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.

Agent admits it is not a good idea to choose an inspector that the agent recommends

Good Morning America interview a Real Estate Agent who confirm you may not be served by an agent refered inspector.


Good Morning America Video

Additional tips when purchasing a Condo

Some final points of advice when looking to purchase in a Multi-Family building


1) Like mentioned in the Vancouver Courier articles (Condo Pitfalls & Condo Nightmares) that inspired these blog entries, any lack of documentation is an automatic Red Flag! If the building is more than 4 years old, and does not have a extensive building envelope review completed in the last 5 years, you should think twice about continuing with the purchase.

Fortunately the lack of report should become a rarer situation going forward now that Bill 8 of the Strata Property Act has been enacted requiring all Strata’s in BC to commission a ’depreciation report’ within the next 2 years.

Note: On a side comment, it is important for Condo owners to realize that the implementation of these studies will most likely culminate in significant Strata Fee hikes as the full cost of maintaining a multi-family-building is better understood by Strata’s.

2) Never allow yourself to be pressured into a purchase. Subject removal dates are arbitrarily defined periods of time with no relation to a logical time period required to properly vet your purchase. They often can represent hype the agents impart into the process to make purchasers feel they need to ‘act fast’ or loose their buying opportunity. This is far too big of a decision, with far too large a potential liability, to be rushed into without due diligence. Take the time to due it right. If it falls through, it probably is for the best. Any vendor who is seriously interested in selling will ensure the buyer has ample time to vet the purchase as they do not want the buyer coming at them later. In markets where there is a buying frenzy, do not be pressured to buy without subjects, you are already buying at what is often the top of the market and can usually ill afford to take on the additional responsibility of unknown liability.

3) At the lower end of the liability scale is a fully rain-screened dwelling. In general, these buildings are more tolerable of faults in the design of the primary water shedding surface and will usually represent a much lower level of potential liability. At the upper end of the liability scale is a face-sealed stucco building without any significant overhangs and a complicated exterior design with lots of penetrations and architectural ‘features’. For a discussion on these two exterior styles see this HPO bulletin.

4) Remember that just because a building is not leaking now does not mean it will not leak down the road. There is a reason that a face sealed building is no longer allowed by code. It does not work! It is usually not a matter of if problems will develop but a matter of when. There is also the issue where many older buildings (pre-1990) are now looking at energy upgrades to the building to reduce the cost of heating bills as energy costs rise. This is often having a negative and unanticipated impact on the building’s health because as more and more of the interior heat is blocked from reaching the exterior sheathing and cladding, that wall assembly’s ability to survive infrequent wetting is substantially reduced. So as the general housing stock is updated to be more energy efficient, it will be increasing more important to ensure that the walls have a continuous water shedding capability.

I hope these entries have helped. I would be happy to discuss these issues further with you at any time. As some final guidance for you, when purchasing a Condo, I recommend you review this bulletin I send all my Condo clients as part of my inspection process.