Signs of termite damage can sometimes be hard to spot. But that’s why your role as a pre-purchase building inspector is so crucial. Buying a home is one of the biggest investments most Australians will ever make and thankfully, you can help buyers avoid nasty surprises. But what happens when you miss something?
This case study looks at a pre-purchase inspection where signs of hidden termite damage weren’t detected, ultimately leading to costly repairs and legal trouble. By learning from case studies like these, hopefully you can better alert home buyers and avoid similar legal battles.
The initial inspection: A missed warning sign
A buyer hired a professional inspector to check a property for major defects, minor defects, safety hazards, and termite damage, following the Australian Standard AS4349. The inspector identified various issues at the property, including Major Defects, but did not make any observations as to visual termite damage or structural defects.
A few months after purchase, the tenant noticed a sagging beam in the lounge.
Signs of termite damage
The long-term tenant, who was there during the inspection, became worried that termites were behind the deteriorating beam. The property manager sent in another timber pest expert, who confirmed the worst: termites were actively eating the beam and putting it at serious risk of failure.
What went wrong?
A closer look revealed that the first inspector had overlooked some key clues:
Visible termite damage beam deflection
While the termite activity itself was hidden, the beam was already sagging at the time of inspection. The inspector had even taken photos showing the deflection but had dismissed it as a cosmetic issue since the house was generally in average condition.
Tenant’s warning
The tenant later stated that they had informed the inspector about previous termite concerns in the property. However, the inspector ignored this information and didn’t recommend further investigation.
The costly consequences of missed termite damage
The property owner faced major expenses. The termite-damaged support beam had to be urgently repaired and the tenant had to vacate during the work. The estimated losses were $110,000, including lost rental income. While this is already severe, can you imagine if the beam had fallen and injured the tenant?
The owner sought to recover these costs from the inspector because he hadn’t warned of this risk in his inspection. If he had, the owner argued he may either not have bought the property, or would have negotiated a cheaper price that factored in potential repair works to the beam.
The inspector tried negotiating with the owner, denying he was liable for the loss, but ultimately sought support and lodged a claim with Rapid Solutions after the owner engaged a lawyer to represent him.
Reaching a settlement
Rapid Solutions brought in a lawyer and an independent building expert to look at the claim. The expert concluded that the inspector should have:
- Reported the sagging beam as a major defect and a safety hazard.
- Recommended a structural engineer evaluate the cause of the sagging.
- Advised the buyer to ask the property manager about any history of termite issues.
- Noted signs of termite damage in a backyard tree and recommended invasive inspections inside the home.
- Estimated the repair costs more accurately, as the tenant may not have needed to relocate for the work.
The case settled for $67,500, with total claim costs reaching $112,818.
Signs of termite damage: Lessons for inspectors
This case highlights key takeaways for pre-purchase inspectors:
- Thorough inspections matter: Whether a property looks pristine or run-down, every element should be carefully looked at.
- Structural clues shouldn’t be ignored: Beams and window architraves are high-risk areas for termite damage. Any sagging or deflection are clues that should prompt you to investigate deeper and report the issues as Major Defects..
- Listen to the occupants: Tenants or previous owners may have crucial insights about past issues. Their input about the property shouldn’t be dismissed.
- Recommend further checks: If there’s any doubt, recommending a structural engineer or pest control expert can protect both the buyer and you as the inspector from future disputes.
Final thoughts
What seemed like a routine inspection turned into a costly oversight. And even though the inspector managed to avoid a court battle, the claim will likely make it difficult for them to get insurance in the future.
This case serves as an important reminder: a thorough, detail-oriented inspection isn’t just about ticking boxes – it can make all the difference in preventing financial loss and legal trouble. By learning from this experience, inspectors can be better equipped to spot hidden risks and provide stronger recommendations to buyers.
Rapid Solutions is on a mission to educate our members on how they can make small improvements to their reporting to avoid stressful incidents like the above. Here are more real cases and resources to learn from:
- Bodily Injury: This Case Study Teaches Very Important Lessons
- Insurance Case Study: Claims Against Termite Pest Control Businesses
- 3 Steps to Take with Pre-Purchase Pest and Building Inspections
- Keeping Records: How To Do It Efficiently and Why It Matters
Protect your business
Imagine the above pre-purchase inspector didn’t have professional indemnity insurance? They would have had to field the legal process and the costs involved on their own – something that could potentially have sunk their business.
Are you covered?
Rapid Solutions has decades of industry experience in providing property services businesses with affordable, quality professional indemnity insurance and general liability insurance. We offer personalised customer service with our in-house claims team that’s focused on fast turnaround times. Contact Rapid Solutions today if you have questions about our insurance cover or training courses to support and protect your business.