RESIDENTIAL INSPECTION AGREEMENT & STANDARDS OF PRACTICE

RESIDENTIAL INSPECTION AGREEMENT & STANDARDS OF PRACTICE CALIFORNIA REAL ESTATE INSPECTION ASSOCIATION RESIDENTIAL STANDARDS FOUR OR FEWER UNITS

THE COMMITTEE • Jerry McCarthy, CREIA Fellow, CNCS • Al Virtue, MCI, CNCS • Steve John, MCI, CNCS • Duane McCutcheon, MCI, CNCS • George Harper, MCI • Steve Rush, MCI, CNCS (contract) • Edited and formatted by Gary Sniffin

THE REVIEWERS • Kris Thompson, Esq. • David Roberson, Esq. • Bob Pearson and Legal Staff, Marion Allen Insurance • Nigel Bonnie, FREA Insurance • CREIA Board of Directors • CREIA Member feedback

THE COMMITTEE GOAL • Concise • Easy to understand • User friendly • Clearly and broadly stated • 100% compliance 100% of the time • Were 46 dos & 63 don’ts • Now 47 dos & 30 don’ts • 3,800+ words to 1,800 +/- words

IN THE END • Increase legal protection • Integrate SOP’s into contract • Fewer differenced between CREIA and ASHI standards

THE SOP ARE NOT: • About how to do an inspection • Books have been written for that purpose • About how to write a report

CA BUSINESS & PROFESSIONS CODE • SECTON 1 It is the intent of the Legislature that, in ascertaining the degree of care that would be exercised by a reasonably prudent home inspector pursuant to Section 7196 of the Business and Professions Code, the court may consider the standards of practice and code of ethics of the California Real Estate Inspection Association, the American Society of Home Inspectors, or other nationally recognized professional home inspection association.

B&P 7195 7195 – DEFINITION: (a) (1) "Home inspection" is a noninvasive, physical examination, performed for a fee in connection with a transfer, as defined in subdivision (e), of real property, of the mechanical, electrical, or plumbing systems or the structural and essential components of a residential dwelling of one to four units designed to identify material defects in those systems, structures and components. “Home inspection” includes any consultation regarding the property that is represented to be a home inspection or any confusingly similar term.

Added to 7195 to encourage inspections to include energy efficiency. • (2) "Home inspection," if requested by the client, may include an inspection of energy efficiency. Energy efficiency items to be inspected may include the following: • (A) A noninvasive inspection of insulation R-values in attics, roofs, walls, floors, and ducts. • (B) The number of window glass panes and frame types. • (C) The heating and cooling equipment and water heating systems. • (D) The age and fuel type of major appliances. • (E) The exhaust and cooling fans. • (F) The type of thermostat and other systems. • (G) The general integrity and potential leakage areas of walls, window areas, doors, and duct systems. • (H) The solar control efficiency of existing windows.

B&P 7195 • (b) A “material defect” is a condition that significantly affects the value, desirability, habitability, or safety of the dwelling. • Style or aesthetics shall not be considered in determining whether a system, structure, or component is defective.

B&P 7195 (c) A “home inspection report” is a written report prepared for a fee and issued after a home inspection. The report clearly describes and identifies the inspected systems, structures or components of the dwelling, any material defects identified, and any recommendations regarding the conditions observed or recommendations for evaluation by appropriate persons.

B&P 7196 It is the duty of a home inspector who is not licensed as a general contractor, structural pest control operator, or architect, or registered as a professional engineer to conduct a home inspection with the degree of care that a reasonably prudent home inspector would exercise.

7196.1. (a) Nothing in this chapter shall be construed to allow home inspectors who are not registered engineers to perform any analysis of the systems, components, or structural integrity of a dwelling that would constitute the practice of civil, electrical, or mechanical engineering,

B&P 7198 • 7198. Contractual provisions that purport to waive the duty owed pursuant to Section 7196, or limit the liability of the home inspector to the cost of the home inspection report, are contrary to public policy and invalid.

B&P 7199 • 7199. The time for commencement of a legal action for breach of duty arising from a home inspection report shall not exceed four years from the date of the inspection.

CREIA STANDARD RESIDENTIALINSPECTION AGREEMENT

CREIA STANDARD RESIDENTIALINSPECTION AGREEMENT • Unless you have legal advice to the contrary USE THE CREIA CONTRACT!

STANDARD RESIDENTIAL INSPECTION AGREEMANT • THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT, PLEASE READ IT CAREFULLY

SCOPE OF THE INSPECTION The real estate inspection to be performed for Client is a survey and basic operation of the systems and components of a building which can be reached, entered or viewed without difficulty, moving obstructions or requiring any action which may result in damage to the property or personal injury to the inspector. The purpose of the inspection is to provide the client with information regarding the general condition of the building(s).

SCOPE OF THE INSPECTION Inspector will prepare and provide Client a written report for the sole use and benefit of Client. The written report provides documentation of material defects in the systems and components which, in the opinion of the inspector, are safety hazards, are not functioning properly, or appear to be at the ends of their service lives. The inspection shall be performed in accordance with the Standards of Practice of the California Real Estate Inspection Association (CREIA), attached hereto and incorporated herein by reference and is limited to those items specified therein.

CLIENT’S DUTY Client agrees to read the entire written report when it is received and promptly call Inspector with any questions or concerns regarding the inspection or the written report. The written report shall be the final and exclusive findings of Inspector. Client acknowledges that Inspector is a generalist and that further investigation of a reported condition by an appropriate specialist may provide additional information which can affect Client's purchase decision. Client agrees to obtain further evaluation of reported conditions before removing any investigation contingency and prior to the close of the transaction. In the event Client becomes aware of a reportable condition which was not reported by Inspector, Client agrees to promptly notify Inspector and allow Inspector and/or Inspector's designated representative(s) to inspect said condition(s) prior to making any repair, alteration or replacement. Client agrees that any failure to so notify Inspector and allow inspection is a material breach of this agreement.

ENVIRONMENTAL CONDITIONS Client agrees what is being contracted for is a building inspection and not an environmental evaluation. The inspection is not intended to detect, identify, or disclose any health or environmental conditions regarding this building or property, including, but not limited to: the presence of asbestos, radon, lead, urea-formaldehyde, fungi, molds, mildew, PCBs, “Chinese drywall” or other toxic, reactive, combustible, or corrosive contaminants, materials, or substances in the water, air, soil, or building materials. The Inspector is not liable for injury, health risks, or damage caused or contributed to by these conditions.

GENERAL PROVISONS: The written report is not a substitute for any transferor’s or agent’s disclosure that may be required by law, or a substitute for Client’s independent duty to reasonably evaluate the property prior to the close of the transaction.This inspection Agreement, the real estate inspection, and the written report do not constitute a home warranty, guarantee, or insurance policy of any kind whatsoever. No legal action or proceeding of any kind, including those sounding in tort or contract, can be commenced against Inspector/Inspection Company or its officers, agents, or employees more than one year from the date Client discovers, or through the exercise of reasonable diligence should have discovered, the cause of action. In no event shall the time for commencement of a legal action or proceeding exceed two years from the date of the subject inspection. THIS TIME PERIOD IS SHORTER THAN OTHERWISE PROVIDED BY LAW. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, successors, and assigns. This Agreement constitutes the entire integrated agreement between the parties hereto pertaining to the subject matter hereof and may be modified only by a written agreement signed by all of the parties hereto. No oral agreements, understandings, or representations shall change, modify, or amend any part of this Agreement. Each party signing this Agreement warrants and represents that he/she has the full capacity and authority to execute this Agreement on behalf of the named party. If this Agreement is executed on behalf of Client by any third party, the person executing this Agreement expressly represents to Inspector that he/she has the full and complete authority to execute this Agreement on Client's behalf and to fully and completely bind Client to all of the terms, conditions, limitations, exceptions, and exclusions of this Agreement.

SEVERABILITY: Should any provision of this Agreement be held by a court of competent jurisdiction to be either invalid or unenforceable, the remaining provisions of this Agreement shall remain in full force and effect, unimpaired by the court’s holding.

MEDIATION The parties to this Agreement agree to attend, in good faith, mediation with a retired judge or lawyer with at least 5 years of mediation experience before any lawsuit is filed. All notices of mediation must be served in writing by return receipt requested allowing 30 days for response. If no response is forthcoming the moving party may then demand binding arbitration under the terms and provisions set forth below.

ARBITRATION • Any dispute concerning the interpretation or enforcement of this Agreement, the inspection, the inspection report, or any other dispute arising out of this relationship, shall be resolved between the parties by binding arbitration conducted in accordance with California Law, except that the parties shall select an arbitrator who is familiar with the real estate profession. If the parties cannot agree on an arbitrator the parties agree to have the matter arbitrated by an arbitrator familiar with the real estate profession, selected at random, by the nearest office of the American Arbitration Association. The parties also agree that they shall be entitled to discovery procedures within the discretion of the arbitrator. The arbitrator shall manage and hear the case applying the laws of the State of California to all issues submitted in the arbitration proceeding. The award of the arbitrator shall be final, and a judgment may be entered on it by any court having jurisdiction. Any disputes are to be arbitrated by Construction Dispute Resolution Services, LLC

NOTICE TO THIRD PARTIES This report was prepared for John and Jane Doe in accordance with our inspection agreement and is subject to the terms and conditions agreed upon therein. A verbal consultation is a critical part of this report. If you were not present during the inspection, call (888)765-4321 for a full discussion of the entire report and an overview. This report was prepared for the sole and exclusive use of Client and any third party, including other purchasers, who are not part of this contract, may not rely on or use this report for any purpose and should not make any decisions based on this report. Inspector assumes no liability for third party interpretation or use of this report.All such parties are advised to retain a qualified professional inspector to provide them with their own inspection and report.

RESIDENTIAL STANDARDS OF PRACTICE FOUR OR FEWER UNITS

Table of Contents Part I. Definition and Scope Part II. Standards of Practice 1. Foundation, Basement, and Under-floor Area 2. Exterior 3. Roof Covering 4. Attic Area and Roof Framing 5. Plumbing 6. Electrical 7. Heating and Cooling 8. Fireplace and Chimney 9. Interior Part III. Limitations, Exceptions, and Exclusions Part IV. Glossary of Terms

Part IDefinition and Scope These Standards of Practice provide guidelines for a real estate inspection and define certain terms relating to these inspections. Italicized words in these Standards are defined in Part IV, Glossary of Terms.

Part IDefinition and Scope A. A real estate inspection is a survey and basic operation of the systems and components of a building which can be reached, entered or viewed without difficulty, moving obstructions or requiring any action which may result in damage to the property or personal injury to the inspector. The purpose of the inspection is to provide the client with information regarding the general condition of the building(s). Cosmetic and aesthetic conditions shall not be considered.

Part IDefinition and Scope B. A real estate inspection report provides written documentationof material defects in the inspected building’s, systems and components which, in the opinion of the inspector, are safety hazards, are not functioning properly, or appear to be at the ends of their service lives. The report may include the inspector's recommendations for correction or further evaluation.

Part IDefinition and Scope C. Inspections performed in accordance with these Standards of Practice are not technically exhaustive and shall apply to the primary building and its associated primary parking structure.

Part IIStandards of Practice A real estate inspection includes the readily accessiblesystems and components or a representative number of multiple similar components listed in Sections 1 through 9 subject to the limitations, exceptions and exclusions in Part III.

Part II,Section 1FOUNDATION, BASEMENT AND UNDER-FLOOR AREA A. Items to be inspected: • Foundation system • Floor framing system • Under-floor ventilation • Foundation anchoring and cripple wall bracing • Wood separation from soil • Insulation

Part II,Section 1FOUNDATION, BASEMENT AND UNDER-FLOOR AREA B. The inspector is not required to: • Determine size, spacing, location or adequacy of foundation bolting/bracing components or reinforcement systems • Determine the composition or energy rating of insulation materials

Part II,Section 2EXTERIOR A. Items to be inspected: • Surface grade directly adjacent to the building • Doors and windows • Attached decks, porches, patios, balconies, stairways and their enclosures • Wall cladding and trim • Portions of walkways and driveways that are adjacent to the buildings

Part II,Section 2EXTERIOR B. The inspector is not required to: • Inspect door or window screens, shutters, awnings or security bars • Inspect fences or gates or operate automated door or gate openers or their safety devices • Use a ladder to inspectsystems or components

Part II, Section 3ROOF COVERING A. Items to be inspected: • Covering • Drainage • Flashing • Penetrations • Skylights

Part II, Section 3ROOF COVERING B. The inspector is not required to: • Walk on the roof surface if, in the opinion of the inspector, there is risk of damage or a hazard to the inspector • Warrant or certify that roof systems, coverings or components are free from leakage

Part II, Section 4ATTIC AREA AND ROOF FRAMING A. Items to be inspected: • Framing • Ventilation • Insulation

Part II, Section 4ATTIC AREA AND ROOF FRAMING B. The inspector is not required to: • Inspect mechanical attic ventilation systems or components • Determine the composition or energy rating of insulation materials

Part II, Section 5PLUMBING A. Items to be inspected: • Water supply piping • Drain, waste and vent piping • Faucets and fixtures • Fuel gas piping • Water heaters • Functional flow and functional drainage

Part II, Section 5PLUMBING B. The inspector is not required to: • Fill any fixture with water or inspect overflow drains or drain-stops, or evaluate backflow devices or drain line cleanouts • Inspect orevaluate water temperature balancing devices, temperature fluctuation, time to obtain hot water, water circulation or solar heating systems or components • Inspect whirlpool baths, steam showers or sauna systems or components • Inspect fuel tanks or determine if the fuel gas system is free of leaks • Inspect wells or water treatment systems

Part II, Section 6ELECTRICAL A. Items to be inspected: • Service equipment • Electrical panels • Circuit wiring • Switches, receptacle outlets and lighting fixtures

Part II, Section 6ELECTRICAL B. The inspector is not required to: • Operate circuit breakers or circuit interrupters • Remove cover plates • Inspect de-icing systems or components • Inspect private or emergency electrical supply systems or components

Part II, Section 7HEATING AND COOLING A. Items to be inspected: • Heating equipment • Central cooling equipment • Energy source connections • Combustion air and exhaust vent systems • Condensate drainage • Conditioned air distribution system

Part II, Section 7HEATING AND COOLING B. The inspector is not required to: • Inspect heat exchangers or electric heating elements • Inspect non-central air conditioning units or evaporative coolers • Inspect radiant, solar, hydronic or geothermal systems or components • Determine volume, uniformity, temperature, airflow, balance, or leakage of any air distribution system • Inspect electronic air filtering or humidity control systems or components

Part II, Section 8FIREPLACE AND CHIMNEY A. Items to be inspected: • Chimney exterior • Spark arrester • Firebox • Damper • Hearth extension

Part II, Section 8FIREPLACE AND CHIMNEY B. The inspector is not required to: • Inspect chimney interior • Inspect fireplace inserts, seals or gaskets • Operate any fireplace or determine if the fireplace can be safely used

RESIDENTIAL INSPECTION AGREEMENT & STANDARDS OF PRACTICE