The U.S. Environmental Protection Agency (EPA) reports that termites cause billions of dollars in structural damage each year, while property owners spend more than $2 billion annually on termite treatment. These costs can make termite-related problems a significant concern for property owners and buyers.
If you find your home termite infested, termite bonds can provide treatment, inspections, and other services under an agreement. But disagreements can still arise when the damage is excluded from the coverage. There will also be disputes about who is responsible for repairs.
After a property is sold or while the termite bond is active, the inspection report, contract terms, treatment records, and disclosures may become important in determining responsibility when termite problems appear.
Let’s take a closer look at how termite bonds can lead to a real estate dispute and what property owners should understand.
What a Termite Bond Actually Promises
Understanding how termite bonds work is the necessary starting point, since the bond functions as a warranty between a property owner and a pest control company, agreeing to provide inspections, treatment, and sometimes repairs.
These bonds fall into two categories: a retreatment warranty, which covers additional treatment if termites return but not the resulting damage, and a repair warranty, which is more expensive but also covers structural repairs when subterranean termites are found on a later inspection.
Which type of bond is in place affects what a property owner can actually expect to recover if something goes wrong.
Why Termite Bonds Show Up in Real Estate Transactions Specifically
The termite bond will often become an issue when it comes to the purchase or sale of property. If the inspection reveals any prior damage from termites, or the risk of future damage is great, then the buyer might make the purchase contingent upon the seller obtaining a termite bond, and the mortgage lenders might make that their requirement as well.
In this case, the termite bond acts more like a closing requirement than an optional service, and that is what makes the whole matter very serious.
How a Bond’s Language Can Become a Point of Contention
Issues are likely to come up when there is disagreement on what the warranty covers. For instance, if the buyer thought that the property had an assurance of repairs in case of a problem, but after closing discovered that the warranty was one of retreatment only, the buyer would be liable for any repairs they thought would be covered by the warranty.
Disagreement may come up due to uncertainties on issues like when the property will be inspected or what triggers the warranty.
Contract Ambiguity Is a Familiar Problem in Real Estate Disputes Generally
This kind of disagreement over contract language isn’t unique to termite bonds. According to a Roseville commercial real estate litigation attorney, differing interpretations of contract language, along with incomplete or inaccurate documentation, are among the most common obstacles in commercial real estate disputes generally, since both sides can have a reasonable basis for their competing interpretation of the same clause.
A termite bond is, at its core, exactly this kind of contract. The same categories of dispute that arise in leases or purchase agreements can arise just as easily over a termite bond’s specific terms.
When the Dispute Involves Bad Faith or Fraud Rather Than Ambiguity
Not all disputes that arise between a pest management company and a homeowner due to a bond are based on an actual misunderstanding of the terms of the bond. Sometimes, certain pest control firms do not fulfill their obligations under the bond at all, either due to negligence, lack of manpower, or simply fraud. This results in damage to a property even if the bond is still active.
What a Property Owner Needs to Support a Dispute
The issue of interpretation or non-performance of a termite bond contract can always lead to disputes that need to be settled through proper documentation. These include the original termite bond, all inspection reports conducted according to it, communications with the pest control company, and photographs of any damages found.
In case of a real estate transaction, the documents relating to the closure of the deal and the terms of the bond become very important.
Why These Disputes Often Require Both Termite and Real Estate Expertise
A bond dispute involving termites associated with a real estate transaction is often found to lie at the juncture between two separate fields of law. One that knows how to deal with the terms of pest control contracts and their practices and the other that knows about the entire process of the real estate transaction, which has a bond dispute attached to it.
Treating a Termite Bond With the Same Scrutiny as Any Contract
The termite bond can be easily viewed as mere formalities since the termite bond may just be something that needs to be met before the purchase of the property is closed. However, termite bonds are contracts in themselves that should be given the proper attention and analysis that any real estate agreement receives.
Knowing the kind of bond, what is covered by the bond, and what will happen if the pest control service does not fulfill its obligation can help avoid future problems.
