By Bob Aaron

A decision from the Ontario Superior Court in July highlights the obligation of real estate agents to review home inspections with their clients.

Suzanne Powell and her mother Joyce Powell wanted to buy a property in Toronto’s west end. Their real estate agent, Barbara Kirby (now Den Ouden), introduced them to a house on Indian Grove.

When they visited the house, they were shown a summary of a home inspection report prepared for the owner, Tadeusz Lojko. It indicated, among other things, leakage of water around a skylight on the second floor.



Kirby prepared an offer for the Powells to sign. It required the seller to fix the skylight. I represented the Powells when they closed their $730,000 purchase in March 2010. After closing, a serious mould problem appeared throughout part of the house that was occupied by tenants, forcing them to move out.

A mould growth expert was called in and he reported significant contamination in several areas due to water seeping into the basement through the foundation and upstairs through leaks from the skylights.

Unknown to the Powells, two years before their purchase there had been a major flood in the basement, resulting in considerable evidence of mould and mildew.

As a result of the mould infestation, the Powells incurred damages exceeding $141,000, including repair costs and lost rent. In 2011, they sued the seller, Lojko and Kirby, their agent.

At the trial before Justice Thomas Lederer in February, a key issue turned out to be whether Kirby had an obligation to alert the Powells to the significance of the summary of the home inspection.

After hearing evidence from Barry Lebow, an expert in the duties of real estate agents, the judge wrote, “It is not as if there were no hints or indications that something was amiss. The summary of the inspection undertaken on behalf of the seller and available at the time of the inspection should have or, at least, could have raised concerns in the alert reader.

“… As seen by Barry Lebow this was a wakeup call. It should have been apparent, particularly to Barbara Kirby as an experienced agent, that, at the least, this required an examination of the full report to be assured that there were no further or unforeseen problems.”

The Powells were never shown the full report.

In ultimately assessing liability, Justice Lederer wrote: “Barbara Kirby owed the Powells more than drawing up an offer that had the best chance of success. She was required to provide advice as to the risks of doing so in order that her clients could make an informed choice as to how best to proceed. … she did not counsel Suzanne Powell and Joyce Powell as she was obliged to do.”

A reasonable agent, the judge concluded, would have obtained and reviewed the full report. Had she done so, “a great deal of the problems that ensued could have been avoided.”

In the end, Kirby was required to pay 25 per cent of the $141,105 in damages, or $35,276. She also paid $35,000 in costs. The Powells had to absorb 25 per cent of the damages themselves. For the Powells, it was a moral victory if not a financial one. Prior to trial, Lojko, the seller, signed a confidential settlement agreement with the Powells, so we will never know what share of the damages, if any, he absorbed.

But the case is a lesson for real estate agents who are now on notice of their obligation to review home inspections with their purchaser clients.

  • Carolyne in Canada

    Cameron – Saturday evening reply: Disqus cannot permit “reply” so I post here;

    Thank you once again,
    Personally, and again it is just my way during a 38-year career, I refer to a list choice of “experts,” but I refrain from comment, having experienced some wickedly poor inspectors people have chosen on their own.

    The better point of reference in the case would be perhaps to have insisted, yes, and write it down that the buyer rejected the advice: to get their own inspector. (Liability disclaimer). Pre-market inspections can be a good thing. But beware the pitfalls.

    Only once in my career I had a would-be buyer refuse to get an inspection. He fancied himself an expert because he and his dad built Rec rooms. I said “okay! Sign here. That you rejected my advice.” Time-stamped and dated and kept in the file.

    He bought the very nice MLS listing. Moved in and was most disgruntled when he decided to remove the kitchen cabinets, attached to the wall between the dining room and the kitchen.

    Plaster on lath construction came tumbling down. No drywall used till after the 1950’s. THAT then revealed that overhead joists had literally no insulation in the attic. NONE. Whatever insulation had been there initially had evaporated. Completely disappeared. He planned on ducting the bungalow and installing a gas heating system.

    An all electric house, built in the 1950’s. Very clean and well-kept, but no one had ever gone into the attic in 40 years. The basement wasn’t finished, and not even a cobweb in sight.

    The term WICKED! WOW! didn’t nearly cover it, and he accused me of knowing what the MLS property had or had not. Lucky I had his disclaimer. Might not have been the productive sale for me, subsequently, I had tried to convince him but his pride was his enemy, not me.

    It was useful that more so than real estate skill set, his personality evaluation might have saved the day for me.

    I was familiar with plaster on lath construction because it was such as how my very first home, brand new bought from a fabulous Italian builder of the day, was constructed. That, and “solid” brick construction. I had loads of fun (and learning curve) watching it being built. And I was only 21 (now 75). Never knowing I would one day have a real estate career.

    Our “back and forth” is a good example of a REM discourse learning opportunity for some, perhaps. Grateful.

    Carolyne L 🍁

  • Dave says

    Also I should have added that a competent home inspector acting for the buyer would have the expertise and equipment to detect the obvious moisture in the basement.

    • Brian Martindale

      Exactly

  • Dave says

    I would advise clients to always obtain their own inspection report as I believe there was an Ontario court ruling some years ago that a buyer cannot rely on an inspection report prepared for a seller and therefore there is no recourse against the inspector and no fiduciary duty required from the sellers inspector.

    • Brian Martindale

      Anyone who relies on a report prepared for another person is asking for trouble. Trying to save a few hundred bucks (by using a seller’s report) could (In this case, it did) cost a buyer thousands in the long run.

  • Nora Kechout

    Buyer’s inspector missed the mould issue here. when you have significant amount of mould, you cannot miss its odor unless the mould started to develop after closing…
    Seller’s inspection report showed only (leakage of water around a skylight on the second floor) and the buyer’s realtor did a good job in asking for its repairs… seller did not speak about water seeping into the basement through the foundation (latent defect). the realtor would not know that neither buyer’s home inspector to look for it… I won’t use harsh wordings against this realtor… I would blame the sellers if they new about it and hide it.

  • Rita Giglione

    Reviewing a home inspection report prepared by the seller is not enough to protect the buyer.
    I would recommend that my buyers get a new home inspections report on the property to make sure they are getting an up to date and accurate assessment of the property.

  • An interesting case, and perhaps the headline is not the author’s. The sentence describing what a reasonable agent would do, is not the first sentence in the critical paragraph on this point sited in the decision: more relevant, IMO, is the words: “…. Barbara Kirby did not have the expertise necessary to understand the nature of the risks it pointed to. She failed to direct her clients to obtain the advice of someone who did (s. 8 of the Code of Ethics) and she failed to act to obtain the material facts it pointed to (s. 21 of the Code of Ethics). …” The headline suggests registrants are to review the inspection report with the client, inferring we should or must highlight the risks identified therein. As I read the case, the role is to ensure the report and all relevant information is available to the client AND we direct them to resources offering expert advice.

    • Carolyne in Canada

      Of course many people have many opinions. It is my personal opinion that agents should have nothing to do with inspections. Period. From any perspective.

      Mostly agents have no construction skills. Construction, plumbing and heating, sump pump installation, residual water expulsion in new style furnaces, heat exchangers and the like, electrical (ESA is the only one who issues required permits; no one ever asks for copies or to see permits), insulation – regulation or expectation, roofing, architectural design and reformatting to meet various building and planning department codes (what is submitted in subdivision approval doesn’t always match what ends up being built particularly in regard to cosmetics: position of closets, bathrooms, laundry rooms), rules, and related regulations – all of the above and more are outside the purview of any and nearly all REALTORS(r), not part of their real estate related education and or training.

      And mostly not brought to their real estate career with any sort of cv, bio, credentials list, except on the most rare occasion. Brokers don’t have that training, most company owners do not, including their directors and executive staff. I haven’t come across any real estate company that has home inspectors or ex-city building inspectors as part of their working staff.

      It has always been my opinion that since home inspectors are deemed professionals, that the company they work for should have independent access to the property for 2-4 hours inspection time, or 8 hours, or whatever timeframe is required. No need for the (unqualified) agent to be there. Whether the owner is present or not. A second appointment could be arranged if required to review pertinent points or issues requiring specific attention, for the purpose of explaining to all involved.

      There is no logical reason for agents (unskilled such as they are) to be present, or to review any findings, or indeed to be expected to offer an opinion outside their own personal expertise.

      In this situation, it’s no different than if a buyer or a seller expected their lawyer to attend. He doesn’t have those specialized skills, either, most likely.

      I believe firmly that this expectation is outside the realm of the ridiculous.

      Soon it might be useful to hire experts in each of the specific fields, not just a generic inspector. If he, as an expert misses issues, how on earth can an agent be expected to bear the burden of analyzing any such circumstance, latent or patent. Clearly a misdiagnosis, misinterpretation, all ’round. How many hats does an agent wear?

      Where does the liability string end? It should end when an agent says: I am not a home inspector and I have no related skill sets. Don’t discuss the findings with me. I have no right to comment or offer an (unqualified) opinion. Both or either side must rely totally on the inspector’s expertise and hold the agent harmless; as to digestion, interpretation and or related cost structures to modify, fix, or replace. (Time for another liability disclaimer?)

      Of course I am absolutely no expert and this is just my personal observation and opinion within the structure of my own skill sets, or lack thereof.

      And I believe firmly that in the words of the prior American president’s wife, “just say no,” might genuinely apply. It’s time agents worked “only” within their defined realm of knowledge and (lack of) training, and stop being expected to be an expert on topics they know nothing about and for which they have no training, and should not be expected to stand in such a place that is way far above and beyond the definition of fiduciary.

      Respectfully

      Carolyne L 🍁

      • Brian Martindale

        You make some good points Carolyne.
        One has to wonder what the new education providers will include within the scope of wannabe Realtor education courses. Will construction related issues still be included? Perhaps all wannabe Realtors should be schooled to offload all and every bit of non-sales related questions as posed by consumers to specifically qualified experts.
        Question: What will be left for Realtors to do?
        Answer(s): Realtors: Act as an advocate for your clients’ fiduciary concerns. Be an expert negotiator. Make sure that all of the “i’s” are dotted and all of the “t’s” are crossed on the only thing that matters…legally…the APS. Say what you mean and mean what you say. Keep your eye off of the commission money ball. View yourself as a professional, not as a salesperson. Look in the mirror every morning–diligently–and declare to your reflection that “I will not do anything to harm anyone today (be it physically, emotionally, psychologically, or financially) in pursuit of my own interests”. Sell (explain) the steak, not the sizzle. Set your personal standards bar high, and resolve to surpass it. Go over your day every night prior to turning in and make sure that you met your obligations to the world as set out that morning. When you see unethical/illegal/immoral self-serving conduct being practiced by a fellow Realtor, call him/her out and report same to the authorities. Ignore the self-serving industry accepted dictate to not speak poorly of fellow Realtors (who deserve to be spoken poorly of) within the public sphere. Do the right thing; undermine corruption within the real estate sales culture when you find it. Stand alone. Be a somebody, not a salesperson. Be proud of what you do for a living. If you do all of the above, you will become a member of an elite cadre’ of real estate professionals that bucks the trends of the in-crowd. The real professionals are already out there; seek them out and gravitate toward them. Become the change that is needed with Organized Real Estate, one Realtor at a time.

      • Please go read the case. My initial point is the headline belies the facts on which the case turned in favour of the plaintiff…which is namely….the registrant did not advise the buyer to seek professional assessment of the property inspection report provided to them. It is not, at all IMO, about the registrant failing to be that expert!

        • Carolyne in Canada

          Thank you for your reply to my reply, Cameron. It isn’t always easy to figure out where to attach a comment in the disqus system used by REM.

          I read the header (most often supplied by our REM editor Jim). The header being:
          “Why you must review home inspections with clients” [and I wanted to scream: WHAT ???]
          NewsLegal IssuesSep 12, 2017

          ===

          My comment merely indicates my personal feelings on the topic. The short blame-define possibly could be said the agent should have advised a separate buyer’s inspection right from the get go.

          But my comment was purely in regard to my thoughts that agents should not be expected “to examine or interpret” any (expert’s) findings in any manner, with regard to any opinion as to any “expert’s” involvement, largely due to likely lack of having explicit likewise expert related knowledge.

          I have a reasonable working knowledge of lots of related topics in a general sense, but am not an expert by any definition. And would “never,” for a split second even entertain thinking about interpreting or reading a home inspection report. Or offering “my” opinion. (That’s outrageous! IMO) Don’t expect me to do that as part of my fiduciary duty definition.

          As regards the case article as presented for education purposes here on REM, I read it in detail, twice. Often interpretations vary, in the human element. I’m not looking to be argumentative. Just commenting as I saw it…
          The writer states: “I represented the Powells when they closed their $730,000 purchase in March 2010.”

          And further in the article, stated: “The summary of the inspection undertaken on behalf of the seller and available at the time of the inspection should have or, at least, could have raised concerns in the alert reader.” (Who is/was the so-called alert reader? Since allegedly the Powell’s never were presented with the report, itself (that’s the first mistake, maybe?)
          (How so? stating the home inspector addressed a skylight problem, agreed to be fixed.)

          That being said, did the lawyer (writer) not have an obligation to suggest before the closing, that the property might require a secondary home inspector, if something “smelled” like potential trouble in the future??? Who is such a powerful prognosticator? since the lawyer would have read that inspection report in full (???), or at least have had a conversation with “the expert?” (On behalf of his buyer client. (???) Oh, my! Not the lawyer’s job to read the home inspector’s report in full, or comment on it?

          My interpretation rests in the vein (without pointing fingers in any way) that the seller’s agent “did her fiduciary duty” that being that a pre-sale home inspection was done, and apparently flowed with the APS. But the job of warning and interpreting is whose?

          That’s where her obligation ends, IMO. IMO, it is not in any way part of the buyer-agent’s job to interpret or understand the report findings, either.

          Likely the buyer-client had a lawyer, who perhaps might not have had any better understanding than everyone else had regarding the report (even if he did read it, but that is not addressed in this article).

          IMO, it is not for the (read: any) agent to distill the information in a report, in any manner. Not her job to “read” the report or make “any” suggestions as to its validity or not.

          The expert in this case is:are the home inspector(s) none of whom caught the latent or patent defects in regard to the (subsequent) foundation-mold related issue.

          In my layman’s opinion which is worth its cost of zero dollars, it is that the case was mishandled in more than one sector, seemingly from the get-go.

          Perhaps any of the lawyers involved would have been well-advised to have suggested an expert to evaluate the value of the (expert) home inspector’s findings, so as to redirect the onus to where it rightfully belonged (in full): on the home inspector entirely unless it could be proved the seller was blatantly at fault. It’s a confusing article at best, as is often the situation, and the header I’m sure was meant to be an alert in the caution sense.

          The point of my comment was merely to state that there were several experts on board (each in their own fields) none of whom addressed the heart of the “subsequent” problem, but rather effectively divvying up the spoils, often characteristic of “dividing the blame” in various apportionments.

          Many, and maybe any agent would have had no skill to “interpret” that the home inspection needed further substantiation, and was therefore relied upon by all the parties to the contract, and the agents are never party to the contract. Of course, neither is the lawyer, in fairness.

          And as stated, the mold issue, etc. was not discovered till post-closing. I don’t see how having had the agent(s) reviewing this particular home inspection report would have brought the mold issue to the foreground.

          I see the key to the case as: “The Powells were never shown the full report.” (Why?) and therefore were they deemed to have accepted it, anyhow? (WHO exactly was driving that bus?)

          But that report, regardless, seemed not to have addressed a mold problem in the basement due to a foundation issue. Only noted the skylight issue? Doesn’t that seem a little odd? Since the home inspector was an expert?

          There seems to be incomplete information in the article, perhaps, but that aside, the header draws attention to responsibility upon an agent to “interpret” home inspection findings. I disagree that any agent working on behalf of a consumer has that requirement as part of their fiduciary. Of course I could be wrong.

          Again, respectfully
          Carolyne L 🍁

          • Carolyne, opinion is never wrong. It might be ill informed or otherwise have failings. It is never wrong to express it either because in the expression and the possible repsonse….we learn!

            Some opinionated thoughts on your response:

            Registrants should, indeed must, read the property inspection report. Regardless of one’s expertise. On the aspects where one has knowledge or experience, of course advice can and should be offered. However, the primary advice is to come from the “expert” and we would consistently convey that message.

            The “alert” reader is the registrant, at least IMO according to the judge. And I think the judge got that correct. The judge is saying, to the extent my read is a correct understanding, that the registrant did not read the report, did not ask for the report AND had they done so the potential problem would have been self evident to any registrant AND that would naturally lead to the registrant suggesting further professional, expert investigation and advice.

            There was no clear indication of a problem that would give off a “smell”. And in any event by the time the Buyer’s lawyer viewed the contract…it was a firm deal no doubt.

            It is not the lawyers responsibility to read the detailed reports, just as it is not their responsibility to review the comparable sales data. Of course a lawyer will review the details when an apparent problem arises in the course of their work to complete the transaction. That is not the same thing as reading it “just in case”. The review to highlight problems is the responsibilyt of the registrant..who must ascertain all facts related to the sale or purchase…AND that was the point made by the judge.

            To be clear the judge did not say it was the registrant’s role to interpret or advise on the information the report would or could have indicated was important to act on. The judge said, clearly IMO, the registrant failed to do the necessary work to ensure the Buyer had the best advice and all of the information. And had the registrant simply been diligent at obtaining all facts and information….it would have been obvious to all concerned that a problem or future problem likely would manifest.

            IMO it is in the hand of every registrant to understand how to read a property inspection report. It is their responsibilty to understand the meaning of the work and its importance. It is their responsiblity to ensure it is understood by the client AND if not, to assist the client in obtaining the best possible advice and counsel so as to properly understand the report. We give them comparable sales, we give them a legal description, we give them wording for terms and conditions of an offer, etc. We are not lawyers, but we are writing their contract.

            IMO, Carolyne, the argument you are making re the sometimes less complicated property inspection report as not within our scope of expertise does not stand up against the other significant areas of “non” expert advice we are giving to clients every day.

            The report that could have been reviewed, AND WAS NOT, would have indicated a need for further investigation as I understand the assessment of the judge. Inspectors found what was necessary.

            The judge acknowledge the registrant was not solely responsible and assigned only partial responsibility, so you are right others had a hand in the matter.

            The property inspection report is not appended to the case for review by us. We only have the judgement to rely upon, and that judgement was the report that existed and was not brought forward to the Buyer on the part of their representative, DID illuminate a risk sufficiently clearly to warrant further investigation. And the mold issue, it is acknowledged, could have arisen after the completion of the transaction…..however, and regardless of this possibility….the root of the problem lay in the historical condition the report apparently inferred could or did exist.

            The header of the article does exactly what you indicate..it suggests the registrant should be reviewing content and the inference is to advise the client on that content. In this sense I agree with you…we are not to do that. What we are required to do is review and point to items the client ought to investigate further. We, IMO, ought to be able to interpret the need for more review…and if we cannot do that…we best stop suggesting who the inspector should be also, and stop recommending mortgage brokers, moving specialits, etc…..

            Carolyne, you are not wrong. Where you do not see yourself having the expertise to assess property inspection reports, presumably you ensure your clients understand that is not a service you will provide. In my case, And that is doing what is expected of you, to ensure you offer only the service to which your skills apply well. In the alternative, if you had the skill, it would be an added value to your clients..

  • Brian Martindale

    Hmmm…another breathless commission-chaser who abandoned her fiduciary obligations to her clients…either by way of ignorance or by way of willful negligence. Either way, this story highlights how easy it is for a Realtor to display his/her incompetence…as long as someone who becomes aware of becoming aggrieved by said incompetence takes the Realtor to task. For every form of Realtor misconduct that comes to light, how many fly under the radar, never to see the light of day? Likely about as many speeders on our roads who don’t regularly get caught.
    In his book “The Happy Agent…”, Ross Wilson quotes the Merriam Webster dictionary’s definition of the word “salesman” as “…an ‘unconscionable’ person who sells another’s wares for a financial reward…etc.” or words to that effect. The word “unconscionable” says it all.
    In order for a professional Realtor to be able to decipher the wording of an inspection report, one must be familiar with the terms of usage as well as being familiar with construction-related problems. That would entail one having at least a rudimentary working knowledge of construction techniques. Hands-on experience would be even better. How many Realtors posses such experience, do you think? Answering questions on an exam derived from text-book learning won’t cut it. Too many Realtors talk about things that they know little to nothing about, much like car salespeople who don’t know how many cylinders a V6 has, or if an automatic transmission is a CVT or a conventional one, or if the car uses synthetic oil or not etc. Too many salespeople are trained to sell the sizzle (future benefits, psychological benefits…HAPPINESS) instead of the steak. The steak is what we buy, not pie-in-the-sky.