Home Inspection Reports (are they worth the paper they are written on?)

1. What is an “exculpatory clause?”

An exculpatory clause is a clause in a contract or other agreement which purports to eradicate or limit the liability of one of the parties (usually the party who drafted the contract).

Standard contracts often contain such clauses in an effort to limit the liability of companies and big organizations who deal with large numbers of customers.

You will find exculpatory clauses in airline tickets, parking receipts, baggage claims and sporting event tickets.

2. Exculpatory clauses in standard home inspection contracts

Prior to September, 2016 all standard BC Home Inspection Contracts contained a clause which purported to limit damages for negligence of a home inspector to the cost of the home inspection (usually about $500).

This clause was upheld in BC Supreme Court in in Gordon vs. Krieg (2013 BCSC 842), purporting to rely on a recent Supreme Court of Canada case (Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010]).

In the Gordon case the court found that the building inspector was negligent and would have awarded the plaintiffs $67,000 but for the exculpatory clause (which limited the claim to $400, being the cost of the inspection).

Thus, public policy (not to mention the legal requirement) for home inspectors to be insured was totally defeated by the provisions of their standard contract.

However, in September of 2016 the BC government disallowed the use of such clauses in standard home inspection contracts, so now an aggrieved homeowner has recourse to the courts to obtain proper compensation.

Home inspectors are now required to carry insurance for an amount up to $1,000,000 to insure that damage awards for negligence are actually paid.

3. Why was the law changed?

We are advised by the BC Consumer Protection Office that pressure from the public (which we hope included members of our network who read our article on this issue earlier last year) and other interested stake holders caused the government to eliminate the use of exculpatory clauses in standard home inspection contracts.

That is good news for home buyers.

A home is usually a person’s major asset and an inspection by a qualified home inspector is a standard item of due diligence when buying.

However, even experienced, qualified and competent home inspectors can make mistakes or overlook deficiencies on occasion. That is why they are required by law to carry insurance. Thanks to the above mentioned legislative amendment, consumers can now obtain the protection of said insurance when appropriate.

7. Are exculpatory clauses used by other service providers or professionals?

Lawyers –   NO         Mortgage Brokers – NO

Doctors –   NO          Architects      –  NO

Dentists –   NO         Accountants   –  YES

Realtors –   NO

In addition, the biggest culprit by far is the GOVERNMENT which constantly limits its own liability for negligence by way of legislative exculpatory clauses.

If you are thinking of buying, selling, mortgaging or title insuring real estate in BC call us BEFORE you sign. We can often save you time AND money while ensuring that you fully understand all of the terms.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2017 Pazder Law Corporation