Buyers will insist on the right to have a home inspection by a qualified home inspector. The various forms of real estate contracts used around the state have different time frames related to inspections. They also provide for the consequences from the inspection; i.e., new negotiations or either side can terminate the contract. But Johnson v. Davis disclosures are not excused because the buyer failed to pursue a home inspection.
But more importantly, a seller or a REALTOR® who convinces a buyer not to get the inspection contracted for, may be making a big mistake. That may have been what happened in the appellate case of Southern National Track Services, Inc. (“Purchaser”) v. JD Gilley (“Seller”) in October last year.
That case out of Hamilton County was reversed by the First District Court of Appeal in Tallahassee on a procedural point. It was sent back to the local trial court for further action. But the issue seemed to be that a buyer who does not exercise his right for an inspection does not necessarily forfeit its right to complain about what would have been revealed by the inspection.
The Purchaser contracted to buy some property containing some cottages and a modular structure. It was the modular structure that was the basis of the lawsuit.
Mr. Plezia, an employee of Purchaser, was to be housed on the property, along with other employees, while working for Purchaser in the area. He did a walkthrough of the property before the contract, and had 20 days to have an inspection. The contract also provided that Seller warranted that there were no violations of local ordinances.
Mr. Plezia walked through the property again during the 20 days with the Seller and her daughter. It was undisputed that other than these walkthroughs, Purchaser did nothing to further inspect the property. He did nothing to have it inspected or confirm that the modular structure was constructed for use as a residence.
Months after closing, Purchaser learned that the structure was not built pursuant to local ordinance. And Purchaser noticed that water leaked into the structure, and it was worse during the rainy season.
Purchaser then learned that the local government required many repairs, and learned that the structure was not built pursuant to local ordinance. And it appeared that mold on the walls had been painted over. Purchaser sued.
The trial court granted summary judgment for the Seller, saying that Purchaser did not have its inspection done, and that would have disclosed the problems. In effect, Purchaser could not complain now since it did not protect itself.
And the Seller’s affidavit said there were no violations “to the seller’s knowledge.” But that is not what the contract called for.
To that last point, it is clear that there is a difference when a seller warrants that there are no ordinance violations and then only warrants to the best of seller’s knowledge. Purchaser contracted for the former, but the affidavit Seller got at closing was less than that which was contractually required.
But the biggest point is that the appellate court forgave Purchaser for not getting the inspection when it would have made a difference. The court said that some excuses may be enough to get by that defense.
Here, the purchaser alleged that the seller and her daughter had made representations that, in hindsight, were clearly false. The purpose of such representations, or the intentional non-disclosure of condition, was to assure the closing and avoid the home inspection.
If that was the intent, it worked.
Purchaser closed and did not get the home inspection because, it alleged, it was assured of both the good condition of the structure, and the lawful nature of the construction of the structure. Purchaser wanted to use the cottages and the modular structure for residential purposes; the latter it apparently could not.
The appellate court also pointed to the advertising related to the structure. The real estate advertisement referred to the structure as a two-bedroom home complete with a swimming pool and other accoutrements typical of a residence, not a converted storage shed, as apparently that is what it was.
The advertisement as a residence when it was not gave the appellate court a lot of concern. Because that was a material fact that was in dispute, the appellate court sent the case back to the trial court to hear all of the evidence.
The point to all REALTORS® is this: just because the buyer does not exercise its right for a property inspection does not mean that the buyer cannot after closing sue for matters that were not disclosed, even if they could have been discovered if the inspection had occurred.
But if the misrepresentation, assuming there was one, related to matters that are “obviously false,” a purchaser cannot later sue over the misrepresentation.
So, putting it all together, we know this:
1. If the seller in the contract warrants that the structure is legal, the seller cannot at closing get by saying that “to the best of seller’s knowledge”—the contract calls for more.
2. Buyer cannot rely on representations by seller that are “obviously false.”
3. And most important, if a purchaser contracts for a home inspection to be made, the REALTOR® and seller should insist that the purchaser get that inspection, and stay away from talking the purchaser out of the need for such an inspection.
We do not know the final outcome of this case, since it was sent back to the trial court late last year. What we do know is that the parties are paying attorneys’ fees, and using up time, to deal with this case. And all of that might have been avoided by the purchaser getting the inspection on time, and not possibly having the seller and real estate broker dissuade the purchaser from getting the inspection.
Joe R. Boyd
TBR Legal Counsel
Board Certified Real Estate Attorney
Boyd & DuRant, P.L.