North Vancouver, BC, Canada
Musings of chief inspector and president of SENWI House Inspections

Wednesday, February 22, 2012

Dollar Limit on Subject To Inspection Clauses

I have occasionally come across clients who have accepted an inspection subject clause wording that greatly reduces their ability to pull out of the purchase if they are not satisfied with the findings of the home inspection report.


This clause can be worded similar to:

“Inspection Report against any defects whose cumulative cost of repair exceeds $ entered dollar amount (often $1000) and which reasonably may adversely affect the property’s use or value. The Seller will allow access to this property for this purpose on reasonable notice.”

There are two problems associated with a clause similar to above.

The first problem is that there can be conditions or characteristics uncovered during the home inspection that man not have a high dollar value to address, or in some cases may not even have the ability to assign a dollar value to, but cause the dwelling to be undesirable in the eyes of the purchaser. One example is rodents in the attic. Many people are not comfortable with this style of defect even though the cost of remediation can be in the low hundreds of dollars. If you accept a subject clause limiting your ability to pull out only when deficiencies are over $1000, then if the rodents are the only found issue, you are stuck purchasing a home you are really not comfortable living in. Another example of a characteristic of a home that you may not be able to assign any value to, and that actually caused one of my clients to pull out of their purchase, had nothing to do with the dwelling itself but instead addressed a ‘green belt’ that ran behind the property. During my review with the client at the end of the inspection, I indicated that the ‘green belt’ was in fact being utilized as a dirt bike obstacle course and that the bike activity could be clearly heard inside the house with all doors and windows closed during much of the inspection. When this was reported to the wife, a decision was quickly made that this was not the property for them. They were not interested in their peaceful weekend mornings, drinking coffee on the porch, being interrupted by the howl of dirt bikes going by.

The second problem with this kind of limit being set is that it is difficult for the purchaser to prove a specific dollar value to remediate defects uncovered by the inspection. Often it is pretty clear that the defects are well over the subject limit, but without a quote, how can the buyer prove this. Inspectors are not contractors and cannot possibly provide accurate estimates for each and every defect uncovered. Many inspectors will not provide any estimate at all for remediation while others will try to provide some form of ballparks to the purchaser. So in order to comply with a clause like the above, the buyer would need to bring in contractors to provide fixed quotes on the various defects identified by the report. The subject removal period does not typically grant enough time for this type of activity and so extensions would have to be granted (often a week or more would need to be added).

You can see that neither condition is desirable for the purchaser. Even if it can be proven that the condition found is below the limit set by the clause, the buyer may not be comfortable living in a home with the condition even in a repaired state. Or the buyer may not have the time or facilities to deal with a repair and the delay it may represent to the ability to occupy the home. These are all decisions that should be left to the purchaser and not limited by an inspection clause.

We recommend that buyers not accept a dollar limit in their inspection subjects and instead insist on wording as close as possible to:

“Subject to the Buyer being satisfied with a property inspection to be performed, at the Buyer's expense, by a licensed Home Inspector of the Buyer’s choosing. Access to the property will be provided by the Vendor on reasonable notice and to the extent required to fulfill the Buyer’s due diligence”

The last part of this clause is important as we have occasionally come up against vendors who have refused to provide adequate access to the property. Because there agent (selling agent) has advised then that most inspections take 3 hours or less, they have initially refused access for our 4-8 hour process. The wording of this suggested clause also provides access to the property for secondary inspections that may be warranted based on the original findings of the home inspector.

Bottom line: As a buyer, you should not accept any wording that reduces your ability to legitimately pull out of the purchase should your home inspector uncover a deficiency or condition you are not comfortable accepting.