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Professional Standards Manual

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4. General Information

(a) Contract Clauses - View Entire Section

(XXIV) Property Inspections

In recent years, pre-purchase property inspections have become more common in the marketplace. The Council considers this a positive development in that a property inspection will assist the buyer in understanding, prior to the purchase, the condition of the property and what repairs may be necessary.

For this reason, a buyer’s agent should always advise a buyer to have an independent inspection of a property and the licensee should explain the importance of why such an inspection is necessary and that licensees are typically not qualified to provide home inspection advice. If a buyer chooses not to have an inspection, the agent’s advice to do so should be documented. This documentation can take one of several forms.

Some market areas and/or agents have developed a contract addendum that specifies additional terms to be included in all Contracts of Purchase and Sale. Such an addendum might include a clause such as the one that follows, when the buyer is to have the property inspected.

Inspection of Property Clause

Subject to the Buyer, on or before (date) at the Buyer’s expense, obtaining and approving an inspection report against any defects whose cumulative cost of repair exceeds (select a monetary value) and which reasonably may adversely affect the property’s use or value.

The Seller will allow access to the property for this purpose on reasonable notice.

This condition is for the sole benefit of the Buyer.

Alternatively, where such a preprinted addendum is not used and the buyer chooses not to have the property inspected after having been so advised, the licensee should provide separate documentation of this fact by way of a letter addressed to the buyer confirming that on a particular date, the buyer was advised to have the property inspected but chose not to do so. A copy of this confirmation letter should be kept in the brokerage’s transaction file.

In some cases, in addition to a buyer wanting to have the property inspected, a seller may also want such an inspection before listing the property for sale so that the seller is aware of what issues the property inspection report may identify.

If a licensee intends to refer clients to a property inspector, the safest way to do so is to provide a list of at least three professionals with whom the licensee, or others he or she knows, has dealt and have the client call, interview, and select them independently. It is recommended that licensees avoid ‘‘steering’’ buyers towards particular service providers or communicating information about their fees.

Effective March 1, 2009, providing a property inspection for a fee became an activity for which a licence is required. Consumer Protection B.C. is the agency responsible for property inspector licensing. For further information, visit www.consumerprotectionbc.ca.

Licensees should exercise care in selecting those to be included in this list of service providers. Before making a referral, licensees should, ensure the individual is properly licensed, consider the inspector’s experience and credentials and also what insurance coverage the inspector carries, such as errors and omissions insurance, liability insurance and worker’s compensation coverage.

Once a buyer has determined which property inspector is to be used, licensees must respect the client relationship this creates between the buyer and the property inspector. The buyer is paying the property inspector for professional advice with respect to the condition of the property he or she is considering purchasing. Licensees should not attempt to thwart that relationship either by downplaying the importance of deficiencies noted by property inspectors or by making disparaging comments about the buyer’s choice of property inspectors.

As with any subject clause, the length of time allowed for its removal should be reasonable while not being unnecessarily long. In the case of property inspections, sufficient time is required to arrange and conduct the inspection, prepare the report, and have the report reviewed by the buyer. The goal is to ensure the buyer has full knowledge of the results of the inspection and, if necessary, clarification from the inspector or any other qualified person as required.

In order to avoid the possibility or even the appearance of a conflict of interest, licensees are advised not to pay the cost of the inspection report on behalf of a buyer. If the licensee were to pay, the inspector could be suspected of not wanting to jeopardize the transaction of the person paying him or her, who might or might not ask for his or her services in the future, depending on the conclusions of the inspection report.

Finally, as with any referral, section 5-11 of the Rules requires that if a licensee is to receive a referral fee or other consideration from a property inspector, this must be disclosed in writing to the licensee’s client.

A question often arises whether the seller’s agent should be present during the inspection. The Council recommends that the seller’s agent either be present or obtain permission from the seller that the seller’s agent is not required to be present during the inspection. In making this decision, the seller should be advised whether the buyer and/or the buyer’s agent intend to be present when the property inspector views the property. If the seller agrees that the seller’s agent does not need to be present, the seller’s agent should obtain the full name and address of the inspector as well as information on whether the inspector is bonded.