You just purchased your new home and closed escrow. You feel you did everything right. Among other things, you (1) read the purchase contract in detail, (2) obtained a home inspection report from a reputable home inspector, (3) read the inspection report carefully, (4) inspected the home yourself, (5) reviewed the seller property disclosure statement, and (6) identified all issues needing repair for the seller and came to an agreement regarding the same.
Shortly after moving in, you discover a water leak, and later learn that the home had a history of repeat roof issues and roof leaks. You further learn the home has mold issues resulting from all the water leaks that must be dealt with. None of this was properly disclosed by the seller via the seller property disclosure statement. The home inspector did not discover the roofing issues or water leak damage either.
What you thought was a dream home purchase has quickly devolved into a nightmare situation. Your instinct is to want to both sue the seller and the home inspector. Putting aside the question of whether the seller knew about the roofing issues yet failed to disclose them in violation of Arizona law, you have to ask, is it worth it to sue the home inspector?
Intuitively, it makes sense to want to sue the home inspector. After all, the primary reason for hiring the inspector was to identify issues with the home so as to avoid being surprised shortly after move-in with a major issue that should have been disclosed or identified during the inspection period. Further, the home inspector’s expertise is to locate material issues in homes that may not have been disclosed by the seller, so it is not unreasonable to expect a home and/or roof inspector to spot these issues.
Legally, however, the analysis is much different. The reason is, most home inspection agreements contain what is called a limitation of liability clause. This generally means that if the home inspector misses an issue due to negligence of the home inspector, the legal recourse for the home buyer is to seek back the fee charged by the home inspector. In other words, if the inspector misses an issue that causes $100,000 in legal damages to the buyer, the buyer’s remedy against the inspector is limited to the inspection fee, which generally ranges from $250 to $800.
The law in Arizona, in general, upholds reasonable limitation of liability clauses. Therefore, it is important to consult with a qualified attorney to determine all of a home buyer’s options before pursuing a case against the home inspector for failure to identify a material issue with the home. The conduct of the home inspector may be so egregious it falls outside of the limitation of liability clause, or the home inspector agreement may provide some other remedy to the home buyer, or there may be some other theory of liability supporting the home buyer’s case against the home inspector. On the other hand, the home buyer may be bound by the limitation of liability clause, which should render any attempt to obtain full damages ineffective.
Further, a home buyer needs to be mindful about asserting inconsistent theories of liability in a non-disclosure case. For instance, to assert liability against a seller of real property, a home 2
buyer might allege that the home seller failed to disclose a latent (hidden) and material issue associated with the home. In that same case, however, the home buyer might allege that the home inspector failed to identify that same issue and was negligent or grossly negligent since the issue should have been obvious to any reasonable home inspector.
At the end of the day, after learning about a faulty home inspection report, a home buyer should evaluate all of his or her options before proceeding forward.
If you have questions, you can contact Ben Gottlieb at [email protected]; or call 602-533-2840.