Liability of Home Inspectors: Where Should the Line be Drawn?

A recent decision of the Ontario Court of Appeal provides interesting insights into the role of home inspectors and real estate agents where a specific issue is identified by a potential purchaser before the inspection takes place.

In Halliwell v. Lazarus and Coldwell Banker Terrequity Realty, the purchaser appealed from a trial decision in which liability had been apportioned among the home inspector at 50%, the real estate agent at 25% and the purchaser at 25% for contributory negligence. 

The problem had not been highlighted in the report in a sufficiently clear and precise manner.

On the facts of the case, the purchaser had made it clear to her agent and the home inspector (who had been recommended by the agent) that she was allergic to mould and required the house to be completely dry. 

The inspection was a condition of the offer so that the purchaser had the right to back out of the transaction if she was unhappy with the results of the home inspection.

The home inspector prepared a report that provided warning signs of moisture problems. 

It appears, however, that the home inspector did not elaborate on these problems so as to make clear that such problems had the potential of resulting in the growth of mould in the home.

The transaction went ahead and shortly after closing, the purchaser began to suffer allergic reactions to mould.

At trial, the judge found the purchaser 25% contributorily negligent because she had failed to read the inspection report completely and carefully.  At the same time, however, the trial judge found that the purchaser did not have the knowledge or experience to appreciate the warnings signs for moisture problems that were contained in the report.

The Court of Appeal determined that these contradictory findings could not be reconciled and that on balance, the purchaser should not be found contributorily negligent for having missed the warning signs contained in the report.

The trial judge had found that the agent was liable for failing to read the inspection report, reviewing it with the purchaser and bringing to the purchaser’s attention the potential for moisture problems arising out of the findings in the report. 

This finding was overturned by the Court of Appeal as well.  It does not appear that any expert evidence had been called at trial concerning the standard of care expected of an agent in these circumstances, and the Court of Appeal simply did not accept that the agent had these obligations. 

The Court of Appeal determined that the inspector was 100% liable for the damages sustained by the Plaintiff (which amounted to $90,000).  While there is no indication in the case that the inspector knew or ought to have known that the Plaintiff’s knowledge and experience in the area was so limited that she would not recognize the warning signs of a moisture problem contained in the report and act on them, the Court clearly determined that the sole party responsible to discover the potential moisture problem was the inspector.  The Court concluded that the problem had not been highlighted in the report in a sufficiently clear and precise manner, particularly given the fact that the inspector had been sensitized to the issue at the outset. 

The practice of making offers to purchase conditional on home inspections is almost universal.  This case highlights the importance of bringing to the attention of a home inspector, prior to the inspection taking place, any specific concerns that a purchaser may have.

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