Home Inspector Sued By the Seller
By Natalie Eisen, Isaac Peck and David Brauner
Can an inspector be sued for just about anything? The answer is, unfortunately, yes.
It’s a fact of life that a home inspector is likely to find some issues with the house he or she is inspecting. Inspectors know that even new construction has problems! If it’s an inspector’s job to report issues to potential buyers so they can make an informed decision before purchasing, when are they liable for just doing their job? Can an inspector be responsible for how a buyer reacts to the findings in the report? One seller in Connecticut thinks they should be.
The seller, who is also a Realtor, has sued a home inspector in small claims court because the buyers lost interest in purchasing a house after reading the inspection report. This leaves inspectors scratching their heads and wondering how to protect themselves. Two issues seem to be at play: the accuracy of the report and who has standing to sue.
Regarding the report itself, liability probably depends on the quality, most agree. “I think an inspector may be liable if the findings are in error,” says Lawrence Transue, a Pennsylvania inspector. “If that is the case, I believe the seller has a legitimate gripe and possible grounds for a suit.” Transue says an exaggeration or mistake would mean that the buyer’s decision to walk away stemmed from a bad report and not any problems in the home, leaving the inspector with a difficult position to defend in court. On the other hand, if the report is accurate and the seller is just displeased about the buyer not purchasing the home, most agree that the lawsuit is frivolous.
Texas inspector Jim Starkey knows the drill. “I have had several sellers file complaints against me over the years,” says Starkey. “The sellers were angry that the buyer walked. They accused me of making false statements about the house which caused the deal to fall through, but when you read what I wrote and see the pictures of the defects, it was very obvious I did my job and they were totally clueless. These cases were all judged in my favor and that was the end of that,” says Starkey.
Covering Your Assets
Many inspectors keep scrupulous records of their inspections in order to avoid being sued. They recommend never advising clients towards or against buying the house – only presenting the facts and letting them make their own decisions. If the client is present during the inspection, many inspectors use a voice recorder or video camera to record the process. “I carry a voice recorder in my shirt pocket,” explains Steve Ott, an inspector from Ontario, Canada. “I record every word I say during an inspection and file them all. If someone comes back to me in the future and claims that I said such and such, I can go listen to the entire inspection.”
Being able to stop a complaint or lawsuit before it snowballs is the preferable strategy. If the client isn’t with you, be sure to keep records of conversations you have with them. Save emails, and transcribe phone calls if you are concerned. When you are inspecting the home, it goes without saying that you should take pictures of any problems you may find. Record-keeping pays off when you need it.
But what if a suit occurs anyway? “I’d stand my ground,” says David Tucker, owner of The Inspector Inc. “If the lawsuit isn’t retracted, I would hire a lawyer to first send the seller a ‘demand letter’ for retraction, then I would file a counter-suit in the county court. The seller is not the inspector’s client and has no contractual agreement with the inspector. The seller’s ‘contract’ is with the buyer,” says Tucker. “Don’t let yourself be intimidated, and remember that you are accountable to the person who paid for the inspection– not the Realtor or the seller.”
Well…maybe. In some states, third parties can sue even though they did not directly engage the inspector. To be sure about your state’s laws, you should consult a local attorney.
Non-Client Can Sue
Regarding whether a third party such as a seller or agent has standing to sue, Todd Stevens, experienced trial lawyer for inspector issues and past President of the San Diego Bar Association, says it depends on the specific laws in each state. Stevens says the legal term at issue is privity, which posits that only parties to a contract should be able to sue to enforce their rights or seek damages. “In some states, privity is required to file a lawsuit like this. However, in other states like California, privity is not required. My advice to any home inspector in this situation, even if you believe the law in your state is on your side, is to take the threat of a lawsuit seriously and not ignore it,” says Stevens. The reason, Stevens says, is that even if the seller isn’t able to sue you based on your contractual obligations to them, there still may be other ways for them to pull you into a lawsuit.
Joseph Denneler, another lawyer experienced in home inspector claims, concurs that the ability of a third party to bring a suit varies by state. “It depends on the particular state law. Generally in a contract-based relationship, a stranger to the contract has no standing to sue for non-performance or for flawed performance. However, I have defended several third-party suits in New Jersey where inspectors were sued by someone with whom they had no relationship at all. Judges are not apt to dismiss claims even though there is clearly a legal flaw in the proposition. Every time I raise this argument in court I get a curiously blank stare from the judge,” says Denneler.
Whether a claim is considered frivolous is also defined by state law, according to Denneler. “In [this] example, most states would not find that claim to be frivolous if it can be argued that the claimant is trying to change the law or proffer a new type of claim that the law doesn’t currently recognize,” says Denneler.
Michael Casey, principal at Casey O’Malley Associates, says that situations where the seller sues the inspector are very rare. “The seller suing the inspector because of the deal falling out is rare. In my experience with over 600 inspector claims, only one was of this type. We responded that the home inspector complied with the Standard of Care and reported material defects as required by published Standards of Practice, thus fulfilling his/her professional obligation. This particular claim went away,” says Casey.
The other type of claim that might arise from a seller is an indemnity claim, Casey explains. “I have seen some cross claims against inspectors by sellers for indemnity when they are sued by the buyers, and the inspector is not named in the original action (usually because the condition was in the report, but not properly repaired or nothing was done). These are rare but must be defended like any other claim,” says Casey.
Veterans agree that if you find yourself in a similar situation and your case goes to court, present the best defense you can, armed with the facts and the confidence that you have done the right thing.