Stuff That's In My Inspection Agreements

Drawing from 20 years of experience refining inspection agreements with national and local attorneys, we explore the crucial legal clauses that have repeatedly saved home inspectors from unnecessary liability and litigation.

• Third-party protection clause prevents contractors, attorneys, and others from misinterpreting your report and holding you liable
• Claim notification requirements demand clients provide written notice within 14 days of discovery via certified mail
• Insurance company disclaimers prevent your reports from being misused for insurance purposes
• Binding arbitration clauses discourage frivolous claims by requiring significant financial commitment from potential litigants
• Specialist investigation clauses protect you when clients ignore recommendations and problems escalate
• Opinion clauses shield inspectors from contractors and code officials who contradict findings
• Recording prohibition prevents clients from using your statements against you
• Equipment usage restrictions prevent client injuries on your ladders and tools
• Property access verification ensures you have permission to be on the premises
• Cancellation policies with graduated fees discourage last-minute cancellations
• Rights to terminate services allow inspectors to walk away from unsafe conditions

We are not attorneys - so check with a qualified attorney before implementing anything from this podcast or any clauses in your agreements, as laws vary significantly by state. This is not legal advice - just our own experience.

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*The views and opinions expressed in this podcast, and the guests on it, do not necessarily reflect the views and opinions of Inspector Toolbelt and its associates.

Chapters

• 0:00 Introduction to Inspection Agreements
• 3:02 Third Party Misinterpretation Protection
• 9:33 Claim Notification Requirements
• 15:36 Insurance Company Disclaimers
• 20:02 Binding Arbitration Benefits
• 24:26 Specialist Investigation Clauses
• 26:07 Client Behavior and Recording Policies

Transcript

Ian Robertson  

Welcome back to Inspector Toolbelt Talk everyone. Today, we're going to be talking about stuff that's in my inspection agreements. Now, for the past 20 years, I have spent, for lack of a better term, a butt load of time and money working with both national and local attorneys, refining our inspection agreements and even some of the association attorneys. Through this, we've taken, we started off with the InterNACHI standard agreement, you know, 20 years ago, and then we've refined it over time. So I'm going to start this podcast off with a disclaimer. I am not an attorney, and I don't know if any of these disclaimers are going to work for you personally. Some are allowed in my state and not other states. Before you use any of these, please consult with a qualified attorney, and any one of these that you want to use, you can find in our transcript, copy and paste, and again, send it to your attorney before using it. But here are some of the things that are in my inspection agreements that we have refined over time and added on legal consultation. 

First one, this is one of my favorites, simple one sentence, "Inspector accepts no responsibility for use or misinterpretation by third parties." I love this. It seems simple, right? Like that's a one liner. It doesn't even need to be said? But it does need to be said. This aligns with things like what they call the privity of contract doctrine and things like that. But more importantly, it's typically upheld in court, from what I'm told, and it allows us to control our own narrative. So for instance, we call something out, we say the roof is leaking. Now a contractor comes and says something stupid, like, the roof isn't leaking, the shingles are leaking. And now it turns into this weird thing, and the seller won't negotiate, and the contractor gives them the wrong estimate, blah, blah, blah, and they say we're wrong for our wording. This happens quite a bit over the years. I say quite a bit, enough that this sentence has become very important to me, because it has saved my butt more than once, because then legally, we can go and say they misunderstood. Here is what I meant, and it gives us legal precedent to do that, so we accept no responsibility for use or misinterpretation by third parties, and it's typically going to fall on the contractors or we think we're clear about an issue, but the attorney's in a rush that day at closing and misunderstands what we say. Now he's trying to push back and say, hey, well, you should have been clear. Well, you misinterpreted what I said. It's a really strong legal standing to be able to say that. So inspector accepts no responsibility for use or misinterpretation by third parties. 

I remember one particular time this helped me. There was this construction litigation attorney. Oh, my goodness. This guy was awful to deal with. I don't know how he got through life, but he misinterpreted my report. There was a door on the back of this nearly new home, and it kind of stuck a little bit. I could see what was wrong, and it wasn't a structural issue, but he misinterpreted it as one. So everybody wanted to come after me because of a door that was sticky in the back. And this is what, one of the things that upheld. We never went to court or anything like that. In fact, my client just thought it was stupid. She was an attorney too, but he misinterpreted it. He's a third party. He misunderstood it and applied it wrong. And he got burned because of it, and he wanted to come back at me. This will happen in our careers more than we'd like to hope. So, if you're a new inspector, plan on that. If you're an experienced inspector, you're shaking your head right now, like, yeah, a lot of people misinterpret my reports. So that's a good one to have, in my opinion. 

All right. Second one. "In the event of a claim against inspector, client agrees to supply inspector with the following: one, written notification of adverse conditions within 14 days of discovery by certified mail, and two, access to the premises. Failure to comply with the above conditions will release inspector and its agents from any and all obligation or liability of any kind." This one, in my opinion, is gold and written just like that. So let's take that first one, written notification of adverse conditions within 14 days of discovery. So that's important. We'll talk a little bit about being reasonable in agreements. We don't want to have onerous things in our agreements. Say, within three hours of discovery. We can sit in the courtroom and say, listen, I gave them 14 days. They discovered this major leak. Now they're coming to me two months later as an afterthought when their insurance didn't pay for it or something else, I gave them 14 days. Why did they not let me know? It needs to be within a reasonable time period. And from what attorneys have told me, that's reasonable time frame. Now that's subjective, that time frame. All of the time frames are subjective that we'll talk about. So talk with your attorney about it. That's the one that's in my agreement. Now you notice it says from time of discovery, it's a little bit too one sided to say from time of inspection. It's like most people aren't even closed, you know, from discovery, and that makes you look magnanimous. It gives them time and reasonableness and by certified mail. By certified mail, makes sure that they can't send you some ambiguous email saying, hey, we're having some trouble in our living room, and then not say anything. And then some attorney later on say, well, they gave you notification of the issue. It's like, no, I need written notification of the adverse conditions by certified mail. I want it in my mailbox. It seems old school, but certified mail's there for a reason. 

Now, number two, this is one that sometimes I'm not always so certain on. It just says in my agreements, access to the premises. Now, it used to say sufficient access to the premises. That got removed because the question came up of, well, what's sufficient? Who determines it's sufficient? Is it sufficient that the seller give you 10 minutes to look at something, or is it sufficient that you get access to the premises and spend three days there? So access to the premises is what we have in our agreements. I would definitely talk to your attorney, because I imagine that goes state by state. But either way, you need access to the premises. You need to be able to get there, look at the issue, and talk about it. Now, where it says failure to comply with the above conditions will release inspector and its agents from any and all obligations or liability of any kind. From what I understand, that holds up. So courts generally enforce reasonable notice provisions and preconditions for claims, releasing liability for failure to provide timely notice is typically valid, provided it's clearly stated. Don't bury this in your agreements. Put in it bold letters. Put it in italics, whatever. Most of the things that we want to protect us, we want to put in bold in our agreements so they stand out. There's a case reference here Oppenheimer and Company versus Oppenheim, Apel, Dixon and Company. So this was a 1995 case that shows that strict notice provisions and contracts are enforceable when unambiguous. So feel free to look up any of these cases. They're just references to show that it stands up all right. 

Third one, "Client acknowledges that this report is not intended for use by an insurance company, and is a misuse of this report to provide this report for insurance purposes." Now you Florida inspectors are like, we work with insurance companies all the time. Great. That's a 4-point, wind mit, other parts of the country, cool. If that's what your area does, that's fine. You'll find that a lot of insurance companies right now are having problems getting accurate information for their insurance policies. So what they're trying to do is to get people to give them the home inspection report. You know what this creates for us as home inspectors? Headache and liability. Headache in, I do not want to hear from the insurance company calling me, hey, can you tell us the age of all the wiring in the house? I'm like the house was built in 1920. There's every decade, there's a piece of wiring from that decade. Second of all, none of their business. I did an inspection for my client. I answered their questions. I factored into my price, their time, their questions, not you. So now the insurance company is calling us, then the agent's calling us. Can't you just do me a favor? You know, just answer the insurance company's questions. The clients calling us. I already paid for an inspection. Why aren't you answering the insurance companies questions? Now they're leaving grumpy messages. It's a huge headache. So I like to be able to point back to our agreements to say, listen, this is what our inspection was created for. 

Second of all, insurance companies have their own standards. So now in our state, we're going to inspect for certain types of wiring. Insurance companies may not care about that or something that's a standard in our area might be a big no no for insurance companies. What if they give their insurance company your report and they get denied a claim? Now you have a legal issue saying, well, home inspector said this, but that's not a big problem. You shouldn't have reported that. Insurance company's like, doesn't matter, we're not given a claim. They can't go after the insurance company, so they come after us. Big hassle. We have had this in our inspection agreement for years. So something to support this, a disclaimer of intended use can limit liability for misrepresentation or harm caused when the report is used inappropriately. Courts often uphold express language restricting use. The case reference here that you can look at Milau Associates Incorporated versus North Avenue Development Corporation. Disclaimers about purpose of a report were upheld, were not relied on for unintended purposes. 

Number four, this is dispute resolution. I'm not going to read this whole thing, but we use binding arbitration. Here's my reasoning for it based on legal counsel. Most home inspection claims are not going to be multi-million dollar claims. They're usually going to be things like five to $50,000 and stuff floating around in that range. Binding arbitration is expensive. So for instance, if somebody wants to sue me for $10,000 for a new heating unit, even though I told them that their heating unit was at the end of its useful life, and a year or two later, it dies. Okay, what are you gonna sue me for? Filing a court claim is cheap, in a municipality you know, anywhere from 50 to a few 100 bucks. You can file a small claims court, or you can go even higher, and it's not that expensive. So now, when people look you up, you're gonna have court records. You're gonna have to stand in court and defend yourself. It's stressful. Binding arbitration says, listen, if you really think I'm at fault, spend the couple few grand to go to arbitration. That's it. I have found that most people won't do it. Once they realize they have to put some put their money where their mouth is and not just throw the spaghetti against the wall and see if it sticks, they tend to walk away. Matter of fact, an agent called me one time. He said, when he bought a house, he said there was a $10,000 roof issue. This was probably 15 years ago, but I still remember this. And he said I was going to sue my inspector, but then I realized, when I talked to my attorney that he has a binding arbitration clause. He goes, by the time I would have been done with it. I only had a 50/50 shot of winning anyways, maybe less, according to my attorney, but it would have cost me money. So he didn't do it. I have found, personally, that binding arbitration is better than going to court. So as a side note, I've actually never been to court, not for me anyways, and I've never gone to binding arbitration. This particular disclaimer in our reports, in my opinion, has saved us more times than I'll probably ever know. So whether or not you choose to do that, talk to your attorney, and remember, some states do not allow you to do binding arbitration and a limitation of liability clause. New York does, so I get to use both, at least they did. I haven't checked in the past, I don't know six months or so, but if we're in New York, check with our attorney, but I have a binding arbitration clause and a limitation of liability, both of which hold up, typically.

Number five, "Client acknowledges that each item in this report should be investigated..." Going back to our podcast on the use of the word further, I accidentally threw that in there, but "client acknowledges that each item in this report should be investigated and reported on by a qualified specialist in the applicable field before the home is purchased or used. Every item in the report could indicate other conditions and failure to have each item investigated and to comply with the above conditions will release inspector and its agents from any and all obligations or liability of any kind." We ever tell people that there's a problem or multiple issues, they don't fix it, a maintenance issue becomes a major issue, you know, a year later and they're mad. This is the clause in our agreements that would hypothetically protect us. So just supporting information. It says here, this is a classic risk allocation clause designed to avoid liability for an incomplete discovery or future defects. Some state courts generally uphold these, if not deemed unconscionable for case reference, Glaser versus Laprestae. It's a 2000 case. Home inspection report did not guarantee thoroughness beyond its limited scope. Basically, this says, this is a layer. This says that we're not responsible if you didn't get everything that we told you to look at, looked at. You know, we go to the doctor. So go get a colonoscopy. We don't get the colonoscopy, we get colon cancer. Now we want to sue the original doctor. He's going to say, why didn't you just do what I said? So this tells people to look at everything in our report. So put that in there or not. But this kind of goes back to the disclaimer in in our disclaimers podcast for our report. Go back and listen to that. This is a good protection, and it has helped me before. So for instance, there was a floor on a secondary building in a property we inspected one time, and we went back a year later and inspected it, and it was just completely fallen through. There's one tiny little, you know, it was basically a leak outside of a shower, and it just got huge. And I thought to myself, if they didn't get it looked at, they would have this huge issue that they would blame me for. And there's been other instances too, but it's a good disclaimer to have in our inspection agreements. 

Number six, "the buyer is free to consult whomever they choose after the inspection, but the inspector is in no way bound to the opinions or advice of others, the client agrees that the inspector cannot and will not be held responsible by the client or any other party for the opinions of others or codes applied in a municipality when they differ from the opinion of the home inspector." This is an opinion clause. So basically it says you're paying for our opinion, and if you hire somebody who has a different opinion, or they can say, well, look, it's right here in the code. It's not supposed to be like this. We can go back and say, my opinion is what you purchased. My opinion is that this house built in 1782 is not going to meet any building code since, you know, maybe 100 years after it was built. So this protects us against contractors saying we're wrong. The father-in-law that shows up on the inspections, code enforcer that comes when they try to put an addition on and say, you know, you can't add this addition because this portion of your house doesn't meet modern day building code. Then they come back. We can't be held to the opinions of others. There was one time where it seems like heating units come up a lot in my area. There's one time with a heating unit, and it was a 20 year old heating unit, a heating unit guy came and said, we can't work on this. He was just trying to sell a new unit because it's an older unit. It doesn't meet building code. Clients wanted to sue me. And I said, listen, are you going to replace your heating unit every time the code changes? You're going to be replacing your heating unit a lot. And they're like, oh well. I'm like, and look at this. I'm like, my opinion was it's working fine. Is it working fine? Yeah. I'm like, okay, guy wants to sell you a new heating unit. Go find a new heating guy. They did. New heating guy goes, yeah, this is working fine. And he serviced it and left. These kind of disclaimers help protect us from those things. And remember, most of these disclaimers get read by attorneys in rooms with clients that we'll never know about. So the less we hear, usually the better our disclaimers are working. 

Number seven, this one's going to be funny, and this one I'm going to get some flack on, so I'm waiting for it. "Client agrees not to video or audio record any part of the inspection, or any comments, phone conversations or any other information, or to use such recordings from any other party regarding any part of the inspection, or the inspector services, qualifications, or other matters concerning the inspector services." I don't like to be recorded on my inspections. Do I take a picture of a pipe that's shooting poo out in the backyard? Oh yeah, heck yeah. But I don't put any identifiable information in there. I respect other people, and I don't record their conversations on my inspection. I don't provide it to anybody. It's not part of the report, whatever. So I would like the same respect. If we do not want to end up on YouTube in a funny viral video because we shot ourselves in the face with the bidet or whatever, or our comments, we say one thing, then we go back to our office writing the report. We're like, you know what? Upon further research, it's something else, and now they're trying to use our comments against us, whatever the situation. This prevents them from doing that. You don't have to have it in there, but I've seen so many bad instances of this coming out of it. Now you can say, well, state laws said they can't record me anyways. I would look into that like, for instance, my state, New York, is a one sided, I forget what they call a one sided case, whatever. Anyways, basically, only one person needs to give permission to record a conversation in New York. So for instance, if me and you are talking right now, I can give permission for myself to record our conversation, and it's perfectly legal in New York State. If I'm in a room with people, I can give permission because I'm one side and I can record the conversation. There are a lot of states that are like that. I don't know what it's like up in Canada, but in the US, make sure and check, because people could be recording you without your knowledge. I don't like them to record my comments, because I'm going to be a little bit more candid than I am in a report. Same information, but like in the instance I gave before, sometimes my opinion changes when I go back and look it up, I'm like, oh, you know what? It can be considered an egress window, because X amount of inches on this side and this or that, I'm like, okay, so I'm going to change my comments a little bit. That's not changing our story, that's doing research, and that's what ends up in our final report. So that's just a clause that we have in our agreements. And it says here, while some states require one or two party consent, that's it. One or two party consent, one party consent states. One party consent states allow this clause often. It's a layer of contractual protection and privacy. So as we're talking about these things, before we get the last few here, remember that all of these are just layers. Attorneys look at us in matter of layers. And we've had people on the podcast, and we have had people leave comments that were like, oh, well, I'll just do this and I can defend it this way. Cool. The attorney doesn't care if we can defend our position. It's a matter of layers. Attorney's gonna look and say, okay, it's gonna cost me $8,000 a layer to get to this home inspector to get $40,000 out of them. So if he has eight layers for me to get to the $40,000, it's not worth it. And they tell their client, not worth it. Now, if you have one layer, but it's really good layer. It's like, okay, that's gonna cost me $12,000 to get to the $40,000 yeah, that's worth it. Let's go after them. It's all a matter of layers. It's not a matter of win or lose, because now your attorney is gonna go, Listen, it's gonna cost them 12 grand to get to you. It's gonna cost you 22 grand to defend it. Let's settle for 22 grand. Now you're out 22 grand. From what attorneys have told me, it's all a matter of layers. They can get through them. And they can also say, well, this is how much it's going to cost you to defend. So if you're sitting in a room with two attorneys talking about their clients, one guy is going to say, hey, here's all the clauses. It's going to cost me $98,000 to get to your client for $200,000. Other attorney goes, yeah, I think it's going to be more like 140, let's split the difference. You want to settle for like 120? Yeah, sure. It's a matter of dollars. So we sit there and think we know how the legal system works. We don't. That's why they have all these law schools that are so many years and so many different degrees and all that stuff. It's a matter of layers and dollar signs. So the more layers we have, typically the more protected we are. 

All right, this one is an important one, in my opinion, "if any party requires or requests further information, court appearances, expert testimony or documents, client agrees to pay the home inspectors current hourly rate for all time, travel, and to compensate in full any materials involved. This will be done only upon written consent with an additional agreement signed by client." Too many times, clients will sue the seller and want to get their deposit back for walking away or other little tiffs going on that we have nothing to do with. It's like, listen, you paid me for a report. You want to have me give testimony. You want to have me provide additional documentation, whatever, I want to get paid my hourly rate. I'm sorry you're in a tough spot. I'm a home inspector. I take care of my clients, but I'm not going to spend the next three days doing all these things for you free of charge. So important, in my opinion to have it on there. Now this doesn't mean we hardline and say, oh, I'm not giving you an extra invoice or printing out the report. Of course, I'm going to do that for you. We're just talking about going above and beyond that. 

This one's important, because I imagine most of us have a story by now. If we've been in the inspection industry for more than a year, "client agrees not to use the inspector's equipment, ladder, or other items. If they choose to do so, it is at their own risk and will not hold inspector or any of its agents liable and acknowledge being duly warned." Man, if I had a dime for every time a client followed me up on a roof or in the attic, had a guy fall through a ceiling one time after I audibly told him, on top of that, stay out of the attic and he goes, I insist in mid sentence, he falls through the ceiling, ended up in the hospital. I don't know why people who have climbed a ladder, maybe twice in their life, decide to go and climb a ladder. It just is what it is. Or somebody grabbing our drill, and if you're like me, you know my equipment's my equipment. I'm going to know how to use it, so I'm going to know if the locking mechanism on my drill doesn't work properly, but the guy grabbing the drill and shoving it into the electric panel trying to take the dead front off is not going to know that, and it's going to slip. I don't want people touching my tools. It's not safe. And to be honest with you, putting out a sign each time is not practical. So I like to have this in my agreements. 

This one is one that I do not see in enough agreements, our number 10, "if client is not the owner of the subject property, the client certifies that he has the owner's written authority to execute this agreement on behalf of the owner." Now you can word this many different ways. That may or may not be the most optimal way, but basically it gives us permission to be there. There have been too many bad experiences where people had hired us to do an inspection, and I get there and the seller shows up at the beginning and in the middle and is like, what the heck are you doing here? New agent didn't know that you can't just schedule an inspection without telling anyone, you know client without an agent. Those are my favorite. They do some crazy things. They're like, oh yeah, the seller said we could do the inspection tomorrow. We get there and they are not happy. Or later on, the seller claims, what were you doing in my house? You had no right to be there. Back door was open. We just walked in. We were supposed to be there because we got here to do an inspection. We thought the back door was open for us. And we're walking around the house, and they call the police. This gives us someone to go back to say, listen, my client certified that I had permission to be there, and they had permission to execute this agreement, so I'm not at fault. My client is. That has been an important one for us.

Now number 11, this one says, this will be our final one, "client agrees to give the inspector at least 72 hours written notice before canceling or rescheduling the appointment. If the appointment is canceled or rescheduled in less than 72 hours, the following fees will apply [insert your fee], less than 72 hours notice [insert your fee], and less than 48 hours notice [insert your fee], and less than 24 hours notice [insert your fee]." But for us, for less than 24 hours notice, the client agrees to pay the full fees under their agreement. We have very rarely have, I think maybe twice since we've had this, we've enforced it, and the people have gladly paid. They've even, one of them even said, hey, I know there's a cancelation fee. We'll pay it. And I think we just, we chopped it in half, because it was like, wow. Okay, well, thank you for being nice. But this has discouraged so many people from just up and canceling, or when they schedule it, and they schedule a couple of different inspectors, or, you know, just scheduling a couple different times, seeing what works, and then canceling one and not the other. People do crazy things. This prevents them from doing that. It doesn't prevent them. It discourages them from doing that. Our cancelation rate dropped dramatically after adding this, and we've had people say, oh my goodness, I'm so sorry. We have to cancel. Don't worry about it. We're not charging you. Is what it is. It's just there to discourage people. Again, maybe twice we've actually done this, and nobody really cares. Everybody's like, okay, that's reasonable. If I skip my doctor's appointment, they charge me. So this is reasonable. Here's the legal support. These are liquidated damages and enforceable, if not punitive, and represent a reasonable estimate of lost income. So we can't say, listen, you didn't show up. I'm charging you $800 instead of $500 can't do that. So case reference, Truck Rent-a-Center, Inc., verses Puritan Farms 2nd Inc.,So you can check that out. It was apparently upheld there too. 

A couple of quick references before we end this podcast. If you want to add these to your agreements, check with your attorney first, but right to terminate or decline services. We're not going to give you the wording for these four. Just real quick. These are really good to have. How many times have we walked on site and said, I wish I could walk away right now. Have a right to terminate or decline services. The legal support is that we can end the inspection or not perform certain services at our discretion, and it gives us the right to withdraw a service for safety or professional judgment reasons, supported by what is called freedom of contract. So however you want to write that up having a right to terminate. In other words, we can just walk away from that inspection at any time for any reason, for our professional judgment. Jurisdictional venues, if we don't want, if we unfortunately get sued at some point, we want to make sure that our jurisdictional venue is to be handled in our county, so we don't have to keep traveling. So make sure that's in our agreement somewhere, because otherwise if you get sued, sometimes, might end up, depending on the laws of your state, end up traveling to handle those. Time limits for legal actions, we talked about that. Typically it's going to be one year, talk with your legal counsel about that. And last but not least, electronic signature consent. If we're using electronic signatures, hopefully we are, it's very time saving, but make sure we have a consent in there, properly written, saying that the client accepts any and all electronic signature options. All right, so not the sexiest subject, right? But this is important stuff to have. Those are things that have gone into my agreements over the years. It's not everything, but I wanted to give you a good taste of it. So feel free to copy and paste. Have your attorney check it. Have any questions, please feel free to reach out, and we'll look forward to seeing you on our next episode of Inspector Toolbelt Talk.

Outro: On behalf of myself, Ian, and the entire ITB team, thank you for listening to this episode of Inspector Toolbelt Talk. We also love hearing your feedback, so please drop us a line at info@inspectortoolbelt.com.

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*The views and opinions expressed in this podcast, and the guests on it, do not necessarily reflect the views and opinions of Inspector Toolbelt and its associates.