Where a home inspector fails to identify or follow-up on warning signs of significant potential property defects, courts may find the inspector breached their duty of care to the purchaser. In this case, the court ruled a full evidentiary record and analysis was required to determine whether the defects were apparent or hidden. That analysis would include whether the home inspector breached his duty of care to the purchaser in not following up on identified indicators of foundation issues to determine the full extent of the defects.
The purchasers of residential property brought an action following the discovery of significant foundation defects resulting in expensive remediation. They alleged the sellers concealed the true condition of the property through misrepresentations and omissions. In the alternative, they argued the pre-purchase home inspector was negligent in failing to properly advise them of the condition of the foundation and associated risks.
The inspection report identified cracks in the stucco and signs of moisture at the foundation level and recommended consulting a specialist. However, the inspector’s report classified the cracks as repairable. The purchasers alleged the inspector reassured them the house was in good condition. The inspector completed his 34-page report in under 30 minutes.
The chambers justice dismissed the purchaser’s claim against the inspection company, ruling the alleged defects were not apparent, there were insufficient allegations of fault, and that the claim amounted to an abuse of process. The purchasers appealed this decision.
What the Court Said
The Court of Appeal allowed the appeal and reinstated the claim against the inspection company. The court emphasized a claim should only be dismissed at a preliminary stage where it is clearly and obviously without merit. Where there is uncertainty, the matter should proceed to trial so that the parties can present a full evidentiary record.
The court held the chambers justice erred by deciding key issues, including whether the defects were apparent or latent, on an incomplete evidentiary record. The characterization of a defect being apparent or hidden is not purely a factual determination, rather, it is a legal one requiring expert evidence and full analysis of the circumstances. Furthermore, the purchaser’s allegations of the home inspector’s misrepresentations and omissions, if proven, may support findings of liability.
Pre-purchase home inspectors have a duty to conduct careful and diligent visual inspections. This duty extends to pursuing or making further inquiries where indicators of issues that could affect the integrity of a property exist. As this indicator was present here given foundation cracks, the claim could not be characterized as an abuse of process.
Takeaways
This case demonstrates courts are reluctant to dismiss actions before trial where a full evidentiary record is required for more complex analysis of issues, particularly where expert evidence is required to determine liability. The distinction between apparent and latent defects is often driven by the factual matrix, requiring the full evidentiary record and resulting analysis.
This case also confirms that pre-purchase home inspectors may be exposed to liability in failing to properly interpret, or follow-up on warning indicators of further or more significant defects in the inspected property. The underlying contract terms of the home inspection contract will be relevant, but a home inspector can still be liable for failing to conduct further inquiries on certain issues.
Pre-purchase inspection and latent defect disputes often involve complex factual backgrounds; therefore, it is advisable to consult legal counsel. Contact Anthony Burden in Calgary, Jeremy Taylor in Edmonton, or any member of Field Law's Construction Group for advice.
