Home inspectors are professionally trained to identify issues and risks with a home and may suggest recommendations based on the inspection. A pre-inspection agreement allows you to set the exact terms of your inspection and helps insulate you. EliteMGA requires that you always have a signed pre-inspection agreement before you begin an inspection.
A critical component of the home inspection process is a pre-inspection agreement. A pre-inspection agreement should be signed by clients before a home inspector performs an inspection. A pre-inspection agreement sets clear expectations and protects the home inspector against future claims and disputes. Key elements for pre-inspection agreements are included in the contract. For added security, EliteMGA provides home inspectors with errors and omissions insurance policies that protect them from lawsuits or claims that are based on omissions or mistakes made in an inspection.
Here are some primary reasons why it is important to obtain signed contracts for inspections before starting the work.
There are numerous sample home inspection agreements online. However, these should be used only as references. It’s important to check the state code and have the pre-inspection agreement reviewed by an attorney.
An attorney will provide suggestions on the agreement and ensure that the agreement covers the home inspector in the event of a claim or dispute. The pre-inspection agreement is the home inspector’s first line of defense if issues arise.
Sometimes, pre-inspection agreements are difficult to interpret and understand. A pre-inspection agreement must be easy to read by including proper spelling, appropriate fonts, spaces, and organized text. Although this is necessary, it’s even more imperative that the technical details of the home inspection are easy to understand. Be specific about identifying key elements for home inspection agreements.
There are several types of exclusions, including items that a home inspector: never inspects, usually inspects but may exclude due to extenuating circumstances, and only inspects if the client adds the service for a fee.
It’s crucial to have an attorney’s assistance when creating a pre-inspection agreement since state laws vary. Limitations of liability provisions, in particular, can be location-specific. By drafting an easy-to-follow and clear home inspection agreement, inspectors are likely to resolve disputes before a lawsuit arises, with less impact on their home inspection insurance.
A statute of limitations provision deters clients from coming back with complaints against home inspectors long after their inspection. Additionally, a severability clause protects the contract when a court voids a portion of it.
Another important agreement for risk and claims management is an operating agreement for home inspectors. A question that often comes up for single-member LLCs is whether or not they need an operating agreement. From the perspective of a litigator with 20-years of experience, yes, you should have a written operating agreement. The reason is to protect you and your individual personal assets, as well as your family’s assets, from any action taken or a judgment obtained by an unsatisfied client or a regulatory body. You want to make sure that there’s a clear line of separation between you and your business in order to preserve the insulation that the LLC or other corporate structure gives.
It’s always better to have a written agreement in which you “dot all the I’s and cross all the T’s” related to setting up the business keeping the records and adhering to the operating agreement. Having a written agreement in place works to preserve this insulation should someone try to sue you as an individual or should somebody try to bring a claim or judgment against your business and seek to enforce that judgment against you personally.
Not every state requires a written operating agreement. States that require a written operating agreement include:
In no state do you have to create your operating agreement and put it on file with the state when you organize and start your LLC. Those are always meant to be kept by you. In some states, like Delaware and Arizona, the corporate records do not even display the identity of the owners of the LLC.
Regardless of state requirements, you should certainly have a written operating agreement. You should also speak to a lawyer in your state who is fully familiar with setting up a business in that state and who knows the state’s requirements for doing so. Consulting with a lawyer will help ensure that you have an operating agreement that protects you, your assets, and your family from any possible liability and sets forth the terms of the operation of the LLC for the future.
Knowing the risks that insurance inspectors face is our business, and we take those risks very seriously. From identifying risks to helping home inspectors mitigate those risks on the job, we constantly research the latest trends in the industry so that we can be prepared to give advice to inspectors who are in search of answers about mitigating risk.
Through our time in the errors and omissions insurance industry, we’ve found that the Home Inspector pre-inspection agreement is among the chief concerns for inspectors, regardless of how much experience they have in the field.
Thus, we have here compiled a short list of errors and omissions insurance questions and answers regarding the pre-inspection agreement, and we hope that it will serve as a resource for inspectors and their clients:
