My job is defending professionals who find themselves on the wrong end of court proceedings. My clients include lots of professions involved in property and construction: architects, project managers, finance brokers, engineers and real estate agents.

And also, residential building inspectors. I defend heaps of inspectors.

I love getting a glimpse into everyone’s profession as I work alongside them. Unfortunately, out of all my clients, building inspectors attract the most claims. They get pursued regardless of whether they have done anything wrong, and often have huge sums claimed from them.

The Job

Unfortunately, liability for inspectors often comes from customers’ unrealistic expectations that inspectors should report every minor defect, predict future defects which occur only after the inspection, and essentially provide a full warranty for the house. Legally that is not the case.

A building inspector is usually required to identify “significant defects visible at the time of inspection”. That’s the wording of the New Zealand Standard on property inspection, NZS 4306:2005. That standard is very prescriptive on what must be inspected. It specifies everything from appropriate ladder length to the minimum access hole size which an inspector must squeeze through.

It’s not compulsory for an inspector to follow this standard, but if they do it is difficult to criticise their reports.

The difficult cases are where an inspector misses a small defect, and that has huge knock-on consequences. For example, I have defended inspectors who missed the fact that one flashing on a window was cut off 10mm shorter than it should have been. It transpired that the house leaked, and the inspector was criticised for failing to identify the short flashing, which allegedly would have put the homeowner on notice that the flashings were defective and the house leaky.

In the end we paid a modest settlement because while the flashing was missed, the leaking was invisible at the time of inspection. It would only have been visible if gib board or the cladding were removed, which was impossible in a non-invasive inspection.

What They Don’t Do

So, the general rule is that building inspectors identify significant visible defects.

So, what is outside of this duty?

Inspectors can take into account the age and condition of a building when deciding what is “significant”. For example, if a two-year-old home in a new subdivision has badly fitting windows, that is a significant defect. However, if a 130-year-old villa has badly fitting sash windows, that is probably not a significant defect.

In some regards, it would be surprising if an old villa didn’t have rattly windows. Those age-related defects may be mentioned in reports, but technically don’t need to be.

Similarly, inspectors do not need to identify seasonal issues. We’ve just had one of the driest summers on record. If it hasn’t rained for two months, evidence of any leaks is going to be more difficult to spot. I have defended dozens of claims where a property was inspected in January and looked fine, but then it leaked after a week of rain in July. Building inspectors are generally not liable for missing such defects, provided they were truly not visible at the time of the inspection.

The Exodus

It’s getting harder to find good inspectors. Many are leaving the industry because they cannot place insurance.

Anecdotally, probably about half the inspectors operating today are uninsured. They simply can’t place liability cover. An important tip for investors is to ask two questions to inspectors:

1. Do you have liability insurance?
2. Are there any sub-limits in the insurance for weathertightness or earthquake damage?

Lack of insurance available to inspectors means they are unprotected, but it also means customers are left unprotected too. If an inspector misses a significant defect, they generally don’t have the funds to correct it without insurance cover.

Richard Hargreaves is a partner with Wynn Williams. He specialises in professional liability defence work for pre-purchase inspectors but also other professionals such as lawyers, architects, real estate agents, brokers and engineers. He also advises clients on professional liability, including bringing negligence claims in respect of professional services.
wynnwilliams.co.nz