Purchasing a home is exciting, especially when you obtain in advance of the sale a report from a home inspector, to better understand the property you’re buying. Nobody likes surprises that waste your time and money, right? But what happens when the inspector fails to note an important defect: something big. Let’s say, upon moving into your new home, you learn for the first time that it has:
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- a leaky roof,
- dangerous mold,
- rotted sub-flooring,
- faulty wiring or electrical issues, or
- a basement that fills with water on every hard rain (wet basement), termite damage, radon, or dozens of other things?
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Can you (the buyer) just plan to sue the home inspector (for breach of the inspection contract) — and everyone else involved (such as the seller and real estate agent) — for the cost to fix a hidden defect?
The answer is: not necessarily.
Let’s Look at the Seller and Real Estate Agent (or Broker) Liability, First
Before we talk about the home inspector’s liability, it’s important to note the challenges to making claims on a real estate agent or the seller of property. For example, the standard sale agreement for residential property in PA provides:
27. RELEASE (9-05) 514 Buyer releases, quit claims and forever discharges SELLER, ALL BROKERS, their LICENSEES, EMPLOYEES … from any and all claims … including, but not limited to, personal injury and property damage … , whether known or not, which may arise from the presence of termites or other wood-boring insects, radon, lead-based paint hazards, mold, fungi or indoor air quality, environmental hazards, any defects in the individual on-lot sewage disposal system or deficiencies in the on-site water service system, or any defects or conditions on the Property.
That said, our Pittsburgh lawyers have succeeded in court for money damages against both sellers and real estate agents (and also a closing company or two). However, the bar (to recover money) is high. Such cases are tricky. We must prove actual knowledge of the defect prior to sale (contact us for more information). This challenge makes many home buyers pivot their attention to the home inspector, whose job it was to discover the concealed defect.
“I can sue my Home Inspection Company, right, and make them pay to fix all the problems?” says the buyer.
Maybe.
Asserting a Claim Against the Home Inspection Company
The home inspector’s duty to inspect your home comes from a contract. Only, contracts are boring. Even the author of this article — a Pittsburgh lawyer who focuses on contract dispute claims (and defenses) in court — finds yard-work more interesting than reading most contracts. But when a home inspection is concerned, the home inspector’s contract will often govern — and possibly severely limit — your right to sue the inspector for a concealed defect of your newly purchased home.
Contact a lawyer at our firm to review any important contract before you sign it. For example, you don’t want to learn after it’s too late — that your home inspection contract:
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- limits your claims to sue for the hidden defects (often worth 10K or more) to the cost of your home inspection report ($300 to $700),
- absolved the inspector of any duty to look hard for defects, meaning, no duty to either: (a) enter a crawl space (to look for issues), (b) set foot on the root, to inspect damage or water runoff issues, or (c) and move anything out of the way, such as furniture, to look for concealed defects or dangers,
- limits the time period for you to sue, from four years (for breach of contract) down to six months or less,
- Requires the buyer to notify the home inspector within 14 days after discovering the hidden defect, or lose the right to sue,
- waives your right to a jury trial, forcing you to proceed instead in (often expensive) arbitration outside of the courts.
The Waiver of a Jury Trial: the (Dreaded) Arbitration Clause
Let’s talk about a home inspection contract’s waiver of the jury trial, first. This comes in the form of a clause compelling arbitration (outside of the courts) to resolve all disputes. But what’s the big deal? First, the process can be expensive, since the litigants must pay for the arbitrator’s hourly time. Despite this, most home inspection contracts require you, the buyer, to sue in arbitration outside of the courts.
“Politics” Waters Down the Result. It’s rare for an arbitrator to “hammer” (or rule heavily against) a home inspector. The concept of a “runaway verdict” in the jury trial system is much less common in arbitration cases. The awards are typically watered down to appear especially “fair” to the plaintiff and defendant.
But why?
The arbitrator’s fees (often very expensive, as mentioned) are shared by the parties, so the arbitrator is almost like an employee of the parties, who became the arbitrator’s “boss.” Therefore, the arbitrator will avoid trying to deeply offend either litigant. What’s more, the arbitrator wants future business from the litigants, who must consent to a particular arbitrators’ involvement. Long term, an arbitrator can’t afford to develop a reputation for being heavy-handed against one party or another. But in the jury trial system, no such dynamic exists. The jurors are truly independent.
Is an Arbitration Clause Enforceable?
The short answer: most often, yes.
Absent fraud or unconscionable conduct by the defendant-inspector, the appellate courts in PA will likely send all issues to arbitration (outside of the courts) if the home inspection contract includes an arbitration clause. Recently, in VON SICK v. ANC BUILDERS, INC., 298 A.3d 424, 2023 P.A. Super 116 (Pa. Super. Ct. 2023), the plaintiff-home purchaser sued his home inspector in court, for damages related to a home inspection. There, the home inspection contract heavily favored the home inspector. Two clauses of note were:
“(1) a clause requiring [the homeowner] to notify [the inspector] of any defect for which it may be liable within 14 days of discovery; and (2) a clause limiting [the inspector’s] liability to the lesser of actual damages or the inspection fee.”
The home inspection contract also compelled the parties to use arbitration to resolve all disputes. With that, the defendant-inspector objected to the lawsuit, saying it should not have been filed in court. The trial court overruled the objections, allowing the Plaintiff’s claims to proceed.
The home inspector then appealed to the superior Court.
Superior Court Compels Arbitration of Home Inspection Dispute
An agreement to arbitrate — by itself — does not violate Pennsylvania law. As the superior court noted:
“Pennsylvania has a well-established public policy that favors arbitration, and this policy aligns with the federal approach expressed in the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (FAA).” Pisano v. Extendicare Homes, Inc., 77 A.3d 651, 660 (Pa. Super. 2013). This policy applies to all arbitration agreements. MacPherson v. Magee Mem’l Hosp. for Convalescence, 128 A.3d 1209, 1219 (Pa. Super. 2015) (en banc).
Thus, an arbitration clause — by itself — does not make a contract “unconscionable,” even though the homeowner is effectively losing her right to a trial by a jury of her peers. Moreover, the court in VON SICK also found that the arbitration clause did not heavily favor one party or the other, as to be “unconscionable.” The reason? Each side could present all of its claims and defenses in arbitration. So after all that — including an appeal to the superior court — the Plaintiff learned a lesson the hard way: the process — to recover money from a home inspection company — was just getting started.
Difficult But Not Impossible
Every case turns on its facts. The arbitration clause in VON SICK (above) was enforceable, but that does not mean a home inspector can say or do anything he likes, with no consequence. To the contrary, even in arbitration, a home inspector can be liable for negligently failing to detect a defect.
And what about those limitations on claims, such as damages limited to the cost of the inspection?
The VON SICK court sent those questions to arbitration, as well, meaning, the limitations on claims might not hold up. There, in arbitration, an arbitrator could find that a home inspection contract — replete with clauses exonerating the home inspector — can actually hurt the inspector’s position, overall.
Court Find Numerous One-Side Clauses to Be “Unconscionable.”
In Lucier v. Williams, 841 A.2d 907, 366 N.J. Super. 485 (Super. Ct. App. Div. 2004), the Superior Court evaluated a home inspection contract replete clauses favorable to the inspector, making liability almost impossible. This, arguably, gave the inspector no incentive to even care about the quality of his inspection if, for example, his maximum liability was the $500 cost of his inspection. There, the court held:
There is no hard and fast definition of unconscionability. As the Supreme Court explained in Kugler v. Romain, 58 N.J. 522, 279 A.2d 640 (1971) . . . The standard of conduct that the term implies is a lack of “good faith, honesty in fact and observance of fair dealing.” Id. at 544, 279 A.2d 640. . .
Applying these principles to the home inspection contract before us, we find the limitation of liability provision unconscionable. We do not hesitate to hold it unenforceable for the following reasons: (1) the contract, prepared by the home inspector, is one of adhesion; (2) the parties, one a consumer and the other a professional expert, have grossly unequal bargaining status; and (3) the substance of the provision eviscerates the contract and its fundamental purpose because the potential damage level is so nominal that it has the practical effect of avoiding almost all responsibility for the professional’s negligence. Additionally, the provision is contrary to our state’s public policy of effectuating the purpose of a home inspection contract to render reliable evaluation of a home’s fitness for purchase and holding professionals to certain industry standards. (Emphasis added).
Thus, numerous one-sided clauses — solely benefiting the home inspector — can constitute a contract of adhesion, meaning, something unfairly forced on the home purchaser and therefore not enforceable.
International Association of Home Inspectors’ Interpretation
Here is how the International Association of Home Inspectors interprets Lucier v. Williams, 841 A.2d 907, 366 N.J. Super. 485 (Super. Ct. App. Div. 2004):
Courts have determined some home inspection liability limitations substantively unconscionable because they did not provide the inspector “a realistic incentive to act diligently” and because they imposed a disparate impact on the homebuyer. Lucier, 841 A. 2d at 912–13; Pitts, 905 So. 2d at 556–57
Violation of PA’s Unfair Trade Practices and Consumer Protection Law (UTPCPL)
Pennsylvania’s UTPCPL grants special rights to consumers who enter into non-commercial contracts, such as cont relating to one’s personal home. At one point, theUTPCPL required proof of fraud. But in Gregg v Ameriprise Fin., Inc., No.29WAP2019 (Pa. Feb 17, 2021), the Pennsylvania Supreme Court did away with the “fraud” requirement. Instead, a strict liability standard now governs Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL).
Thus, if a home inspector makes a false statement — even if done innocently — either in his contract with you (a consumer) or his home inspection report and you rely on the statement, you could have a claim for violation of the UTPCPL. This allows you, the consumer, to recover not only your actual damages — for reliance on the false statement — but also recover an award for your attorney fees plus treble (or triple) damages.
What’s the Conclusion? Serious Cases Should be Litigated
Above all, even if a court sends your claims to arbitration (against a home inspector), the case against the home inspector is not over. There, you, the homeowner, will have the arguments set forth in Lucier v. Williams, 841 A.2d 907, 366 N.J. Super. 485 (Super. Ct. App. Div. 2004), to void some or all of the inspector friendly clauses in his agreement, because such limitations can amount to an unenforceable contract of adhesion. Plus, you could have your own claims for violation of consumer protection law, above.
But there are no guarantees in litigation, except that it will cost time and money.
Let’s Get Started!
Contact a Pittsburgh attorney at our law firm to learn your rights. We charge over $225 per hour but we can review your claim or defense for a flat fee of $200 during a consultation of up to one hour. Call or email any time!
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