Your Pre-Inspection Agreement:Understanding Exclusion Clauses in Your Contracts

What are exclusions and exclusion clauses? 

As many exclusion clause definitions will say, these are items of risk specifically not covered by a contract to avoid excessive liability. (You’ll see exclusions in your inspection insurance policy, for example.) 

In pre-inspection agreements, exclusions limit or eliminate your responsibility to inspect for certain defects or examine certain systems and components. Also known as exclusionary clauses or exemption clauses, they outline what home inspectors are not allowed to do.  By outlining the conditions and circumstances your inspection does not cover within your agreement, you can better serve your clients and manage your risk. 

Steven Rinehart of Rinehart Real Estate Inspection Service in Texas gives exclusion clauses a prominent place in his contracts. By addressing the contract exclusions that most often spark questions in his pre-inspection agreement, Rinehart prevents misunderstandings and enhances his communication with customers.

"I answer the most common questions in my contracts," Rinehart said.

There are several types of exclusion clauses. They address items you:

• never inspect.
• usually inspect but you may exclude due to extenuating circumstances.
• only inspect if the client adds the optional service for a fee.

We analyze these examples of exclusion clauses in more detail below.

Items You Never Inspect: Exclusion Clauses for Every Inspection

Since they are limited, non-invasive surveys of homes and their systems and components, home inspections aren’t technically exhaustive. There are some things you just cannot or will not find because discovering such defects reaches beyond the scope of a home inspection.

To protect yourself, use exclusion clauses in your pre-inspection agreement to disclaim these items you never expect. Doing so creates transparency and sets appropriate expectations with your clients. For Emerson Treffer of Pro Home Inspection Services, Inc. in South Carolina, this communication also gives clients the opportunity to hire specialists for those excluded services.

“I want [my clients] to understand where my liability starts and where it ends, and I want them to know that I’m a generalist, not a specialist,” Treffer said. “[For example, if they have stucco concerns,] they need to hire an outside expert who’s trained to look at the drainage behind the EIFS.”

Similarly, due to his state’s additional licensing requirements for ancillary services such as termite inspections, Rinehart must be extra cautious about items outside his scope. He uses the exclusion clauses in his contracts to cover himself against ancillary services he isn’t licensed to perform.

“I don’t do wood-destroying insects, I don’t do septic tanks, [and] I don’t do hazardous materials, like asbestos. So, it’s very clear in the contract that those [services] are not part of the inspection, and those [services] are not things that I can even offer,” Rinehart said.

Curious what the incorporation of exclusion clauses looks like in writing? Fritz Kelly of Kelly Home Inspection in Arizona shares this real contract exclusions example from his pre-inspection agreement below:

Inspection excludes the following items:

• Window air conditioners
• Portable appliances
• Freezers
• Landscaping/fences
• Solar heating systems
• Septic systems
• Private wells
• Water softener/filters
• Alarms or intercoms
• Humidifiers
• Landscape lighting
• Swimming pools
• Built-in hot tubs

Inspection also excludes: portable appliances such as washers, dryers, and refrigerators.

Items You Usually Inspect

Sometimes, items you’d typically inspect are not accessible or are otherwise off-limits. In these instances, it’s important to highlight your limitations using exclusion clauses. We suggest adding them on a case-by-case basis in your reports, and in a blanket statement in your agreements.

Here’s how Kelly addresses these types of exclusion clauses in his contracts:

Ensuring that the utilities are turned on for the inspection is the responsibility of the Agent or Seller and extra charges will apply for return trips to the property...

Wet crawl spaces or those with very low head room are not entered but are examined from the access hatch. Inspector enters attics if an access opening is readily accessible. The inspector will not enter any area which he considers dangerous.

Electrical or mechanical systems that have been shut down are not inspected. In addition, if these systems do not respond to the normal controls, then the system cannot be activated or operated. The inspector does not examine any systems whose utilities are off.

By explaining what home inspectors are not allowed to do, you prepare clients for the possibility of a re-inspection or an incomplete inspection. This reduces your likelihood of disappointing clients or facing legal disputes for items or areas you couldn’t access. Moreover, if your clients have a duty to call you back for a re-inspection, incorporating exclusion clauses transfers liability from them to you.  

Items You Inspect for an Additional Fee

Many home inspectors offer add-on services to their standard home inspections. Under such circumstances, it’s important to identify these optional services so clients don’t assume they’re automatically included.

If a client attempts to argue that you included a service like radon testing in every inspection, you can point to your agreement, in which they opted not to pay for it. Plus, listing services that require additional payments also increases your likelihood of an up-sell. Thus, your inspection agreement can help increase your profitability.

See this additional contract exclusions example from Kelly:

The following items are not included in an inspection unless specified (extra charges apply):

• Portable hot tubs
• Outbuildings
• Guest houses

For added transparency, you might also ask clients to sign supplemental pre-inspection agreements for your additional services. They won’t replace your standard pre-inspection agreement. But they will add more terms specific to the extra service.

Make your pre-inspection agreement a priority.

Contract exclusions benefit both you and your clients. Taking the time to point out and define exclusion clauses with your clients, both verbally and in your agreement, can combat misunderstandings, surprises, and disappointments later. This is powerful for not just your customer service, but also for educating consumers. Because the unfortunate truth is, few homebuyers have an accurate idea of what inspections really are.

“A lot of times, we come across clients who either haven’t had a home inspection in 10 to 20 years or it’s their first time,” said Nick Calero of CR Pro Home Inspections in Florida. “By letting the client know [about] our responsibilities, that really allows us to gauge them, number one, and number two, put them in the right state of mind.”

Still have questions about exclusion clauses in your contracts? Want more helpful tips to crafting contracts of steel (and getting them signed before every inspection, every time)? Leave it to us. Our contracts are catered to your area's requirements and our claims' data. Learn more about our state-specific pre-inspection agreement templates here.

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The ASHI Reporter published this article in March 2020. See how this story appears in print below.