The wise sages knew that, in that location, the water heater should have a pan under it. Fact is, it was in such a spot that draining the pan through the exterior wall would be a piece of cake compared to some places where it would take effort. The problem -- nobody bothered to make the hole in the wall and install a drain line. As is, when that tank leaks, there is going to be interior damage. The floor itself is concrete but this cubby-hole has sheet rock all around it. Sheet rock does not respond well to flooding.
Steven L. Smith
Bellingham WA Home Inspections
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