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Consulting, Resource, Education, and Support Services for Professional Building Inspectors “A candle loses no light when it lights another candle.”

DRAFT COPYTHIS WRITTEN WORK PRODUCT IS NOT INTENDED AS OR REPRESENTED AS LEGAL ADVICE OR LEGAL OPINION OF ANY KIND WHATSOEVER NOR IS IT TO BE CONSIDERED OR CONSTRUED AS SUCH. DO NOT USE ANY OF THIS MATERIAL IN ANY MANNER WITHOUT PRIOR DISCUSSION WITH AND REVIEW AND APPROVAL BY A COMPETENT ATTORNEY!

28 PAGES

VARIOUS PARTS OF THIS ENTIRE SET OF PROTOTYPE DOCUMENTS WERE AMENDED ON 5/20/07

COMMERCIAL BUILDING INSPECTION CONTRACT

Introductory Comments

Each time I’ve been asked to assist a subscriber in responding to a demand letter I find that my task has been made more difficult because the subscriber has not incorporated the essential concepts embodied in the ProSpex prototype documents: “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection,” “COMMERCIAL BUILDING INSPECTION Contract Environmental Addendum,” “Description of COMMERCIAL BUILDING INSPECTION Services,” “General Information,” and “COMMERCIAL BUILDING INSPECTION Report Glossary.” These concepts have evolved out of years of research, use, and modification.

Most inspectors seem to believe that their limitation of liability clause is all they need to protect them from claims made by unhappy Clients. Such thinking reveals an incomplete understanding of the concepts pertaining to reduction of their legal exposure. The limitation of liability should be inspectors’ last line of defense, not their first.

The following contract concepts are all essential parts of the protection an inspection contract and agreement can provide:

The “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” is a negotiated contract. It offers Clients a choice of either an inspection with a limitation on liability equal to the fee paid for the inspection or an inspection for which the limitation on liability has been removed for an additional fee.

The following clause is intended to provide liability protection in addition to the clause that limits the inspection company’s liability to the inspection fee.

Client acknowledges that (company name) warrants that its inspection services will be performed in accordance with the Scope of Inspection and the Inspection Report only. This is a limited and non-transferable warranty and is the only warranty given by (company name). (Company name) makes and Client receives no other warranty, express or implied. All other warranties including warranties of merchantability and fitness for particular purpose are expressly excluded. This stated express warranty is in lieu of all liabilities or obligations of (company name) for damages arising out of or in connection with the performance of the inspection and delivery and use of and reliance on the inspection report. (Company name) does not guarantee that the structure inspected will be free from faults or defects. Client waives any claim for consequential, exemplary or incidental damages, even if (company name) has been advised of the possibility of such damages.

*PROSPEX IS A SERVICEMARK OF KEVIN M. O’HORNETT dba PROSPEXCOPYRIGHT 2005 PROSPEXALL RIGHTS RESERVED

Introductory Comments continued

The following clauses limit the inspection company’s liability to the inspection fee.

IN THE EVENT OF A BREACH OR FAILURE OF THE FOREGOING WARRANTY, CLIENT AGREES THAT THE LIABILITY OF (COMPANY NAME) AND OF ITS AGENTS, EMPLOYEES, AND INSPECTORS FOR CLAIMS OR DAMAGES, COSTS OF DEFENSE AND SUIT, ATTORNEYS’ FEES, OR EXPENSES AND PAYMENTS ARISING OUT OF OR IN ANY WAY CONNECTED WITH ERRORS OR OMISSIONS IN THE INSPECTION OR THE INSPECTION REPORT SHALL BE LIMITED TO LIQUIDATED DAMAGES IN AN AMOUNT EQUAL TO ALL AMOUNTS PAID FOR THE INSPECTION TO (COMPANY NAME) BY CLIENT. CLIENT AGREES TO INDEMNIFY AND HOLD (COMPANY NAME) HARMLESS FOR ALL DAMAGES AND LIABILITY INCURRED BY (COMPANY NAME), INCLUDING LIABILITY FOR NEGLIGENCE, EXCEPT AS SPECIFICALLY PROVIDED ABOVE.

The following clause should immediate follow the previous clause in the Contract and it establishes that, even if the Client refuses to accept or cash the fee refund check, they have agreed by contract, the presenting or “tender” of the full amount of the inspection fee is sufficient to release the inspection company.

Client acknowledges the liquidated damages are not intended as a penalty but are intended (I) to reflect the fact that actual damages may be difficult and impractical to ascertain; (II) to allocate risk among (company name) and Client; and (Ill) to enable (company name) to perform the inspection at the stated inspection fee. In the event of the tender by (company name) of a refund of the inspection fee, such refund shall be full and final settlement of all present and future claims and causes of action and (company name) shall be thereupon generally and fully released.

The following clause explains the limitation of liability.

Client acknowledges the liquidated damages are not intended as a penalty but are intended (I) to reflect the fact that actual damages may be difficult and impractical to ascertain; (II) to allocate risk among (company name) and Client; and (Ill) to enable (company name) to perform the inspection at the stated inspection fee. In the event of the tender by (company name) of a refund of the inspection fee, such refund shall be full and final settlement of all present and future claims and causes of action and (company name) shall be thereupon generally and fully released

The following clause is intended to reduce the potential for holding the inspector personally liable.

Client hereby expressly waives any cause of action against the inspector personally, excluding solely willful misconduct, and agrees to look solely to (company name) for any and all liability related to the Inspection including the negligence of the inspector. Client hereby agrees to indemnify the inspector personally for any and all causes of action, including costs of defense and attorneys’ fees, related to or arising from any claim brought by Client against the Inspector.

The following clause requires the Client to notify the inspection company and to permit the inspection company to reexamine the building before the Client takes any measures to address any condition for which the Client claims the inspection company is responsible. If the Client fails to do this and has work performed, this clause says that the Client cannot then demand reimbursement for the work from the inspection company.

In the event Client has a claim of a breach or failure of warranty, or for negligent inspection of any component or item in the inspection, Client shall notify (company name) by certified mail/return receipt requested within seven (7) days of discovery of the condition which forms the basis of the claim and (company name) shall have five (5) working days to re-inspect the component or item before Client repairs or replaces the component or item. This right of re-inspection is to protect (company name) and Client from the business practices of some contractors who base their recommendations to repair or replace components on incorrect, false, or misleading information. If Client fails to comply with the notification and right of (company name) to re-inspect requirements as outlined above in this paragraph, Client waives any claim against (company name) with respect to the component or item.


The following clause sets specific limits regarding how much time a Client has to bring a legal action against the inspection company.

No action, whether in contract or tort, shall be brought against (company name) in arbitration or a court of law beyond the earlier of one year following the date of the Inspection Report or 120 days after discovery by Client of the condition which forms the basis of the action.

The following clause is intended to reduce the potential for claims made by third parties.

The Inspection Report is not intended for use by anyone other than the Client. No third party shall have any right arising from this Contract or the Inspection Report. In consideration for the furnishing of the Inspection Report, the Client agrees to indemnify and hold harmless (company name), its agents, employees, inspectors, directors, officers, shareholders, successors and assigns, for all costs, expenses, legal fees, awards, settlements, judgments, and any other payments of any kind whatsoever incurred and arising out of a law suit, cross-complaint, countersuit, arbitration, administrative proceeding, or any other legal proceeding brought by any third party who claims that he/she relied on representations made in such Inspection Report and was damaged thereby. Client’s request that (company name) release copies of the Inspection Report shall be at Client’s risk with respect to the contents of this paragraph.

The following clause is intended to reduce the potential for Clients’ claims that if they had only known about some condition which was not included in the report, they could have negotiated a better price for the subject property.

Client acknowledges and agrees that it is the Client’s intention to use the inspection and report for the purpose of becoming better informed regarding some of the conditions of the subject property and not for the purpose of negotiating other contracts.

The following clause holds Clients liable for the inspection company’s costs of defense if Clients bring suits against the inspection company and fail to prove their claim.

Except as provided above for arbitration of disputes, if a claim is made against (company name) for any alleged error omission or other act arising out of the performance of this inspection, and if Client fails to prove such claim, Client agrees to pay all costs and attorney’s fees incurred by (company name) and its employees, agents, inspectors, directors, shareholders, successors and assigns.

The following two clauses are intended to reduce the potential for Client claims that they never agreed to the terms and conditions of the inspection contract because they never signed the contract.

THESE CLAUSES ARE NOT INTENDED TO ENCOURAGE INSPECTORS TO PERFORM OR TO SUGGEST THAT INSPECTORS PERFORM ANY INSPECTION WITHOUT A SIGNED CONTRACT! NO INSPECTION SHOULD BE PERFORMED WITHOUT AN INSPECTION CONTRACT SIGNED ON OR BEFORE THE DATE OF THE INSPECTION! THESE CLAUSES ARE “JUST-IN-CASE-YOU-LOSE-YOUR-MIND-AND-DON’T-GET-A-SIGNED-CONTRACT” CLAUSES!

Acceptance of the Inspection Report by any party shall constitute acceptance of the terms and conditions of this Contract as if signed by that party and shall constitute authorization to any person signing as Client to act as an agent in agreeing to the terms and conditions. This contract is binding on Client, Client’s spouse, heirs, distributees, guardians, legal representative, successors and assigns.

The presence of Client has been requested during the inspection. If Client is not present at the time of the inspection or for any other reason is unable to sign this Contract at the time of inspection, acceptance of the Inspection Report shall constitute acceptance of the terms and conditions of the Contract as if signed by Client.


The following clause combines all of the inspection company’s written inspection and inspection report related documents into the contract.

The Commercial Building Property Inspection Report, any addenda, and the “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” collectively constitute the contract document. In the event any provision is held to be unenforceable, it shall be severed from the contract document and the remaining provisions shall be fully enforced.

The following clause is intended to reduce the potential for Clients’ claims that they were, somehow, “forced” to use a company’s inspection services.

If the terms and conditions of this Authorization and Contract are not acceptable to the Client, the Client agrees to notify (company name) or (company name’s) representatives and the inspection shall be canceled, no fee charged, and the Client shall be free to seek inspection services elsewhere.

These paragraphs form the basis of much of the protection that an inspection contract and agreement provides to an inspector. If a Client fails to follow these mutually agreed upon requirements, it’s much easier for me to help a subscriber effectively deny a claim of negligence or incompetent inspection by the Client.

Also, all of the information on page 1 of the “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” document is important. Its purpose is to create a “negotiated” contract which will reduce the potential for Clients to claim that they had no choice other than to sign a liability limiting contract.

Together, the ProSpex “COMMERCIAL BUILDING INSPECTION Authorization and Contract Scope of Inspection,” “Description of COMMERCIAL BUILDING INSPECTION Services”, “General Information,” and “COMMERCIAL BUILDING INSPECTION Report Glossary” form a single, comprehensive, and closed document. Each is designed to work in concert with all the others.

There are certainly many ways of saying the same things. The ProSpex model is simply an example of a concept that has been “field tested” for fifteen years and has consistently proven to be effective.

All such documents should be reviewed and approved by your legal counsel before using them.

Don’t make it more difficult to respond to a demand letter if the need arises.

NOTE TO ProSpex SUBSCRIBERS

The ProSpex “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Work” © does not refer to any specific standard of practice. The American Society for Testing and Materials (ASTM) has guidelines for the performance of what is termed a “Property Condition Assessment (PCA), a specific kind of due diligence, pre-purchase, pre-lease, or post-lease inspection, performed in accordance with specifications developed by the American Society for Testing and Materials (ASTM). This assessment is an evaluation of building systems to assess their physical condition, general code compliance, capacities/adequacies, repair and maintenance issues, and identification of potential environmental contaminants. The ASTM PCA assessment includes:

Review of government records Review of building specifications and drawings Walk through survey Overview of the building's major systems (HVAC, MEP, etc.) Recovery and deferred maintenance costs evaluation

However, the ASTM PCA guidelines are not a standard of practice for conducting commercial building inspections. Therefore, inasmuch as there are no nationally recognized standards of practice that apply to the inspection of commercial buildings, the ProSpex “Prototype COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Work” and related documents differ in some places from the ProSpex prototype documents that pertain to home inspections. These differences reflect the differences between residential and commercial building inspections.

For example, the ProSpex “Prototype COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” specifically excludes the inspection of the interiors of electrical system component enclosures including but not limited to panelboard, switchgear, meter, or other enclosures. This is both to protect the inspector and to reduce the potential for the accidental interruption of the work or business of occupants or employees. The last thing an inspector wants to do is to be electrocuted, suffer electrical burns, or to inadvertently turn off someone’s computer or other essential equipment.

In addition, testing for radon gas, lead, mold, or other environmental contaminants, inspection for compliance with the Americans with Disabilities Act, the performance of Phase 1, 2, or 3 environmental surveys, or inspection of other systems including but not limited to fences, yard walls, swimming pools, spas, recreational facilities, landscape irrigation systems, and other inspections, testing, sampling, and analysis work is specifically excluded in the ProSpex “Prototype COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” Therefore, if any of these or similar excluded inspections or services are offered, it is recommended that consideration be given to performing these services or inspections under separate contracts and agreements which clearly define the scope and limits of such work and which have been reviewed and approved by competent legal counsel. Such scope of work may include any governmental or industry protocols which apply to the work.

COMPANY NAMECOMMERCIAL BUILDING INSPECTION

AUTHORIZATION AND CONTRACTAND SCOPE OF INSPECTION ©

______________________________________CLIENT

______________________________________

______________________________________SUBJECT PROPERTY

AUTHORIZATION AND AGREEMENT1. Client hereby authorizes and contracts for (company name) to perform a COMMERCIAL BUILDING INSPECTION at the Subject Property. Client agrees to the terms and conditions in this Contract. The Inspection Report and its contents are intended for the exclusive use of and are the nontransferable property of the Client. The agreed Inspection Fee is payable at the time of the inspection. Client agrees to pay all telephone long distance and FAX charges associated with the inspection.

2. My signature below acknowledges that I have read, understand, and accept the terms, conditions, and limitations as outlined in the “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection.”

I received and had the opportunity to read both pages of the “Description of COMMERCIAL BUILDING INSPECTION Services” and all four pages of the “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” and I DO NOT elect to pay an additional fee of $1000.00 for the removal of the limitation on liability, liquidated damages, and indemnification described in paragraph 7 for this inspection and report.

THE TOTAL FEE FOR THIS INSPECTION IS: $

_____________________________________ ________________CLIENT’S SIGNATURE DATE

I received and had the opportunity to read both pages of the “Description of COMMERCIAL BUILDING INSPECTION Services” and all four pages of the “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” and I DO elect to pay an additional fee of $1000.00 for the removal of the limitation on liability, liquidated damages, and indemnification described in paragraph 7 for this inspection and report.

THE TOTAL FEE FOR THIS INSPECTION IS: $

______________________________________ ________________CLIENT’S SIGNATURE DATE

(Company name) is authorized to release copies of this COMMERCIAL BUILDING INSPECTION Report to:

_______________________________________________________________ INITIAL

COPYRIGHT 2005 PROSPEXALL RIGHTS RESERVED PAGE 1 OF 4

3. The scope of this inspection is to perform a primarily visual, non-destructive, and non-technical evaluation (using NORMAL OPERATING CONTROLS where appropriate) of the applicable SAFELY ACCESSIBLE and READILY ACCESSIBLE portions of the structural, heating, cooling, plumbing, roof covering, electrical (and permanently installed and attached kitchen appliance if a company elects to add these) systems and components of the Subject Property specified in this Contract and Inspection Report for ADVERSE CONDITIONS. The inspection is performed in accordance with the limits set forth in this Contract and the Inspection Report. Only the visible and SAFELY ACCESSIBLE and READILY ACCESSIBLE portions of the components and items specified in the Inspection Report shall be inspected. THE INSPECTOR IS NOT EXPECTED OR REQUIRED TO MOVE OR REMOVE ANY PERSONAL PROPERTY FROM OR AT THE SUBJECT PROIPERTY IN ORDER TO CONDUCT THE INSPECTION. No other systems, components, items or appliances are included in this inspection. The inspection performed by (company name) is supplemental to any real estate transfer or seller’s disclosure statement and shall not be used as a substitute for such disclosure statements or for a pre-closing walk through.

4. Excluded is the performance of any inspection of any systems, components, or items not specifically included in this contract and the Inspection Report including, but not limited to, the following: thermal imaging, thermal efficiency or energy audits; any information pertaining to manufacturers’ recalls of any component or equipment or “class action” litigation or settlements against contractors or manufacturers; manufacturing equipment; low-voltage systems, swimming pools, saunas, spa (hot tub), or hydromassage systems; electrostatic precipitators or electronic air filters or cleaners; recreational equipment; septic systems, any component or system which is underground, private water systems or equipment, wells and well pumps, cisterns, ponds, fountains, water quality or volume, water conditioning systems; household-type appliances, elevators, escalators, moving walkways, lifts, dumbwaiters; pneumatic equipment and systems; audio and video systems; central vacuum systems; fencing or yard walls or gates, landscaping, landscape or other irrigation systems; active and passive solar space or water heating systems, the interiors of any electric component enclosures including but not limited to panelboard, switchgear, meter, or other enclosures; photovoltaic systems; soils; security systems; fire, smoke, fuel moisture, radon or any other detection, warning, alarm, mitigation, or suppression systems; window and door screening; awnings; retaining walls (except with respect to their effect on buildings included in the inspection); and any evaluation of or inspection or testing for the presence or absence of any toxic, hazardous, or dangerous substances including but not limited to mold, bacteria, asbestos, lead, and radon or other gases except those gases typically used as fuel for building heating and potable water heating systems, and any inspection for the presence or absence of any fauna including, but not limited to, rodents, vermin, insects or any other pests. In the event that the Inspection Report or oral statements made by the Inspector supply any information about any of the forgoing, this information shall be deemed to be informational only and supplied as a courtesy to the Client, and shall not be deemed to be an amendment to or waiver of the foregoing exclusions.

5. This is not a technical inspection. No engineering tests will be made. Excluded is the performance of any inspection to determine or calculate the strength, adequacy, or efficiency of any system or component. No examination will be made to determine compliance with any manufacturers’ installation guidelines or specifications, accessibility standards, conservation or energy standards, covenants, governmental ordinances, regulations, acts, protocols, or codes or other restrictions. The Inspection Report is not to be considered an implied or express warranty or insurance on the Subject Property or its components concerning future use, operability, habitability, or suitability. (Company name) is not responsible for any condition affecting any system or component which occurs subsequent to the inspection or is intermittent and/or otherwise not detectable for any reason during the inspection. This inspection will be performed in accordance with the inclusions and limitations as outlined in this contract and the inspection report unless otherwise noted and where conditions permit. The scope of this inspection also includes the description of the scope and limitations of the inspection as set forth in the “Description of COMMERCIAL BUILDING INSPECTION Services.”

6. Client acknowledges that (company name) warrants that its inspection services will be performed in accordance with the contractual scope of inspection and the Inspection Report only. This is a limited and non-transferable warranty and is the only warranty given by (company name). (Company name) makes and Client receives no other warranty, express or implied. All other warranties including warranties of merchantability and fitness for particular purpose are expressly excluded. This stated express warranty is in lieu of all liabilities or obligations of (company name) for damages arising out of or in connection with the performance of the inspection and delivery and use of and reliance on the inspection report. (Company name) does not guarantee that the structure inspected will be free from faults or defects. Client waives any claim for consequential, exemplary or incidental damages, even if (company name) has been advised of the possibility of such damages.

COPYRIGHT 2005 PROSPEXALL RIGHTS RESERVED

PAGE 2 OF 4

http://www.btr.state.az.us/AZ%20Ashi%20Standards.htm#System%23System

http://www.btr.state.az.us/AZ%20Ashi%20Standards.htm#Component%23Component

7. IN THE EVENT OF A BREACH OR FAILURE OF THE FOREGOING WARRANTY, CLIENT AGREES THAT THE LIABILITY OF (COMPANY NAME) AND OF ITS AGENTS, EMPLOYEES, AND INSPECTORS FOR CLAIMS OR DAMAGES, COSTS OF DEFENSE AND SUIT, ATTORNEYS’ FEES, OR EXPENSES AND PAYMENTS ARISING OUT OF OR IN ANY WAY CONNECTED WITH ERRORS OR OMISSIONS IN THE INSPECTION OR THE INSPECTION REPORT SHALL BE LIMITED TO LIQUIDATED DAMAGES IN AN AMOUNT EQUAL TO ALL AMOUNTS PAID FOR THE INSPECTION TO (COMPANY NAME) BY CLIENT. CLIENT AGREES TO INDEMNIFY AND HOLD (COMPANY NAME) HARMLESS FOR ALL DAMAGES AND LIABILITY INCURRED BY (COMPANY NAME), INCLUDING LIABILITY FOR NEGLIGENCE, EXCEPT AS SPECIFICALLY PROVIDED ABOVE.

8. Client acknowledges the liquidated damages are not intended as a penalty but are intended (I) to reflect the fact that actual damages may be difficult and impractical to ascertain; (II) to allocate risk among (company name) and Client; and (Ill) to enable (company name) to perform the inspection at the stated inspection fee. In the event of the tender by (company name) of a refund of the inspection fee, such refund shall be full and final settlement of all present and future claims and causes of action and (company name) shall be thereupon generally and fully released.

9. CLIENT HEREBY EXPRESSLY WAIVES ANY CAUSE OF ACTION AGAINST THE INSPECTOR PERSONALLY, EXCLUDING SOLELY WILLFUL MISCONDUCT, AND AGREES TO LOOK SOLELY TO (COMPANY NAME) FOR ANY AND ALL LIABILITY RELATED TO THE INSPECTION INCLUDING THE NEGLIGENCE OF THE INSPECTOR. CLIENT HEREBY AGREES TO INDEMNIFY THE INSPECTOR PERSONALLY FOR ANY AND ALL CAUSES OF ACTION, INCLUDING COSTS OF DEFENSE AND ATTORNEYS’ FEES, RELATED TO OR ARISING FROM ANY CLAIM BROUGHT BY CLIENT AGAINST THE INSPECTOR.

10. In the event Client has a claim of a breach or failure of warranty, or for negligent inspection of any component or item in the inspection, Client shall notify (company name) by certified mail/return receipt requested within seven (7) days of discovery of the condition which forms the basis of the claim and (company name) shall have five (5) working days to re-inspect the component or item before Client repairs or replaces the component or item. This right of re-inspection is to protect (company name) and Client from the business practices of some contractors who base their recommendations to repair or replace components on incorrect, false, or misleading information. IF CLIENT FAILS TO COMPLY WITH THE NOTIFICATION AND RIGHT OF (COMPANY NAME) TO RE-INSPECT REQUIREMENTS AS OUTLINED ABOVE IN THIS PARAGRAPH, CLIENT WAIVES ANY CLAIM AGAINST (COMPANY NAME) WITH RESPECT TO THE COMPONENT OR ITEM.

11. In the event any dispute arises regarding this Contract or the contents of the Inspection Report, it is agreed that all parties shall attempt, in good faith, to settle such disputes between themselves. In the event such attempts fail to resolve such disputes, prior to the filing of any legal action by the Client, the Client shall submit to (company name) written notification of the dispute and Client’s intent to file a legal action, and (company name) shall have thirty (30) days to submit the dispute to binding arbitration in (city/state/province). Such arbitration shall be conducted in accordance with the Construction Industry Rules of the American Arbitration Association (or other appropriate entity), except for the rules pertaining to the arbitrator selection. The parties submitting the dispute shall appoint an arbitrator by mutual agreement who is knowledgeable in and familiar with the professional COMMERCIAL BUILDING INSPECTION industry and who will follow substantive rules of law. Each party further agrees to pay its own arbitration costs. Any award made by the arbitration shall be enforceable as a judgment in any court of competent jurisdiction.

12. No action, whether in contract or tort, shall be brought against (company name) in arbitration or a court of law beyond the earlier of one year following the date of the Inspection Report or 120 days after discovery by Client of the condition which forms the basis of the action.

13. The Inspection Report is not intended for use by anyone other than the Client. No third party shall have any right arising from this Contract or the Inspection Report. In consideration for the furnishing of the Inspection Report, the Client agrees to indemnify and hold harmless (company name), its agents, employees, inspectors, directors, officers, shareholders, successors and assigns, for all costs, expenses, legal fees, awards, settlements, judgments, and any other payments of any kind whatsoever incurred and arising out of a law suit, cross-complaint, countersuit, arbitration, administrative proceeding, or any other legal proceeding brought by any third party who claims that he/she relied on representations made in such Inspection Report and was damaged thereby. Client’s request that (company name) release copies of the Inspection Report shall be at Client’s risk with respect to the contents of this paragraph.

COPYRIGHT 2005 PROSPEXALL RIGHTS RESERVED PAGE 3 OF 4

14. Client acknowledges and agrees that it is the Client’s intention to use the inspection and report for the purpose of becoming better informed regarding some of the conditions of the subject property and not for the purpose of negotiating other contracts.

15. Except as provided above for arbitration of disputes, if a claim is made against (company name) for any alleged error omission or other act arising out of the performance of this inspection, and if Client fails to prove such claim, Client agrees to pay all costs and attorney’s fees incurred by (company name) and its employees, agents, inspectors, directors, shareholders, successors and assigns.

16. CLIENT ADDITIONALLY AGREES THAT UNLESS CLIENT HAS ELECTED ON THE FIRST PAGE OF THIS CONTRACT TO REMOVE THE LIMITATION OF LIABILITY AND LIQUIDATED DAMAGES, CLIENT ASSUMES AND ACCEPTS ALL RISK OF OWNER CONCEALMENT OR MISREPRESENTATION. IN THE ABSENCE OF SUCH AN ELECTION BY CLIENT, IF CLIENT MAKES A DEMAND OR BRINGS AN ACTION AGAINST THE OWNER(S) FOR FRAUD, CONCEALMENT OR MISREPRESENTATION REGARDING A CONDITION OR COMPONENT OF THE SUBJECT PROPERTY, CLIENT HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS OR LIABILITY AGAINST INSPECTION COMPANY AND INSPECTOR(S) FOR DAMAGES RELATED TO THE CONDITION OR COMPONENT FOR WHICH THE DEMAND OR CLAIM IS MADE AGAINST THE OWNER.

17. Acceptance of the Inspection Report by any party shall constitute acceptance of the terms and conditions of this Contract as if signed by that party and shall constitute authorization to any person signing as Client to act as an agent in agreeing to the terms and conditions. This contract is binding on Client, Client’s spouse, heirs, distributees, guardians, legal representative, successors and assigns.

18. The presence of Client has been requested during the inspection. If Client is not present at the time of the inspection or for any other reason is unable to sign this Contract at the time of inspection, acceptance of the Inspection Report shall constitute acceptance of the terms and conditions of the Contract as if signed by Client.

19. (Company name) reserves the right to modify the written inspection report by a written addendum for a period of forty-eight (48) hours after the inspection report has been delivered to the Client. If ( company name) exercises this right to modify the written report within the time as specified above, (company name) shall provide telephone, fax, or email notification of the need for such addendum to the Client or Client’s authorized agent and Client agrees that the Inspection Report is not complete until receipt of the written addendum. Any such written addendum shall be mailed, emailed, faxed to the Client, or made available for pickup by Client within three (3) working days of the date of the Inspection Report.

20. The COMMERCIAL BUILDING INSPECTION Report, any addenda, and the “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” collectively constitute the contract document. In the event any provision is held to be unenforceable, it shall be severed from the contract document and the remaining provisions shall be fully enforced.

21. The Client agrees that (company name) is not a party to ANY contracts or agreements between the Client and any third parties including, but not limited to: property sellers, lessors, lenders, appraisers, insurors, or real estate agents and that (company name) cannot and will not provide ANY advice or direction pertaining to the use of ANY information contained in the inspection report with regard to ANY such contracts or agreements. The Client further agrees that any decisions regarding consulting with any representatives or other parties are solely the responsibility of the Client and to indemnify and hold harmless (company name), its agents, employees, inspectors, directors, officers, shareholders, successors and assigns with regard to the Client’s decisions pertaining the use of ANY of the information contained in the inspection report.

22. If the terms and conditions of this Authorization and Contract are not acceptable to the Client, the Client agrees to notify (company name) or (company name’s) representatives and the inspection shall be canceled, no fee charged, and the Client shall be free to seek inspection services elsewhere.


PAGE 4 OF 4

Environmental Exclusion Addendum toThe Commercial Building Inspection Contract©

AMENDED: 9/26/06

________________________________

________________________________SUBJECT PROPERTY

I understand and agree to the following:

1. Specifically excluded from this COMMERCIAL BUILDING INSPECTION and COMMERCIAL BUILDING INSPECTION report are any inspections for, sampling of, testing of, or analysis of any suspected harmful, dangerous, or toxic substances or materials or environmental hazards including but not limited to: mold or other bio-aerosols, radon or other gases, lead, asbestos or other non-biological airborne particulates or in situ materials, waterborne, airborne, or soil borne materials or contaminants, heavy metals, volatile organic materials, petroleum products or petrochemicals, radioactive materials, non-ionizing electromagnetic radiation, or plant, animal, or insect secretions or excretions.

2. That if I desire to obtain information regarding the presence of any environmental hazards or harmful, dangerous, or toxic substances or materials, it is solely my responsibility to contact and engage the services of QUALIFIED individuals or companies that specialize in the areas of my specific interest or concern. Such QUALIFIED individuals or companies may include, but are not limited to, those specializing in geo-technical engineering; environmental surveying, testing, and analysis; industrial hygiene; mold testing and analysis; and radon gas testing.

3. That I will indemnify and hold harmless (company name), and its agents, employees, and inspectors for the presence of any environmental hazards and any harmful, dangerous, or toxic substances or materials at the subject property as well as for any and all damages and liability for any mitigation, construction, or any other costs associated with the presence of any such hazards or substances or materials.

4. In the event that the Inspection Report or oral statements made by the Inspector supply any information about any of the forgoing, this information shall be deemed to be informational only and supplied as a courtesy to the Client, and shall not be deemed to be an amendment to or waiver of the foregoing exclusions.

By initialing in the space indicated, I agree to the all of the terms and conditions as specified above in this “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” addendum.

CLIENT’S _____________________________ INITIALS DATE

COPYRIGHT 1/05 PROSPEXALL RIGHTS RESERVED

PAGE 1 OF 1

DESCRIPTIONOF

COMMERCIAL BUILDING INSPECTION SERVICES©

AMENDED 4/4/07

The (company name) COMMERCIAL BUILDING INSPECTION is a limited and primarily visual, non-destructive, and non-technical evaluation (using NORMAL OPERATING CONTROLS where appropriate) of the applicable, SAFELY ACCESSIBLE and READILY ACCESSIBLE installed systems and installed components specified in this inspection report for ADVERSE CONDITIONS. Only the visible, SAFELY ACCESSIBLE and READILY ACCESSIBLE portions of the specified systems and components will be inspected. The (company name) COMMERCIAL BUILDING INSPECTION is intended to assist the Client in identifying these conditions. It is not a technical inspection. Destructive testing and/or disassembly of materials of components, other than the removal of access covers intended to allow normal building owner maintenance, is excluded. Barriers, carpet, walls, ceilings, tile, obstacles, personal goods or stored items are not removed or moved to gain access or to provide a clearer view.

Examination and evaluation of certain systems and components and specific testing, evaluation, and remedial design work require substantial additional time and the services of licensed contractors or individuals with necessarily narrow and highly specialized training. Such services may be provided by (company name) as separate services but are not a part of the (company name) COMMERCIAL BUILDING INSPECTION. These include but are not limited to the performance of engineering services, the inspection of swimming pools, hot tubs, spas, solar systems, irrigation, well and septic systems, elevators, escalators, moving walkways, dumbwaiters, lifts, food preparation, storage, or cooking equipment or appliances; smoke or fire detection, alarm, or suppression systems or components; power generator systems, or inspections for insects, pests, toxic substances and environmental hazards. If inspection or other services not included in the (company name) COMMERCIAL BUILDING INSPECTION are desired, (company name) may, under a separate contract and for an additional fee, provide same of these services or Clients may also seek any of these services independently.

The (company name) COMMERCIAL BUILDING INSPECTION is not a building warranty, guarantee, or insurance of any kind. It is not a substitute for a seller’s disclosure statement or a pre-closing walk through. It does not replace insurance to protect against eventual deterioration of systems or components. Contact your real estate professional, insurance agent, or lender for information about this type of insurance.

In order to provide our Clients with a competitively priced COMMERCIAL BUILDING INSPECTION, (company name) offers a choice of COMMERCIAL BUILDING INSPECTION options. Clients have the option of choosing a/an (company name) COMMERCIAL BUILDING INSPECTION for which the liability of (company name) is limited to liquidated damages in the amount equal to all amounts paid for the (company name) COMMERCIAL BUILDING INSPECTION to (company name) by the Client or a/an (company name) COMMERCIAL BUILDING INSPECTION for which the specific limitation on liability is removed for an additional fee of $1000.00 over and above the fee for a/an (company name) COMMERCIAL BUILDING INSPECTION with the specific limitations on liability.


PAGE 1 OF 3

DESCRIPTIONOF


The following are answers to some common questions regarding COMMERCIAL BUILDING INSPECTIONS.

What about….

moisture staining? When moisture staining or efflorescence on walls, ceilings, floors, or other surfaces is noted, it shall be understood that it cannot always be determined whether the conditions contributing to the staining have been corrected or are still present. Therefore, it is recommended that the Client immediately take additional measures to determine whether the cause of the staining has been corrected.

destructive evaluation? If additional evaluations requiring destructive measures are desired, permission from the property owner must be obtained prior to retaining the services of a QUALIFIED contractor to perform any such additional evaluations.

non-inspection and inaccessibility? When inspection of any system or component is limited or is designated as not inspected due to inaccessibility or for any other reason, it shall be understood that conditions affecting the structure, systems, or components may be present. Therefore, it is recommended the Client immediately take additional measures to examine and to assess the condition of such items.

de-energized systems? Inspectors will not light standing pilots, activate the main water, gas, or electrical controls, energize electrical circuits which are shut off or out of service, or operate any controls other than normal user controls which are typically operated by building occupants in the daily use of the building.

geological stability or condition of the site? For information regarding geological stability or site conditions, a geo-technical/soils engineer should be consulted.

structural stability or engineering analysis? Analysis of the structure, foundation and retaining walls for sustaining capacity, soundness, and adequacy of seismic, shear, and design calculations may be obtained from a registered structural engineer. All Professional Engineering work should be stamped by the Professional Engineer performing the work and should bear the registration number and signature of that Professional Engineer.

building value or appraisal? Consult your real estate professional or appraisal professional for this information.

cost estimates? It is recommended that a minimum of three separate estimates be obtained from QUALIFIED individuals or companies for all recommended or elective improvements, repairs, modifications, or corrective measures.

condition of detached buildings? Detached buildings or other structures are not included but may be inspected upon request for an additional fee.

duplex and other multi-family units? These types of residential-commercial buildings typically have multiple kitchens and often have multiple, separate heating, electrical, plumbing, and other systems which require additional time to inspect. Therefore, a different fee structure applies to the inspection of such buildings.

public records? Legality of property and its present use; conditions of title, boundaries and easements; compliance with local codes, ordinances or regulations and location in earthquake or hazard zones are not addressed and can be obtained from the appropriate public records and documents.

permits and zoning? Inspectors are not responsible for determining if any permits were required or obtained for any work performed on the subject property. Consult the appropriate jurisdictional building and/or land use department for information pertaining to permits and zoning.

COPYRIGHT 2005 PROSPEX PAGE 2 OF 3ALL RIGHTS RESERVED

DESCRIPTIONOF


(Company name) cannot predict any future conditions including but not limited to roof leaks, component failures, or the remaining serviceable life of any inspected component.

(Company name) is not responsible for and will not repair any component which fails subsequent to this inspection or which is identified or described in this report.

All repairs, corrective measures, or new work undertaken on any component or system should be performed only by QUALIFIED individuals or companies. Only new or appropriate materials should be used. All work should be performed in a workmanlike manner and in accordance with all appropriate and applicable industry standards and governmental codes and regulations. Subsequent to completion and where appropriate and applicable, it is recommended that all such work be documented by work orders, invoices, or receipts from the individuals or companies which performed the work as well as by copies of all signed off building permits and lien releases from contractors and their employees, other workers, and material suppliers. (Company name) will not reinspect any property which it has previously inspected to verify that the conditions documented during the inspection have been properly corrected. All systems and components require ongoing and prudent periodic maintenance to obtain their maximum serviceable lives.

When work requiring a permit is performed without obtaining the proper permit and inspections, that work may be considered nonconforming and illegal by governmental building code, ordinance, and regulation agencies that are charged with the promulgation and enforcement of such codes, ordinances, and regulations. Nonconforming work may jeopardize the safety of persons occupying or entering the property. It may also adversely affect specific insurance coverage and the salability of the property and may result in added costs in the form of additional fees and/or property taxes or other penalties.

This report contains our written observations and recommendations which are based on our knowledge and experience. You may receive different information from other inspectors, tradespersons, insurance adjusters, private or public personnel, contractors, building and system warranty company personnel, or other parties whose interests are different from ours. If you receive information which differs from that expressed in this written report, it is recommended that such information also be obtained in writing on the appropriate company or agency letterhead, bearing all applicable licensing numbers, and signed by the individual providing the information.

When other parties state that a component or condition indicated IMMEDIATE ATTENTION is safe and/or adequate at the present time, without the need for any modifications or corrective measures, it is recommended that those parties be asked to put such statements in writing accompanied by a signed letter stating that no attention is necessary and that the component or condition is safe and adequate according to all industry standards and governmental regulations.

The following conditions and limitations apply to the use of ladders throughout this inspection: A ladder will be used only to aid in inspecting roof surfaces and reaching attic access openings. A ladder will be used only, when, in the judgment of the inspector, it is safe and prudent to do so. Use of ladder is specifically excluded when roof surfaces cannot be reached safely with a ladder twelve (12) feet or shorter in length and when attic access openings cannot be reached safely with a ladder six (6) feet or shorter in length.


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GENERAL INFORMATION©

This inspection is performed and this report is prepared solely on behalf of and for the exclusive use of Clients of (company name) and no third parties have any right to this inspection and report.

Its sole purpose is to provide our Clients with both an education and a better understanding of some of the conditions which may exist at the subject property in order to assist our Clients in planning for both immediate and regular maintenance of the specified systems and components.

Therefore, it is recommended that the contents of this inspection and report be kept strictly confidential and not be discussed with or shown to others, including but not limited to appraisers, insurance agents and adjusters, building and systems warranty companies, and lenders, whose interests are different from those of (company name) and its Clients.

(Company name) will not return to any property which it has previously inspected for the purpose of re-inspection to verify that any conditions documented in the course of the original inspection have been modified or corrected or that any remedial measures have been performed.

For this reason, (company name) recommends that all repairs, corrective measures, or new work undertaken on any component or system be performed only by QUALIFIED individuals or companies and that only new, appropriate or specified materials be used. Further, that all work be performed in a workmanlike manner and in accordance with all appropriate applicable industry standards and governmental codes, ordinances and regulations.

Subsequent to completion and where appropriate and applicable, it is recommended that all such work be documented by work orders, invoices, or receipts from the individuals or companies which performed the work as well as by copies of all signed off building permits and lien releases from contractors and their employees, other workers, and material suppliers.

Your inspector may bring to your attention and discuss certain modifications which you may wish to consider as part of upgrading your building. These modifications typically exceed some of the building and construction standards that may have applied at the time of the original construction of the building. The differences between any such original building and construction standards and current standards do not constitute “deficiencies” in the subject property. Therefore, such modifications constitute ELECTIVE UPGRADE conditions and should be considered as suggested improvements which you may choose to implement as part of an ongoing building maintenance and improvement process. As with any modifications to the subject property, all work to address ELECTIVE UPGRADE conditions should be performed only by QUALIFIED individuals and in accordance with all applicable industry standards and governmental requirements pertaining to permits, codes, ordinances, and regulations.

Any oral statements made by the inspector pertaining to ELECTIVE UPGRADE conditions or any inclusion in the Inspection Report of information regarding ELECTIVE UPGRADE conditions shall be deemed to be informational only and supplied as a courtesy to the Client and shall not be deemed to be an amendment to or waiver of any exclusions included in the Contract and agreement for the COMMERCIAL BUILDING INSPECTION.

A COMMERCIAL BUILDING INSPECTION is a limited visual, non-technical evaluation of the multiple systems, subsystems, and components of a commercial building. Therefore, occasionally, in the course of performing evaluations, modifications, or corrective measures as a result of the information contained in the (company name) inspection report, the appropriate and QUALIFIED individuals or companies performing such work may determine that there are other conditions which could not be determined in the course of the original inspection and for which modifications or corrective measures are also recommended.

COPYRIGHT 2005 PROSPEX

ALL RIGHTS RESERVED PAGE 1 OF 1

Authorization to Sign the “COMMERCIAL BUILDING INSPECTION Authorization and Contract

and Scope of Inspection” on Behalf of the Client”©

Legal authorities consistently state that a COMMERCIAL BUILDING INSPECTION should neither be performed nor an inspection report delivered prior to obtaining a COMMERCIAL BUILDING INSPECTION contract signed by the Client of the inspection company or by an individual who has been authorized by the Client to sign the inspection contract on behalf of the Client. Therefore, this prototype document is offered for consideration for use in the event that a real estate agent or other individual states that he or she is so authorized. This form would be signed by an individual so authorized prior to obtaining his or her signature on the inspection contract.

My signature below acknowledges that I am authorized by _______________________ to sign CLIENT’S NAME

the (company name) “COMMERCIAL BUILDING INSPECTION Authorization and Contract and Scope of Inspection” for inspection of the property located at

___________________________________________________________________________PROPERTY ADDRESS

on behalf of the above referenced Client and to receive a copy of the inspection report.

__________________________________________________ _____________________ SIGNATURE OF INDIVIDUAL AUTHORIZED TO SIGN ON BEHALF OF CLIENT DATE


PAGE 1 OF 1

“PROSPEX Prototype COMMERCIAL BUILDING INSPECTION Report Glossary”©and

Supplemental “ELECTIVE UPGRADE” Information for ProSpex Subscribers

The terms “acceptable,” “satisfactory,” and “functional” could be confusing to or misinterpreted by Clients, agents, and attorneys. Use of these and similar terms becomes unnecessary when the term INSPECTED is used to indicate that no ADVERSE CONDITIONS affecting the NORMALLY INTENDED FUNCTION OR OPERATION of the visible, SAFELY ACCESSIBLE and READILY ACCESSIBLE portions of a system or component were determined to be present at the time of the inspection. See the definition of INSPECTED in this glossary.

Also, the term COMMERCIAL BUILDING INSPECTION has been added and defined because the most commonly accepted and utilized inspection standards either do not contain an operational definition of the term or their definitions are inconsistent and incomplete.

NOTE: Depending on an individual inspection company’s report format, the following may be considered:

Some individuals may consider using the definition of the term IMMEDIATE ATTENTION while substituting a term such as “corrective action,” or “priority action” in place of the term IMMEDIATE ATTENTION. However, while the term “as soon as possible” will remain in the definition, the concept of “immediate” disappears. In light of recent arguments advanced by some individuals regarding advising clients to perform certain work “prior to close of escrow” or “prior to closing,” it is recommended that consideration be given to retaining the term IMMEDIATE ATTENTION. For more information, see the ProSpex article “Advising That Specific Work Be Performed ‘Before or Prior to the Close of Escrow’” at the end of this document

PREVENTIVE ACTION may be chosen in place of NORMAL MAINTENANCE without changing the definition.

The inclusion of the term ATYPICAL(LY) in an inspection report glossary allows an inspector to describe certain conditions more concisely and accurately and without unnecessary or potentially confusing elaboration as in the examples below.

“There is ATYPICAL cracking of the garage floor slab.”

“The air conditioning system compressor/condenser unit fan is ATYPICALLY noisy.”

The recommended inclusion of the term NOT APPLICABLE in inspection report glossaries and use of NOT APPLICABLE in inspection reports has come from discussions with other ProSpex subscribers.

Depending on various state regulatory and professional association requirements, inspection report formats may be required not only to include or list certain systems, components, and conditions in every inspection report (regardless of whether or not a specific system, component, or condition is present at a given property), but also to include a comment pertaining to every listed system and component required by a state’s regulations and/or a given standards of practice. The same regulatory and/or association requirements may also require inspection report formats to include a comment pertaining to every listed system and component required to be included in the report.

The term NOT APPLICABLE as defined in this document can be used as a comment when a system or component which is required to be included in inspection reports is either not present or cannot be determined to be present.

The recommended inclusion of the term ELECTIVE UPGRADE in inspection report glossaries and use of NOT APPLICABLE in inspection reports has come from discussions with other ProSpex subscribers. There are three additional related documents which accompany this prototype glossary document.

PROSPEX SUBSCRIBER INFORMATION (cont’d)

The first of these additional documents is titled “Supplemental ELECTIVE UPGRADE” Information” and it both explains the concepts surrounding ELECTIVE UPGRADE conditions in detail and it lists some of the specific devices, assemblies, and conditions to which the term ELECTIVE UPGRADE may be applied when appropriate.

The second of these additional documents is titled “Supplemental ELECTIVE UPGRADE Information” and it both explains the concepts surrounding ELECTIVE UPGRADE conditions in detail, limits the specific devices, assemblies, and conditions to which the term ELECTIVE UPGRADE may be applied when appropriate and provides a check box method of identifying specific assemblies and devices for designating ELECTIVE UPGRADE when applicable.If there are a sufficient number of conditions affecting the NORMALLY INTENDED FUNCTION OR OPERATION of a given component or of multiple components in a system, an inspector may decide that it is appropriate to recommend evaluation of the entire system by a specific tradesperson. In this situation the following language in the following example might be considered:

It is recommended that, based on the extent of the electrical system conditions documented in this report, the entire electrical system be evaluated by a QUALIFIED electrical contractor for any necessary modifications or corrective measures. If, in the course of performing the above referenced work, it is determined that there are other conditions which are not documented in this report and which require modifications or corrective measures, it is recommended that such modifications or corrective measures also be performed at that time.


For this reason, (company name) recommends that all repairs, corrective measures, or new work undertaken on any component or system be performed only by QUALIFIED individuals or companies and that only new, appropriate, or specified materials be used. Further, that all work be performed in a workmanlike manner and in accordance with all appropriate applicable industry standards and governmental codes, ordinances and regulations.

Subsequent to completion, it is recommended that all such work be documented by work orders, invoices, or receipts from the individuals or companies which performed the work as well as by copies of all signed off building permits and lien releases when applicable.

Keep in mind that some conditions which some inspectors may indicate as IMMEDIATE ATTENTION conditions may be able to be addressed by someone other than a tradesperson. Such conditions might include installing a cover plate on a switch or receptacle where one was broken or missing or replacing a damaged / leaking P trap. A building owner or building maintenance personnel may be QUALIFIED to perform such corrective measures and recommending specifically that an electrician or plumber perform these tasks may be inappropriate. This is why the term QUALIFIED is defined in the manner above.

The third document, On Advising That Specific Work Be Performed ‘Before or Prior to the “Close of Escrow’,” is referenced previously in this document.

PROTOTYPE COMMERCIAL BUILDING INSPECTION REPORT GLOSSARY©

For the purposes of this inspection and report, the terms listed below in this section are defined as follows. When any of these terms appear in the inspection report, they will be in bold and all-capitalized text, in color, in italics, or otherwise highlighted.

ADVERSE CONDITION: With regard to a specified system or component and solely in the professional opinion of the inspector, a condition which is producing a detrimental effect on that system or component or on other systems or components, which is impairing the NORMALLY INTENDED FUNCTION OR OPERATION of the specified system or component at the time of the inspection, or which in not consistent with GENERALLY ESTABLISHED PRACTICE with regard to installation, assembly, operability, maintenance, or suitability of use.

ATYPICAL(LY): With regard to any condition noted in this inspection report, the terms ATYPICAL or ATYPICALLY shall mean solely in the knowledge, experience, and opinion of the inspector, unusual, uncommon, not typical, does not conform to the type, is irregular, or is abnormal as pertains to assemblage, manufacture, location, or NORMALLY INTENDED FUNCTION OR OPERATION or use. It is recommended that conditions so designated be further evaluated by a QUALIFIED individual or company and that any necessary modifications or corrective measures deemed appropriate to address such conditions be implemented. It is further recommended that if other conditions requiring modifications or corrective measures become apparent in the course of performing the above referenced work, such conditions also be addressed at that time.

COMMERCIAL BUILDING INSPECTION: A primarily visual, non-destructive, and non-technical evaluation (using NORMAL OPERATING CONTROLS where appropriate) of the applicable, SAFELY ACCESSIBLE and READILY ACCESSIBLE INSTALLED systems and INSTALLED components specified in this inspection report for ADVERSE CONDITIONS.

The findings developed in the course of a COMMERCIAL BUILDING INSPECTION are documented in the written report which is provided to the client and in which the inspector shall:

DESCRIBE the systems and components inspected

REPORT any ADVERSE CONDITIONS which pertain to such systems and components

Recommend appropriate action (not specific repair or remediation techniques) to address such ADVERSE CONDITIONS

REPORT all appropriate systems or components which were present and not inspected and state the reason such systems or components were not inspected

DELETED: When any system or component is so designated, it shall mean that it was specifically excluded from the inspection at the request of the Client and was not inspected or evaluated for any conditions whatsoever. When any system or component is deleted at the request of the Client, the system or component designated for deletion shall be identified in writing and approval for such deletion shall be initialed by the Client.

DESCRIBE: To identify a specific system or component by its type and to distinguish it by characteristics such as material, energy source, etc. which differentiate that system or component from other similar systems or components.

ELECTIVE UPGRADE*: This designates certain information which may appear in the inspection report and which is provided solely as a courtesy to Clients for their consideration as part of any overall upgrading and maintenance program they may choose to implement for the subject property. ELECTIVE UPGRADE conditions DO NOT constitute “deficiencies” in the property. All modifications to address any ELECTIVE UPGRADE condition should be performed only by QUALIFIED individuals or companies and in accordance with all applicable industry standards and governmental requirements pertaining to permits, codes, ordinances, and regulations.

*“Supplemental ELECTIVE UPGRADE Information” appears after the page titled “EXAMPLE OF REPORT GLOSSARY INFORMATION.” EXAMINE(D): With regard to a system or component, EXAMINE shall mean to evaluate such system or component in accordance with both the Scope of Inspection as outlined in the (company name) inspection contract and the Inspection Report.

GENERALLY ESTABLISHED PRACTICE: With regard to the installation, assembly, operability, maintenance, or suitability of a specified system or component, procedures which have, by custom, been applied over an extended period of time.

COMMERCIAL BUILDING INSPECTION REPORT GLOSSARY continued

IMMEDIATE ATTENTION: When any ADVERSE CONDITION is so designated, it shall mean that it is recommended that such condition be evaluated and addressed by an appropriate and QUALIFIED individual or company as soon as possible for any necessary modifications or corrective measures. If, in the course of evaluating and addressing the condition, it is determined that there are other conditions which require modifications or corrective measures, it is recommended that such modifications or corrective measures also be performed at that time.

INSPECTED: When any such system or component is so designated, it shall mean that it was EXAMINED in accordance with the scope of work as specified for the inspection and found to be performing its NORMALLY INTENDED FUNCTION OR OPERATION at the time of the inspection. Further, no visible ADVERSE CONDITIONS affecting the NORMALLY INTENDED FUNCTION OR OPERATION of the visible, SAFELY ACCESSIBLE and READILY ACCESSIBLE portions of that system or component were observed at the time of the inspection.

NOTE: Systems and components can be active or passive. An active system or component is one which, in order to be fully inspected, requires that it and/or other attached or related systems or components be in operation. Examples of active systems and components are central air conditioning systems, water heaters, and plumbing fixtures.

A passive system or component is one which, in order to be fully does not typically require that it and/or other attached or related systems or components be in operation. Examples of passive systems and components are exterior wall claddings, support columns, and roof coverings.

INSTALLED: Attached, connected, or set in place for use such that moving or removal requires the use of tools.

MONITOR: When any condition is so designated, it indicates that, based on experience, education, and training, similar conditions in like components in other residential systems of the same type have not required any immediate action. Therefore, no immediate action is specified at this time. However, factors which contributed to the condition may be ongoing or may recur and other factors including, but not limited to, weather/climate, seismic activity, environmental changes, traffic, change of ownership or occupancy may also cause the condition to change. Therefore, when it is recommended that any condition be MONITORED, such condition should be periodically observed for any change. Should any change be observed, it is recommended that the condition so specified be evaluated by an appropriate and QUALIFIED individual or company, as soon as possible, to determine whether there is a need for any modifications or corrective measures to address the condition. If, in the course of performing such evaluation, it is determined that there are other conditions which require modifications or corrective measures, it is recommended that such modifications or corrective measures also be performed at that time.

NOTE: While, historically and because of its inclusion in some standards of practice, the term MONITOR has been used by many inspectors in their inspection reports, its use may create the potential for greater legal exposure for the inspector or the inspection company should a condition so designated significantly change or worsen. A Client could claim that the inspection report should have indicated the condition as IMMEDIATE ATTENTION Therefore, in the opinion of some legal experts, the term MONITOR should not be used in inspection reports and conditions to which the term MONITOR would previously have been applied should be designated as conditions for which IMMEDIATE ATTENTION is recommended. ProSpex recommends that, as with all written information considered for inclusion in inspection reports, the use of the term MONITOR also be carefully reviewed by legal counsel regarding the advisability of its use.

When such conditions are designated as IMMEDIATE ATTENTION conditions, then a QUALIFIED individual or company determines whether or not the condition requires modifications or corrective measures. Inspectors should not be concerned that the potential that the Client, seller, or real estate agent may be displeased if further evaluation indicates that no modifications or corrective measures are necessary.

Remember, inspectors are like doctors performing a general physical examination; if the physician recommends further evaluation by a specialist based on a condition determined during the primary physical examination, the patient should not be disappointed if, after such further examination and evaluation by a specialist, it turns out that there is nothing of concern.

NORMAL MAINTENANCE: When any condition is so designated, it shall mean that it is typical and common for the age and type of component inspected. To reduce the potential for additional or accelerated deterioration, it is recommended that all NORMAL MAINTENANCE conditions be addressed before additional deterioration occurs and as part of an ongoing, prudent overall property and building maintenance program. Subsequent to addressing any NORMAL MAINTENANCE condition, it is recommended that such condition be periodically reexamined as part of an ongoing, prudent overall property and building maintenance program. If desired, optional upgrading of existing systems or components may also be considered when such work is performed.


NORMALLY INTENDED FUNCTION OR OPERATION: With regard to a specified system or component, the historically and conventionally accepted purpose or use of that system or component and/or the intended purpose or use for which that system or component is designed by the manufacturer.

NORMAL OPERATING CONTROLS: Devices such as thermostats, switches, and valves designed and intended to be used on a regular basis by a building owner or occupant in the normal, day-to-day or seasonal operation of a system or component.

NOT APPLICABLE: When any system, component, or condition is so designated, it shall mean that such system, component, or condition was not present at the subject property or that the presence of such system, component, or condition could not be determined in the course of conducted in accordance with the professional standards under which the inspection is performed and the scope of the inspection as outlined in the Inspection Contract and Report.

NOT INSPECTED: When any system, component, or area is so designated, it shall mean that it was not be inspected due to inaccessibility, unsafe conditions, weather, the presence of landscaping, personal property, pets, factors beyond the inspector’s control or factors beyond the scope of the inspection as outlined in the Inspection Contract and Report. When any system, component, or area is so designated, the inspection report will indicate the specific reason(s) that it could not be inspected.

NOTE: When inspection of any system or component or area is limited or is designated as NOT INSPECTED due to inaccessibility or for any other reason, it shall be understood by the Client that it was not possible to determine if there are any ADVERSE CONDITIONS affecting the area or the NORMALLY INTENDED FUNCTION OR OPERATION of such system or component. Therefore, it is recommended that Clients take immediate measures to have any such systems, components, or systems or components within such non-inspected areas evaluated by a QUALIFIED individual or company for information regarding their condition and their ability to perform their NORMALLY INTENDED FUNCTION OR OPERATION.

QUALIFIED: When referring to any individual or company performing additional evaluation or work on any systems or components at the subject property, QUALIFIED shall mean having the training, skills, expertise, and experience necessary to competently perform the referenced work and, where required, holding all applicable licenses, and meeting all applicable governmental and industry-related requirements.

NOTE: All repairs, corrective measures, or new work undertaken on any component or system should be performed only by QUALIFIED individuals or companies. Only new or appropriate materials should be used. All work should be performed in a workmanlike manner and in accordance with all appropriate and applicable industry standards and governmental requirements pertaining to permits, codes, ordinances, and regulations. Subsequent to completion, all such work should be documented by work orders, invoices, or receipts from the individuals or companies that have performed the work. (Company name) will not re-inspect any property which it has previously inspected to verify that any ADVERSE CONDITION documented during the inspection has been properly corrected. All systems and components require ongoing and prudent periodic maintenance to obtain their maximum service lives.

When work requiring a permit is performed without obtaining the proper permit and inspections, that work may be considered nonconforming and illegal. Nonconforming work may jeopardize the safety of persons occupying or entering the property. It may also adversely affect specific insurance coverage and the salability of the property and may result in added costs in the form of additional fees and/or property tax penalties.

Subsequent to completion and where appropriate and applicable, it is recommended that all such work be documented by work orders, invoices, or receipts from the individuals or companies which performed the work as well as by copies of all signed off building permits and lien releases from contractors and their employees, other workers, and material suppliers.

Because a COMMERCIAL BUILDING INSPECTION is a limited visual, non-technical evaluation of multiple systems, subsystems, and components of a commercial building, there may be occasions when, in the course of performing evaluations, modifications, or corrective measures as a result of the information contained in the (company name) inspection report, the appropriate and QUALIFIED individuals or companies performing such work may determine that there are other conditions which could not be determined in the course of the original inspection and for which modifications or corrective measures are also recommended.Because a COMMERCIAL BUILDING INSPECTION is a limited visual, non-technical evaluation of multiple systems, subsystems, and components of a commercial building, there may be occasions when, in the course of performing evaluations, modifications, or corrective measures as a result of the information contained in the (company name) inspection report, the appropriate and QUALIFIED individuals or companies performing such work may determine that there are other conditions which could not be determined in the course of the original inspection and for which modifications or corrective measures are also recommended.


READILY ACCESSIBLE: With regard to a system or component, in the sole discretion and judgment of the inspector, visible and able to be inspected without requiring the inspector to move, remove, damage, or disturb any wall, floor, ceiling, or window coverings, claddings, or finish treatments; to move, remove, damage, disturb, climb upon, climb over, or straddle any item of personal property; to move, remove, damage, or disturb any landscape plantings; or to interrupt the business of occupants and not requiring the use of any special protective clothing, special tools, or special equipment. ***

REPORT (verb): To communicate in writing.

SAFELY ACCESSIBLE: With regard to a system or component, in the sole discretion and judgment of the inspector, able to be inspected without risk to the safety of the inspector or others, without risk of damage to any item of personal or real property, and not requiring the use of any special protective clothing, special tools, or special equipment. ***

***All of the provisions of this definition shall apply to the inspection of roof covering components and attics with the following exceptions:

1. When, solely in the judgment of the inspector it is safe and prudent to do so and there is safe clearance and access to the attic access opening or the roof eave(s), an inspector may choose to use a ladder to aid in gaining access to attic access openings or to inspect roof covering components. The use of a ladder is specifically excluded when roof covering components cannot be reached safely with a ladder twelve (12) feet or shorter in length or when attic access openings cannot be reached safely with a ladder six (6) feet or shorter in length.

_____________________________________________

Defining these terms in a glossary which accompanies each report and applying them appropriately in the report will both significantly reduce the amount of written information necessary to include in the report and it will reduce the temptation for inspectors to editorialize. Also, it will reduce the potential for misunderstanding on the part of Clients.

EXAMPLE: The discharge piping for the temperature/pressure relief valve on the gas-fired, 50 gallon, storage type water heater is missing. IMMEDIATE ATTENTION

The components have been DESCRIBED (discharge piping, the temperature/pressure relief valve, and the water heater

The water heater has been differentiated from other types of water heaters (gas-fired, 50 gallon, storage type)

The ADVERSE CONDITION affecting the NORMALLY INTENDED FUNCTION OR OPERATION of the component has been REPORTED (the discharge piping is missing

Appropriate action has been recommended (IMMEDIATE ATTENTION).

If there are a sufficient number of conditions affecting the NORMALLY INTENDED FUNCTION OR OPERATION of a given component or of multiple components in a system, an inspector may decide that it is appropriate to recommend evaluation of the entire system by a specific tradesperson. In this situation the following language in the following example might be considered:

Based on the number and type of ADVERSE CONDITIONS determined to be affecting the electrical system and documented in this report, it is recommended that the entire electrical system be evaluated by a QUALIFIED electrical contractor for any necessary modifications or corrective measures. If, in the course of performing the above referenced work, it is determined that there are other conditions which are not documented in this report and which require modifications or corrective measures, it is recommended that such modifications or corrective measures also be performed at that time.


For this reason, (company name) recommends that all repairs, corrective measures, or new work undertaken on any component or system be performed only by QUALIFIED individuals or companies and that only new, appropriate, or specified materials be used. Further, that all work be performed in a workmanlike manner and in accordance with all appropriate applicable industry standards and governmental codes, ordinances and regulations.


Subsequent to completion, it is recommended that all such work be documented by work orders, invoices, or receipts from the individuals or companies which performed the work as well as by copies of all signed off building permits and lien releases when applicable.

Keep in mind that some conditions which some inspectors may indicate as IMMEDIATE ATTENTION conditions may be able to be addressed by someone other than a tradesperson. Such conditions might include installing a cover plate on a switch or receptacle where one was broken or missing or replacing a damaged / leaking P trap. A building owner or building maintenance personnel may be QUALIFIED to perform such corrective measures and recommending specifically that an electrician or plumber perform these tasks may be inappropriate. This is why the term QUALIFIED is defined in the manner above.

When an inspection report glossary is included with the written inspection report, it is recommended that consideration be given to clearly stating, both verbally and in the beginning of the inspection report, that such a glossary is included with the report, that for the purposes of this inspection and report, when any of the glossary terms appear in the inspection report, they will be in bold and all-capitalized text, in color, in italics, or otherwise highlighted.

Providing a list of certain glossary terms which will typically appear in the body of the report along with their definitions at the beginning of the inspection report not only makes it easier for the reader to understand and apply those terms when they see them in the report, it also eliminates the need to repeat/reprint the definitions of these terms every time such terms appear in the report. Such terms may be: IMMEDIATE ATTENTION, NORMAL MAINTENANCE, ELECTIVE UPGRADE, INSPECTED, NOT INSPECTED, NOT APPLICABLE, ATYPICAL, and QUALIFIED (see “EXAMPLE OF REPORT GLOSSARY INFORMATION” on following page).

EXAMPLE OF REPORT GLOSSARY INFORMATION

AN INSPECTION REPORT GLOSSARY IS INCLUDED WITH THIS INSPECTION REPORT.

TO ASSIST CLIENTS IN UNDERSTANDING CERTAIN GLOSSARY TERMS WHICH MAY APPEAR IN THE BODY OF THIS INSPECTION REPORT, THOSE TERMS ARE ALSO LISTED BELOW.

IMMEDIATE ATTENTION indicates that it is recommended that the ADVERSE CONDITION so designated be evaluated and addressed by an appropriate and QUALIFIED individual or company as soon as possible for any necessary modifications or corrective measures. If, in the course of evaluating and addressing the condition, it is determined that there are other conditions which require modifications or corrective measures, it is recommended that such modifications or corrective measures also be performed at that time.

NORMAL MAINTENANCE refers to maintenance conditions which are typical and common for the age and type of component inspected. To reduce the potential for additional or accelerated deterioration, it is recommended that all NORMAL MAINTENANCE conditions be addressed before additional deterioration occurs and as part of an ongoing, prudent overall property and building maintenance program. Subsequent to addressing any NORMAL MAINTENANCE condition, it is recommended that such condition be periodically reexamined as part of an ongoing, prudent overall property and building maintenance program. If desired, optional upgrading of existing systems or components may also be considered when such work is performed.

ELECTIVE UPGRADE designates certain information which may appear in the inspection report and which is provided solely as a courtesy to Clients for their consideration as part of any overall upgrading and maintenance program they may choose to implement for the subject property. ELECTIVE UPGRADE conditions DO NOT constitute “deficiencies” in the property. All modifications to address any ELECTIVE UPGRADE condition should be performed only by QUALIFIED individuals or companies and in accordance with all applicable industry standards and governmental requirements pertaining to permits, codes, ordinances, and regulations.

INSPECTED: When a system or component is so designated, it means that it was EXAMINED in accordance with the scope of work as specified for the inspection and found to be performing its NORMALLY INTENDED FUNCTION OR OPERATION at the time of the inspection. Further, no visible ADVERSE CONDITIONS affecting the NORMALLY INTENDED FUNCTION OR OPERATION of the visible, SAFELY ACCESSIBLE and READILY ACCESSIBLE portions of that system or component were observed at the time of the inspection.

NOT INSPECTED: When any component is so designated, it shall mean that it was not be inspected due to inaccessibility, unsafe conditions, weather, the presence of landscaping, personal property, pets, factors beyond the inspector’s control or factors beyond the scope of work specified for the inspection. When any component is so designated, the inspection report will indicate the specific reason(s) that it could not be inspected.NOTE: When inspection of any system or component is limited or is designated as NOT INSPECTED due to inaccessibility or for any other reason, it shall be understood by the Client that it was not possible to determine if there are any ADVERSE CONDITIONS affecting the NORMALLY INTENDED FUNCTION OR OPERATION of such system or component. Therefore, it is recommended that Clients take immediate measures to have any such systems or components evaluated by a QUALIFIED individual or company if information regarding their condition and their ability to perform their NORMALLY INTENDED FUNCTION OR OPERATION.

NOT APPLICABLE refers to systems, components, or conditions which were not present at the subject property or that the presence of such systems, components, or conditions could not be determined in the course of an inspection conducted in accordance with the scope of work as specified for the inspection.

ATYPICAL/ATYPICALLY refers to conditions noted in the inspection report which, solely in the knowledge and experience of the inspector, are unusual, uncommon, not typical, do not conform to the type, are irregular, or are abnormal as pertains to assemblage, manufacture, location, or NORMALLY INTENDED FUNCTION OR OPERATION or use. It is recommended that conditions so designated be further evaluated by a QUALIFIED individual or company and that any necessary modifications or corrective measures deemed appropriate to address such conditions be implemented. It is further recommended that if other conditions requiring modifications or corrective measures become apparent in the course of performing the above referenced work, such conditions also be addressed at that time.

QUALIFIED: When referring to any individual or company performing additional evaluation or work on any systems or components at the subject property, QUALIFIED shall mean having the training, skills, expertise, and experience necessary to competently perform the referenced work and, where required, holding all applicable licenses, and meeting all applicable governmental and industry-related requirements.

Consulting, Resource, Education and Support Services for Professional Building Inspectors “A candle loses no light when it lights another candle.”

DRAFT COPYTHE WRITTEN WORK PRODUCT WHICH ACCOMPANIES THIS COVER PAGE IS NOT INTENDED AS OR REPRESENTED AS LEGAL ADVICE OR LEGAL OPINION OF ANY KIND WHATSOEVER NOR IS IT TO BE CONSIDERED OR CONSTRUED AS SUCH. DO NOT USE ANY OF THIS MATERIAL IN ANY MANNER WITHOUT PRIOR DISCUSSION WITH AND REVIEW AND APPROVAL BY A COMPETENT ATTORNEY!

“ProSpex ELECTIVE UPGRADE INFORMATION”©

INTRODUCTORY COMMENTS

The question of how to best address conditions which were consistent with generally established practice regarding building/construction at the time of original construction but which would not meet current standards or requirements if the same building were constructed today is a challenging one. While the term ELECTIVE UPGRADE appears in and is defined in the ProSpex “Report Glossary” draft document, some ProSpex subscribers have asked if there were any way the concept of ELECTIVE UPGRADE could be more directly applied to specific conditions.

The specific ELECTIVE UPGRADE conditions that are included in this document are not the only ones that may be present in any particular commercial building. They simply represent those conditions which are common and which inspectors can easily determine in the course of an inspection.

Inspectors who choose to incorporate verbal discussions and/or written information regarding ELECTIVE UPGRADE conditions may wish to determine, on an inspection by inspection basis, which specific ELECTIVE UPGRADE conditions they want to include. Therefore, the following prototype report language may be considered:

GENERALLY ESTABLISHED PRACTICE pertaining to assembly, installation methods, materials, and components of building/construction changes over time and such change is reflected in certain differences in buildings built during different periods. Just as vehicles which met automotive industry practices and U.S. Department of Transportation requirements at the time of original manufacture are not required to be brought into conformance with current practices and governmental requirements unless specific modifications are performed on them, neither are buildings which conformed to GENERALLY ESTABLISHED PRACTICE and applicable building regulations required to be continually modified to meet current GENERALLY ESTABLISHED PRACTICE and applicable building regulations. Typically, changes in such practices and requirements for both vehicles and buildings reflect improvements in manufacture, construction, function, and use.

Any information which may be included in the inspection report or oral statements which may be made by the inspector regarding any ELECTIVE UPGRADE conditions refer to specific conditions at the subject property which may differ from those in a newer or different building because the subject property was constructed when earlier and/or different building/construction practices and standards applied. ELECTIVE UPGRADE information may include, but is not limited to, information regarding GFCI, AFCI, and grounding-type receptacle outlets; smoke detectors; safety glass/glazing; stair, balcony, and deck guardrail openings; and back flow prevention.. The exclusion of any ELECTIVE UPGRADE condition from the inspection report SHALL NOT constitute negligence on the part of the inspector or the inspection company. The inclusion of any written information in the inspection report or oral statements regarding any ELECTIVE UPGRADE conditions is informational only and supplied solely as a courtesy to the Client for their consideration to aid in planning for any overall upgrading and maintenance program they may choose to implement for the subject property and such inclusion shall not be deemed to be an amendment to or waiver of any specific or general exclusion contained in the inspection contract and agreement or the written inspection report.

A COMMERCIAL BUILDING INSPECTION is a primarily visual, non-destructive, and non-technical evaluation (using NORMAL OPERATING CONTROLS where appropriate) of the applicable, SAFELY ACCESSIBLE and READILY ACCESSIBLE INSTALLED systems and INSTALLED components specified in this inspection report for ADVERSE CONDITIONS.

*PROSPEX IS A SERVICEMARK OF KEVIN M. O’HORNETT dba PROSPEX COPYRIGHT 2005 PROSPEX ALL RIGHTS RESERVED

A COMMERCIAL BUILDING INSPECTION includes a written report which documents the systems and components that are present and inspected, DESCRIBES ADVERSE CONDITIONS pertaining to those systems and components, and recommends specific actions to address such ADVERSE CONDITIONS.

A COMMERCIAL BUILDING INSPECTION is NOT a “safety inspection.” A COMMERCIAL BUILDING INSPECTION is NOT an inspection to determine compliance with any governmental codes, ordinances, regulations, or rules; Building owner Association (BOA) requirements or rules; or BOA Covenants, Conditions, and Restrictions (CC and Rs).

ELECTIVE UPGRADE conditions DO NOT constitute ADVERSE CONDITIONS in the property. Any ELECTIVE UPGRADE modifications which the Client chooses to implement at any time at the subject property should be performed only by QUALIFIED individuals or companies and in accordance with all applicable standards and governmental requirements pertaining to permits, codes, ordinances, and regulations as well as in accordance with all BOA; CC and Rs, or other requirements when and where applicable.

Any specific requirements pertaining to ELECTIVE UPGRADE conditions may vary based on the age of a given building and specific current jurisdictional requirements as well as requirements which may have been applicable at the time of construction of the building or at the time of the installation or construction of a specific device or assembly.”

All decisions regarding the choice to address any ELECTIVE UPGRADE conditions documented or DESCRIBED in this report are solely those of Clients and should be based on Clients’ assessments of their own specific interests and concerns.

All modifications to address any ELECTIVE UPGRADE conditions should be performed only by QUALIFIED individuals or companies and in accordance with all applicable industry standards and governmental requirements pertaining to permits, codes, ordinances, and regulations.

THE FOLLOWING IS PROVIDED FOR CONSIDERATION WHEN A SWIMMING POOL IS PRESENT

Requirements regarding GFCI protection for receptacle outlets in pool and hot tub areas and for the presence of child protective features and devices designed and intended to reduce the potential for unsupervised access to pool areas by young children may vary depending upon when a pool was installed and applicable jurisdictional requirements. However, because of the importance of such protective features and devices in reducing the potential for both pool electrical system related and for child access related injuries or fatalities, if ELECTIVE UPGRADE appears in the report in reference to any information regarding GFCI protection for receptacle outlets in pool and hot tub areas or child protective safety features and devices pertaining to swimming pools and/or pool access, it is very strongly recommended that all such safety features and devices be installed in all appropriate locations as soon as possible after taking possession of the subject property and before young children occupy or visit the subject property. All such safety features and devices be installed in all appropriate locations as soon as possible after taking possession of the subject property and before young children occupy or visit the subject property . All modifications implemented to address any ELECTIVE UPGRADE conditions should be performed only by QUALIFIED individuals or companies and in accordance with all applicable industry standards and governmental requirements pertaining to permits, codes, ordinances, and regulations.

Requirements regarding the presence of child protective features and devices designed and intended to reduce the potential for unsupervised access to pool areas by young children may vary depending upon when a pool was installed and applicable jurisdictional requirements. However, because of the importance of such protective features and devices in reducing the potential for both pool electrical system related and for child access related injuries or fatalities, when ELECTIVE UPGRADE appears in the report in reference to any information regarding child protective safety features and devices pertaining to swimming pools and/or pool access, it is very strongly recommended that all such safety features and devices be installed in all appropriate locations as soon as possible after taking possession of the subject property and before young children occupy or visit the subject property.

For ELECTIVE UPGRADE information pertaining to swimming pool barriers and to doors and gates which provide direct access to pools and to pool equipment, please see the United States Consumer Product Safety Commission website at www.cpsc. gov for swimming pool safety information.

NOTE: Commercial building inspectors can go to the website referred to above and can download and print all of the appropriate CPSC information if they wish to provide it to their Clients.


http://www.cpsc./

Consulting, Resource, Education, and Support Services for Professional Building Inspectors “A candle loses no light when it lights another candle.”

DRAFT COPYNOT INTENDED FOR USE, DISTRIBUTION, OR PUBLICATION

THIS WRITTEN WORK PRODUCT IS NOT INTENDED AS OR REPRESENTED AS LEGAL ADVICE OR LEGAL OPINION OF ANY KIND WHATSOEVER NOR IS IT TO BE CONSIDERED OR CONSTRUED AS SUCH. DO NOT USE ANY OF THIS MATERIAL IN ANY MANNER WITHOUT PRIOR DISCUSSION WITH AND REVIEW AND APPROVAL BY A COMPETENT ATTORNEY!

On Advising That Specific Work Be Performed “Before or Prior to the Close of Escrow”

5/21/07

In my opinion, it is inappropriate for professional inspectors to recommend that any adverse conditions determined in the course of an inspection and documented in the written report be further evaluated and/or addressed “prior to close of escrow.” According to an attorney with whom I have discussed this particular concept, doing so may actually increase, rather than decrease, the inspector’s legal exposure.

Professional inspectors are neither de facto nor de jure participants in the contract(s) between the parties to the real estate transaction (buyer, seller, and agent[s]). Nowhere is this point made clearer than in the universally understood and accepted position that inspectors cannot and will not offer any opinion regarding whether a client should or should not purchase the property.

When inspectors advise buyers to further evaluate or address adverse conditions “prior to close of escrow,” they abdicate their role as objective and disinterested third parties and assume the position of participants in the negotiation of contracts to which they are not parties. Should a sale fall through based on the buyer’s demand that, on the advice of the inspector, something be done “prior to close of escrow” and the seller’s refusal to acquiesce to that demand, legal action could be brought against the inspector by the seller and/or one or both agents for the inspector’s improper/tortious interference with their business resulting in monetary losses.

The inspector’s role is to identify and document specific adverse conditions and to provide perspective regarding their relative degree of importance, i.e., recommending that the condition be further evaluated and addressed as soon as possible or addressed as part of normal, ongoing, overall property and building systems maintenance.

By both including an inspection report glossary is with the report in which the term “IMMEDIATE ATTENTION” is defined as:

“When any ADVERSE CONDITION is so designated, it shall mean that it is recommended that such condition be further evaluated and addressed by an appropriate and QUALIFIED individual or company as soon as possible for any necessary modifications or corrective measures. If, in the course of evaluating and addressing the condition, it is determined that there are other conditions which require modifications or corrective measures, it is recommended that such modifications or corrective measures also be performed at that time”

*PROSPEX IS A SERVICEMARK OF KEVIN M. O’HORNETT dba PROSPEXCOPYRIGHT 2007 PROSPEXALL RIGHTS RESERVED

and then by consistently and appropriately applying this term in the written inspection report as a recommended course of action regarding certain ADVERSE CONDITIONS, an inspector has fulfilled his or her contractual and ethical responsibilities to the client. The word “immediate” and the phrase “as soon as possible” clearly convey the concept of “without delay.”

It is incumbent upon clients to discuss the information contained in the report with their appropriate and contractually bound representative(s) in order to make informed decisions regarding how to proceed subsequent to the inspection and it is incumbent upon their representative(s) to advise in this regard.

When inspectors advise buyers to do something “prior to close of escrow,” they are taking on a responsibility that belongs on the shoulders of the agent or attorney who is advising the buyer and with whom the buyer has a contractual relationship which implies or specifies that responsibility. The commercial building inspection contract neither implies nor specifies such a relationship or obligation in the part of the inspector.

Professional inspectors have no knowledge concerning the particulars of a given real estate contract or transaction with regard to whether or not the property is being conveyed “as is,” whether or not the seller is willing to or able to afford to implement any corrective measures, or any other aspects of the real estate contract. More to the point, it’s not appropriate for an inspector to have such information because it may compromise the inspector’s ability to conduct all inspections in a consistent and unbiased manner.

A building and its systems speak for themselves and a competent and professional inspector knows how to listen. The documentation of and recommendations concerning a hole in the roof, improper wiring in an electrical distribution panel, or atypical foundation movement should always be the same regardless of the particulars of the real estate contract.

This is why the ProSpex prototype model commercial building inspection contract includes the following clause:

“The Client agrees that (inspection company name) is not a party to ANY contracts or agreements between the Client and any third parties including, but not limited to: property sellers, lessors, lenders, appraisers, insurors, or real estate agents and that (inspection company name) cannot and will not provide ANY advice or direction pertaining to the use of ANY information contained in the inspection report with regard to ANY such contracts or agreements. The Client further agrees that any decisions regarding consulting with any representatives or other parties are solely the responsibility of the Client and to indemnify and hold harmless (inspection company name), its agents, employees, inspectors, directors, officers, shareholders, successors and assigns with regard to the Client’s decisions pertaining the use of ANY of the information contained in the inspection report.”

“In for a dime, in for a dollar” applies to inspectors who advise clients that any adverse condition be further evaluated and/or addressed “prior to close of escrow.” Unless inspectors apply this recommendation to ALL adverse conditions documented in the report, they leave themselves open to potential liability if an adverse condition for which such a recommendation was not made later turns out to have a greater cost to mitigate or greater implications than might have been originally assumed.

In addition, why stop at “prior to close of escrow?” Why not “prior to close of escrow and prior to occupying the building?” An inspector typically won’t know if the contract between buyer and seller permits the buyer to occupy the building prior to the close of the purchase transaction. An inspector probably wouldn’t recommend that a single missing cover plate on a 120 volt receptacle outlet or switch be evaluated and/or addressed before closing. However, if the buyer occupies the building prior to closing and someone is injured or electrocuted as a result of contacting live electrical components at that receptacle or switch, a case could be made that the inspector was negligent in not recommending that particular adverse condition be evaluated and/or addressed before closing and occupying the property.

The only way to effectively address these issues would be to have a clause in the inspection contract specifying that the client understands and agrees that ALL adverse conditions documented in the report should be further evaluated and/or addressed prior to closing and prior to occupying the subject property. Also, in this scenario it should be stated at the beginning of the report that the inspection company strongly advises that ALL adverse conditions documented in the report be further evaluated and/or addressed prior to closing and prior to occupying the subject property. This is, in my opinion, not appropriate.

In short, a professional inspector doesn’t “have a dog in the fight” with regard to the real estate transaction in which the inspector’s client is involved. In a very real sense (other than in those rare instances when an inspector encounters an egregious life-threatening condition in the course of an inspection such as a condition that places anyone who might occupy the building in immediate jeopardy), inspectors don’t care whether any of the adverse conditions they document are ever addressed. If they did, they’d be on the phone to their clients on a daily or weekly basis to ask if those conditions had been addressed – and this is clearly not the case.

Nowhere is this more evident than in the various standards of practice which professional inspectors apply to their work. Every single one of these standards specifically excludes any requirement for inspectors to make recommendations or statements as the advisability or inadvisability of purchase of a property. When inspectors advise clients to perform certain work “prior to the close of escrow,” they are, in effect, telling clients that they should not purchase the property unless such work is performed before closing.

Professional inspectors have specific responsibilities to their clients. Those responsibilities include being honest, technically competent, thorough, consistent, clear in both verbal and written communication, and to provide perspective with regard the relative degree of importance of the information they provide. They do not have a responsibility to enter into the real estate transaction negotiation process unless their contract with their client specifies and defines such a responsibility.

Finally, I would point out that the term “close of escrow” is not appropriate in all states. Colorado is not an “escrow” state and the term “closing” and not “close of escrow” is used in Colorado to describe the consummation of a real estate purchase contract. Buyers in Colorado typically (but are not required to) tender what is called an “earnest money” deposit which is not commingled with other funds but held in a separate “escrow” account. This money serves as “liquidated damages” in the event that the buyer defaults on the contract for any reasons other than those specified in the real estate contract. The real estate broker’s company may have a specific “earnest money” account or the money may be held in an account controlled by a completely independent third party such as a title company.

The “hat” an inspector wears should read “Professional Inspector.” It should not read “Negotiation Participant,” “Hired Gun,” “Code Compliance Inspector,” “Life/Safety Inspector,” or “Hero.” We’ve all got a little Obi Wan Kenobi in us and we like to impart our “wisdom” to our clients. However, knowing what not to say is as important as knowing what to say. Someone once observed that many of us know how to say nothing, fewer of us know when.


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