responsibilities when it comes to property inspections. In addition to providing information and advice, it is best if agents for both the seller and buyer are present at a property inspection.
With both agents in attendance, the capacity to prevent problems will be greatly enhanced, thereby helping to ensure that the interests of both parties are protected.
Source: FVREB Professional Standards