Pre-Purchase Inspection – A Pandora’s Box

… Montreal Real Estate Law expert discusses having the property inspected prior to sale/purchase –

In nine of the ten provinces of Canada, including Quebec, there is no regulatory agency authorized to train building inspectors for the pre-purchase inspections of  buildings in commercial and / or residential. The only exception is British Columbia. Indeed, inspection of a building is not legally recognized as a profession by the Professional Code, and is not restricted to a particular group of individuals.

Anyone can practice in Quebec as an inspector, but most of them are either engineers, architects, industrial designers, certified appraisers, former promoters or handymen. Their formation is not uniform, and while everyone may possess some knowledge in the area, it is often not sufficient to conduct a pre-purchase inspection. There are associations of home inspectors. However, these are not regulated by the provincial government. Some of these associations adhere to standards of practice and their own code of ethics. On the other hand, professional bodies such as architects, engineers or technologists are regulated by the government, but not necessarily vis-à-vis the building inspection.

What is a non-destructive visual inspection and when is it required?

This is an inspection before buying a building to visually identify any obvious defects (see my article on hidden defects) that can be seen by a prudent and diligent buyer without being assisted by a expert. While the government has not seen fit to require a prospective buyer to use a home inspector, who is basically unregulated, the spirit of the Quebec real estate law is that the buyer be aware – caveat emptor – ( buyer beware) if he / she is involved in an expensive transaction. Consequently, there is a common practice to hire an expert to fulfill the obligation of the purchaser to act prudently and diligently. There is a practice whereby a prudent and diligent buyer has recourse to the inspector service that can discern the obvious potential defects with his expert eye. While the services of a real estate broker are useful, it is required under the Real Estate Brokerage Act (i) to recommend to the potential buyer to conduct a comprehensive inspection by a professional or building inspector that has:

1. has professional liability insurance covering fault, error or omission;
2. uses a recognized inspection contract;
3. performs inspections according to the standards and
4. submits a written report to the party who retained his services;

This regulation is ambiguous at best, since no standard or inspection standards have been established as to how to conduct an inspection, as defined by law. Therefore, to define the requirements above, we must reflect current industry practices and examine by case law.

In addition, the Real Estate Brokerage Act Ethics Code requires that dealers provide their customers with a list of names of more than one professional or one home inspector who meet the criteria mentioned above, so that there is no bias or conflict of interest.

What is an inspection? Can it be destructive?

An inspection, either destructive or non-destructive, can only take place with the consent of the seller. The majority of residential inspections are not destructive and comprise detecting visible defects usually visible to the naked eye. No part (especially in the residential area) of the building is destroyed to determine the presence of a defect. For example, the destruction of the foundations by drilling holes in them to analyze the concrete, or pounding parts of the roof to look beyond cracks and spots is not permitted without the express permission the seller. The normal home inspection is to verify the five major systems: plumbing, foundation, heating and ventilation, roofing and electricity. The average duration of a home inspection is between one and four hours, depending on the size of the residence. However, in the case of a commercial building, most financial institutions insist that there are destructive investigations, where there is a concern for environmental issues or defects that could decrease the property value, which can be rather complicated and expensive.

In conducting non-destructive visual inspection, the inspector that follows the standards will be unable to detect hidden defects. This can only be done (except for instrumentation) using destructive means. However, an inspection that is done correctly can lead the buyer to request further or specialized expertise. When the inspector indicates, either orally or in his report, that he identified apparent defects and suggests further inspection (i.e. the fireplace or the electric panel), and the buyer does not follow up this suggestion, then the seller in this particular situation, will not be responsible thereafter for any kind of hidden defect. The only exception to this rule is that the buyer and / or inspector having been reassured by the answers given by the seller, has come to the conclusion that there was no reason to conduct an inspection and that ‘there was no indication by the inspector that a further inspection (expertise) is necessary. However, if the seller has exaggerated, concealed or lied about a defect, he / she would be civilly liable. This may not be sufficient to exempt an inspector  who may have been required tp pursue further their investigation. This can be found by an independent expert who will assess whether the service provided by the pre-purchase inspector was prudent and diligent to the extent provided by law (jurisprudence).

Thus, hiring a home inspector to conduct a pre-purchase inspection does not relieve the buyer of extra responsibility, and this is where Pandora’s Box opens.

(1) Real Estate Brokerage Act; (RSQ, chapter C-73.2) Regulations – Conditions of exercise, brokerage requirements, professional conduct and advertising; Section 81;