New ERA Article August, 2001

Brokers And Home Inspection Companies -
Similar Duty To Inspect?

In a recent case arising out of Ventura County, California, the Court of Appeal was required to examine the duties of real estate brokers and home inspection companies to residential purchasers. The case initially got under way because the purchaser of a home brought an action against the seller and the real estate broker, alleging undisclosed property defects.

The broker filed a cross-complaint for equitable contribution against two home inspection companies. One company had inspected property for the plaintiff purchaser, while the other company had inspected the property for a prior prospective purchaser. The inspection company for the prior prospective purchaser had prepared a report which was shown to the plaintiff by an agent of the broker. The plaintiff’s purchase of the property took place approximately one month after the prior deal fell through.

The Court of Appeal concluded that a reasonable judge or jury could infer that when the prior home inspection company provided its report to the listing agent on the property, it "knew with substantial certainty that those reports would be transmitted to other prospective purchasers if the pending deal fell through. . . . This inference may be drawn even though [the home inspection company’s] written contract . . . stated that the report could not be used by or transferred to other persons without [its] consent."

The court also noted that a broker may not rely on a home inspection report to avoid his own statutory duty to conduct a reasonable inspection.

The duties to inspect and disclose defects are somewhat similar between real estate brokers and home inspection companies. Real estate agents and brokers involved in the sale of a residence owe the purchaser a statutory duty to conduct a "reasonably competent and diligent inspection of the property offered for sale and to disclose to [a] prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal . . . . The purchaser’s agent also owes the purchaser a higher fiduciary duty to act with the utmost care, integrity, honestly and loyalty."

A home inspection company simply owes the purchaser who contracts for an inspection a statutory duty to "conduct home inspection with the degree of care that a reasonably prudent home inspector would exercise."

When two or more parties have the same obligation to disclose and discover the same defect, the failure of each to perform their duty will result in both parties being jointly and severaly liable to the person to whom the disclosure should have been made. The Court of Appeal thus determined that the broker was entitled to pursue his cross-complaint for equitable contribution against both home inspection companies since all were responsible to the purchaser.

The court noted that a "supplier of commercial information" does not owe a general duty of care to everyone, but could be held liable to "intended beneficiaries" i.e., those third parties whom the supplier "knows with substantial certainty" will rely on the information during the course of a transaction.

The moral of the story? If you have a duty to disclose information, do so fully and completely. If you approach this obligation casually, you may find yourself casually looking for the courtroom in which the lawsuit resulting from your failure to disclose will be tried!


[This column is intended to provide general information only  and
is  not intended to provide specific legal advice; if you have  a
specific  question  regarding the  law,  you  should  contact  an
attorney  of your choice.  Suggestions for topics to be discussed
in this column are welcome.]


Reprinted from New Era Magazine
Myles M. Mattenson © 2001

	Myles M. Mattenson ATTORNEY AT LAW 5550 Topanga Canyon Blvd. Suite 200 Woodland Hills, California 91367 Telephone (818) 313-9060 Facsimile (818) 313-9260 *Email:* MMM@MattensonLaw.com *Web:* http://www.MattensonLaw.com	Brokers And Home Inspection Companies - Similar Duty To Inspect?
Myles M. Mattenson engages in a general civil and trial practice including litigation and transactional services relating to the coin laundry and dry cleaning industries, franchising, business, purchase and sale of real estate, easements, landlord-tenant, partnership, corporate, insurance bad faith, personal injury, and probate legal matters. In providing services to the coin laundry and dry cleaning industries, Mr. Mattenson has represented equipment distributors, coin laundry and dry cleaning business owners confronted with landlord-tenant issues, lease negotiations, sale documentation including agreements, escrow instructions, and security instruments, as well as fraud or misrepresentation controversies between buyers and sellers of such businesses. Mr. Mattenson serves as an Arbitrator for the Los Angeles County Superior Court. He is also past chair of the Law Office Management Section of the Los Angeles County Bar Association. Mr. Mattenson received his Bachelor of Science degree (Accounting) in 1964 and his Juris Doctorate degree from Loyola University School of Law in 1967. Bi-monthly articles by Mr. Mattenson on legal matters of interest to the business community appear in alternate months in The Journal, a leading coin laundry industry publication of the Coin Laundry Association, and Fabricare, a leading dry cleaning industry publication of the International Fabricare Institute. During the period of May 1995 through September 2002, Mr. Mattenson contributed similar articles to New Era Magazine, a coin laundry and dry cleaning industry publication which ceased publication with the September 2002 issue. This website contains copies of Mr. Mattenson's New Era Magazine articles which can be retrieved through a subject or chronological index. The website also contains copies of Mr. Mattenson's Journal and Fabricare articles, which can be retrieved through a chronological index. In addition to Mr. Mattenson's trial practice, he has successfully prosecuted and defended appeals on behalf of his clients in various areas of the law. Some of these appellate decisions are contained within his website.