Top 5 Things to Include in Your Pre-Inspection Agreement
Pre-inspection agreements are home inspectors’ foundations. Without them, clients are left to assume the nature of inspections. And as inspector and mentor Jan Banks stated in a previous article, clients for whom expectations aren’t set often believe inspections are warranties. That leaves inspectors subject to a lot of unnecessary risk.
But simply having an inspection agreement doesn’t necessarily mitigate a home inspector’s risk. Home inspectors need thorough contracts that cater to their specific state law to successfully avoid potential claims.
Below, we list some of the important provisions to include in pre-inspection agreements. The list isn’t exhaustive and does not acknowledge requirements by state. The list can, however, provide inspectors with the groundwork to begin a conversation with knowledgeable, local legal counsel to craft or revise their home inspection contract language.
What to include
Exclusions are exactly what they sound like; they’re items of risk specifically not covered by a contract to avoid excessive liability.
The American Society of Home Inspectors (ASHI) Standard of Practice (SOP) helps determine a typical inspection’s scope. By outlining what inspections are and aren’t, the SOP gives inspectors ground to stand on when excluding elements in their contracts.
There are several types of exclusions, including items that 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
Read on for specifics on each exclusion type with pre-inspection agreement samples.
Items You Never Inspect
Since they are limited, non-invasive surveys of homes and their systems and components, home inspections aren’t technically exhaustive. There are some things home inspectors just cannot or will not find because discovering such defects reaches beyond inspectors’ capacity. Such items that you never inspect need to be excluded from your pre-inspection agreement so that clients have appropriate expectations.
See an example from Arizona’s Kelly Home Inspection, LLC below:
Items You Usually Inspect
Sometimes, items you’d typically inspect are not accessible or otherwise off-limits. In these instances, it’s important to underscore your inability to inspect—both by-case in the report and in a blanket statement in the agreement.
See an example, again from Kelly Home Inspection, LLC, below:
Items You Inspect for a Fee
Many home inspectors offer add-ons to their standard home inspections. Under such circumstances, it’s important to recognize which services are optional rather than automatically included. That way, you’re protected if a client attempts to argue that you included, say, radon testing in every inspection after they opted not to pay for the additional service.
See an example, another from Kelly Home Inspection, LLC, below:
In addition to underscoring that some inspection items are optional, you may decide to include additional agreements for additional services. Such agreements don’t replace your standard pre-inspection agreement. Instead, they serve to add more terms specific to the extra service. See an example from former membership-based training organization Environmental Solutions Association (ESA) below:
Limitation of Liability
A limitation of liability clause puts a cap on your financial responsibility for missing or omitting defects. For example, if a home inspector misses a roof leak, the client may demand that the inspector pay for a brand-new roof. The limitation of liability clause can restrict the client’s demand to no more than double the inspection fee.
Limitation of liability clauses are important aspects of contract law both in and out of the inspection industry. In our article on why pre-inspection agreements need to be signed prior to every inspection, Harvard Law School Professor Charles Fried discussed contracts’ role in protecting against claims. According to Fried, it’s wise for home inspectors to get agreements that include limitations to their liability signed to protect themselves from accusations not covered by their home inspection insurance. (You can read the full article here to find out what Fried and others said about pre-inspection agreements.)
For an example of a limitation of liability clause, see the excerpt from Illinois’ Assure Home Inspections, Inc. below:
As stated in the beginning, it’s important to have local legal counsel assist you in crafting your pre-inspection agreement since state and even county laws vary. With limitation of liability provisions in particular, it’s essential to receive legal assistance as restrictions on these provisions are extremely location-specific.
Dispute resolution specifies just how clients should file claims. By specifying the process, inspectors make sure that claimants file in a place that will treat them fairly and is more likely to close cases quickly. Thus, inspectors are more likely to resolve disputes promptly with less impact to their insurance premiums.
See an example of a dispute resolution provision from Assure Home Inspections, Inc. below:
Statute of Limitations
A statute of limitations provision limits a client’s ability to file a claim against a home inspector to a specific period of time. The purpose of such a statute is to deter clients from coming back with complaints against home inspectors long after their inspection findings are relevant. (i.e. Let’s not blame a home inspector for an appliance failing five years after the inspection.)
Past court cases show that the statute of limitations alone can dismiss claims. (For an example, read about the Moreno v. Sanchez case in our previous article here.)
See an example of just the statute of limitations provision from Minnesota’s Errickson Home Inspections, LLC below:
Sometimes, courts can take issue with one or multiple provisions in a business contract. If the court decides that a clause in your agreement is unfair to your client or is contrary to local law, they can motion to waive your contract all together.
That’s where the severability clause comes in. Basically, the clause protects the rest of your contract when a court voids a portion of it. See an example of a severability clause, again from Errickson Home Inspections, below:
What to do next
You’re now aware of some of the provisions we recommend including in your inspection agreement. When crafting or editing your own pre-inspection contract, we suggest reviewing agreements from other inspectors in your area. Then, with that information, inspectors can contact local attorneys to help them craft their agreements.
Need someone to be there for you when dissatisfied clients point the finger in your direction? Let us give you pre-claims assistance and claims coverage. Apply for a no-obligation quote today.
Want to learn more about how you can protect your business with your inspection paperwork? Check out the recent articles below.
Editor’s note: InspectorPro originally published an article suggesting elements to include in pre-inspection agreements in September 2016. However, this post has replaced that article to include more accurate, current, and comprehensive information.