Friday, July 3, 2015

Buyers: Declare Your Independence From Inspection Agreements

I originally intended to tell some war stories about my fights against arbitration clauses in investment contracts, building contracts, and inspection agreements. My struggle was in trying not to sound too much like a whiner when writing about the bad rulings and in trying not to sound too cocky when writing about the good rulings. Truth is, I could either win or lose a battle against forced arbitration on any given Sunday. You shouldn't care so much about what happens in my arena. What you should care about is avoiding that particular arena in the first place.

I always seek to have my clients' disputes decided in a court of law, usually by a jury of their peers. While I may sometimes gripe about the results or the process, the fact remains that our civil justice system is the envy of the rest of the world. In particular, my clients never have to worry about their opponents bribing, threatening, or punishing the judge or jury.

Unfortunately, arbitration is a different animal. We in the Milwaukee area are familiar with Major League Baseball's punishment of an arbitrator who dared rule against it. The financial industry has fired arbitrators for daring to rule in favor of investors. Word around the campfire is that the Metropolitan Builders Association and the Wisconsin Association of Home Inspectors are not too fond of those who stand up for homeowners either.

I do not often write about buyer claims against home inspectors in this blog because I always advise clients not to sue home inspectors. Home inspectors are protected by a strict two-year statute of limitation and by extremely lenient Standards of Practice. Buyers cannot recover their attorneys' fees on a home inspector negligence claim, and most inspectors do not have errors and omissions insurance. Home inspectors also have the simple-minded (but often convincing) argument that "if I should have seen it, why didn't you?" Home inspectors usually only get themselves in trouble when they downplay the significance of what they see, try to play structural engineer, or engage in deceptive or misleading advertising. That being said, buyers need to protect themselves against accidentally waiving their day in court against their home inspectors.

When you show up for your home inspection, your home inspector will present you with a multi-page document with fine print entitled "Inspection Agreement." In my opinion, you should not have to sign such an agreement.

Why not? The better question is why should you have to sign? Inspection Agreements are not required by the statutes and regulations governing home inspection practice in Wisconsin. There is no Wisconsin law requiring written agreements for services that will take only a few hours to render and will cost less than $500. You should simply be able to write the inspector a check and receive the required home inspection report.

Most of the language in these Inspection Agreements is unnecessary because the Standards of Practice clearly spell out what home inspectors are responsible for, what they are not responsible for, and what they cannot do. Wis. Stat. s. 440.975(2) spells out that home inspectors are merely required to perform reasonably competent and diligent inspections to detect observable conditions and that such inspections need not be "technically exhaustive." Wis. Stat. s. 440.975(3) requires home inspectors to provide written reports. Wis. Admin. Code s. SPS 134.03 spells out the required contents of said reports. Wis. Stat. s. 440.975(4) spells out that home inspectors are not required to report on the need for repairs or whether or not a particular component meets code. Wis. Stat. s. 440.975(5) spells out that a home inspector cannot tell a buyer not to purchase a particular property. Wis. Stat. s. 440.975(6) spells out that home inspectors are not required to give warranties, test or operate components, enter dangerous areas, move personal items, predict future conditions, or inspect for mold.

Some home inspectors sneak illegal language into their Inspection Agreements. Home inspectors will often try to prevent you from holding them liable for repairs to components that they improperly inspected. They might even try to prevent you from holding them liable for bodily injury caused by a defective condition that they missed. No, they can't do that:

Disclaimers or limitation of liability. No home inspector may include, as a term or condition in an agreement to conduct a home inspection, any provision that disclaims the liability, or limits the amount of damages for liability, of the home inspector for his or her failure to comply with the standards of practice prescribed in this subchapter or in rules promulgated under this subchapter.

Wis. Stat. s. 440.976.

While one could argue that home inspection arbitration clauses - especially those that require arbitration presided over by fellow members of the home inspector fraternity - are illegal disclaimers or limitations of liability, I am not aware of any court that has adopted this particular argument. The general rule is that contractual arbitration clauses ARE enforceable. If you want to avoid having any future dispute with your home inspector decided by his friends, there is a solution - do not sign the Inspection Agreement.