A pre-sale inspection allows the seller to find out the condition of the immovable prior to putting it on the market and to identify any repairs that need to be done. It can be a step toward uncovering adverse factors related to the immovable. It can also provide more complete answers to the questions that are contained in the DS (DSD) form.
The fact that the seller has obtained a pre-sale inspection report does not release the licensee from his obligation to advise the buyer to have a pre-purchase inspection conducted.
Building inspection is an essential step when purchasing a house. Under section 81 of RBR, the licensee must recommend to the person proposing to acquire an immovable that the person have a full inspection performed by a professional or a building inspector.
The promise to purchase form includes the following warning in clause 8:
"A promise to purchase without an inspection clause is appropriate only in special circumstances, for example, when the immovable is to be replaced or substantially renovated. ”
The inspection must take place within the time period specified in clause 8.1 of the Promise to purchase form. The indicated time period starts to run the day following the signing of the acceptance of the promise to purchase and is always calculated in consecutive calendar days, i.e. periods of twenty-four hours, from midnight to midnight. Saturdays and Sundays as well as statutory holidays are counted as calendar days. The day marking the starting point, i.e. the date the promise to purchase is accepted, is not counted, but that of the deadline is. It is therefore important to allow sufficient time for the inspection to take place according to the context (e.g. overlapping statutory holidays, buyer’s occupation, availability of inspectors), which will help the buyer avoid asking for an extension of the time period, which can be refused by the seller. To withdraw or renegotiate the price, the buyer must notify the seller (and not the seller's broker) in writing no later than four (4) days after the expiry of the period mentioned in the same clause before 8:00 pm.
The licensee may provide a list of professionals or building inspectors, provided it contains more than one name.
The term “professional” refers to a member of a professional order who is qualified and authorized to carry out building inspections, such as an architect, engineer or building technologist. A contractor, a master electrician or a plumber is not a “professional ” or “building inspector.”
When referring clients to "professionals", the licensee must ensure that these professionals have a valid permit with their respective professional orders. In addition, the licensee must ensure that the person conducting the inspection meets each of the four requirements set out in section 81 of RBR.
The licensee must recommend that the inspection be conducted by a professional or building inspector who meets the four requirements described below. For this purpose, he must make the necessary verifications to ensure that the requirements are met and obtain and keep a copy of the documents proving this. The licensee must also obtain a written undertaking from the individuals retained to the effect that they will inform him if they no longer meet regulatory requirements.
1. Professional liability insurance covering fault, error and omission
The professional or building inspector must have professional liability insurance against fault, error or omission that specifically covers building inspection acts.
2. Recognized inspection service agreement
The professional or building inspector shall use a recognized inspection service agreement that outlines the nature and extent of the inspection services provided and their cost. The buyer may then learn about the limitations contained therein, for example, in terms of liability exclusion.
The licensee must inform the buyer that he must provide the inspector with all documents and information required for inspection in his possession, namely the Declarations by the seller of the immovable (DS) form or the Declarations by the seller of the immovable – Divided co-ownership (DSD) form.
3. Recognized building inspection standards
The professional or building inspector must perform inspections according to recognized building inspection standards.
Recognized inspection standards provide minimum guidelines for building inspection. They give a public character to the services provided by inspectors. They define some terms specific to building inspection and standardize report presentation.
4. Written report
After the analysis of the visual observations, the professional or building inspector must provide a written report to the party using his services.
If there are some elements that have been specifically inspected or reveal more serious or significant problems, they must be clearly stated in the report. In addition, if certain findings require further testing, for example , in terms of pyrite, the inspector must refer the buyer to the appropriate expert.
A written report allows the buyer to refer to concrete findings to modify the amount offered or to terminate the transaction.
The licensee must ensure that the written report is obtained within the time period specified in the promise to purchase.
The fact that an individual is an active member in good standing of one of the following organizations helps assume that the person meets the four requirements set out in section 81 of RBR:
- Association des inspecteurs en bâtiments du Québec [AIBQ]
- Association des thermographes en inspection de bâtiment [ATIB]
- Association des professionnels de la construction et de l'habitation du Québec (APCHQ)
Due to the appearance of conflict of interest, the licensee must not offer to pay the building inspector. Check out the Guideline – Conflicts of interest.
The seller’s broker must be discreet during the inspection and let the inspector do his work with his client, i.e. the buyer.
If a licensee represents a buyer, he must attend the inspection to be able to properly advise his client. It is also important that the buyer attends the inspection. In fact, the inspector must take this opportunity to point out to the buyer material elements that deserve attention and the necessary corrections that should be made, if applicable. These comments must be included in the inspector’s written report.
i) Waiving the inspection condition after inspection
The licensee must not advise the buyer to waive the inspection condition immediately after the inspection is completed or following the inspector’s verbal report or later. The buyer must take the time to carefully examine the report and obtain, if necessary, clarifications from the inspector or any other qualified person.
It is only once the buyer has reviewed the written inspection report, has asked all the questions and got the desired clarifications and is satisfied with them, that the broker representing him can complete with him the Notice and follow-up on fulfilment of conditions form (clause AV4.3) to fulfil the inspection condition before the expiry of the deadline indicated under clause 8.1 of the promise to purchase.
ii) Cancellation of the promise to purchase
The buyer may cancel his promise to purchase if he deems that the inspection report reveals sufficiently serious adverse factors that, had he known about them before the inspection, he would not have offered that price or made a promise to purchase.
The buyer must act in good faith and must not cancel his promise to purchase if the inspection report unveils only minor imperfections that have no real influence on the offered price. In other words, the inspection must not serve as a pretext for the buyer to withdraw without reasonable grounds.
To cancel his promise to purchase, the buyer must send a written notice to the seller (not the seller's broker), along with a copy of the inspection report within the specified time period. It is the receipt of such notice and the report by the seller which will render the promise to purchase null and void.
The form Notice and follow-up on fulfilment of conditions (clause AV4.3), which the licensee completes with the buyer, may serve as a notice. This form is used to send various notices and follow-ups on fulfilment of conditions indicated in each form used in a transaction.
If this form is used by the licensee, the latter will be responsible for sending the document and must get the acknowledgment of receipt from the seller, in a timely fashion, to ensure that the notice has been given on time. By communicating in advance with the seller’s broker, the buyer’s broker may agree with him to have the acknowledgment of receipt of the notice signed by the seller. The buyer's broker must keep proof of receipt on record.
Sending the notice can be done in different ways, but in all cases, the buyer must ensure that the seller receives the notice and the inspection report before the deadline expires. It may be advisable to use bailiffs, for example, if the deadline is approaching or if the seller is not cooperating in acknowledging receipt of the notice.
iii) Renegotiating the terms of the promise to purchase
Upon reading the inspection report, the buyer can renegotiate the terms of his promise to purchase, such as the amount offered.
In accordance with the wording of clause 8.1 of the Promise to purchase form, the buyer must not use minor imperfections that do not have a real impact on the offered price as a pretext to renegotiate the terms of his promise to purchase. In general, the DS (DSD) form helps detect any problems with the immovable and set the price and conditions of the promise to purchase accordingly. The buyer must act in good faith under all circumstances. Thus, the duty to advise of licensee(s) engaged in the transaction is essential.
In order to justify the reasons for these amendment requests, the buyer must send the seller a copy of the inspection report or an excerpt from the report that outlines the issues raised for which he wishes to renegotiate.
It is important to specify that in the context of a renegotiation, the buyer has no such obligation. However, it can be useful for the buyer to do so to justify his request to the seller to do some work or to reduce the price. This can in fact be requested by the seller. Should a copy of the inspection report be submitted in full to the seller, the latter must be notified that this report is not submitted to make the promise to purchase null and void, but for negotiation purposes only.
If the buyer and seller agree to the new terms and conditions, the licensee must record this agreement in writing using the Amendments form and have it signed by both parties. This form is an integral part of the promise to purchase and must be forwarded to the lender. He must also indicate that it is after inspection that the parties have agreed to amend the promise to purchase and must be signed within the period specified in the inspection condition.
The inspection condition states that once this period expires, the buyer is deemed to have waived the condition, and unless an agreement on the amendment to be made to the conditions is reached, he will be obliged to purchase the immovable according to the original terms of the promise to purchase.
In certain circumstances, it can also be understood that the legal warranty of quality does not apply to the subject of the price reduction. The licensee may then use the standard clause 4.2 – Price reduction.
Note that in order to avoid disputes, it is often preferable to renegotiate the price reduction rather than requiring that the seller have the work performed by a professional of his choice.
The existence of any previous report must be reported in the DS (DSD) form. It can be an inspection report prepared at the request of the seller or of a previous promisor-buyer that led to the cancellation of a first promise to purchase.
If a seller has a previous report in his possession, he must submit it to his broker or the buyer's broker if the seller is not represented.
The complete copy of the previous report must be given to the buyer, not just excerpts from it. This way, the seller or his broker makes sure to disclose everything, even the problems that may seem minor to them. These could be significant to the buyer and failing to disclose them could result in disputes.
If it is not possible to submit the existing previous report, the seller's broker must still inform the buyer of its existence and content.
Should adverse factors be raised in the report, the licensee may propose to the seller to report how issues were remedied by presenting relevant supporting documents (e.g.: repair invoices). The seller's broker must ensure that the DS (DSD) form is updated to reflect this information.
If any adverse factors raised in the report obtained by the buyer do not reflect the actual condition of the immovable from the seller’s point of view, the licensee may advise the seller to perform a second expert assessment of the item(s) he does not agree with.
It is also important to remember that the seller’s broker cannot give the buyer a copy of a previous inspection report prepared at the seller’s request if the seller does not agree.
Under his ethical obligations, if the licensee does not provide a copy of the previous inspection report to the potential buyer, he must, at least, inform him of the adverse factors set out in the report which may affect the object of the transaction.
i) Protection of the confidentiality of personal information appearing on the previous inspection report
Pursuant to section 31 of RBR, a licence holder must respect the confidential nature of information given to the holder and the confidentiality of personal information obtained in the course of the holder’s brokerage activities.
The licensee must therefore take the necessary measures to respect the confidentiality of a buyer's personal information included in a previous inspection report, before submitting or giving access to a copy of the report. To protect the confidentiality of personal information while allowing access to the report's content, the personal information must be redacted.