Adequate Inspections Can Be Critical

            Real Estate brokers who sell property have a duty to “conduct a reasonably competent and diligent visual inspection” of such property and to disclose all facts “materially affecting the value and desirability of the property.”  But a very unfortunate case shows that this duty to inspect is not necessarily extended to every person who may be injured or damaged due to defects in real property.

Several years ago, a buyer purchased a beachfront residence in southern California.  The property had a balcony supported by steel beams.  After purchasing the residence, the buyer hosted a large party at his new residence.  During the course of the party, the balcony’s steel beams failed, and the balcony fell.  At least 36 people were injured or killed.

A lawsuit was filed by 36 plaintiffs against the real estate brokers who had sold the residence.  The plaintiffs claimed that a structural engineer had told the selling brokers that there were defects with the steel beams that supported the balcony.  As a result, the plaintiffs claimed that the brokers were liable to the injured plaintiffs for their losses and injuries.

The trial court initially held that the Plaintiffs may have a valid claim against the brokers.  But on appeal, the Court of Appeal ruled that the brokers were not liable to any of the 36 plaintiffs or their heirs.  None of the Plaintiffs were buyers or sellers of the beachfront property.  The Court of Appeal ruled that the brokers’ inspection and advisement duties did not extend to the Plaintiffs because the Plaintiffs were not involved in the purchase of the property.  The Court of Appeal therefore held that because there was no duty, then there was no claim by the Plaintiffs against the brokers who sold the residence. This case is reported as FSR Brokerage, Inc. v. Superior Court (1995) 35 Cal. App. 4th 69.

If the owner of the residence had been injured, then the result may have been different such that the owner may have had a valid claim for his injuries.  But because the invited guests were not involved in the real estate transaction, none of them had a valid claim against the selling brokers in this case.

Real estate brokers have a duty to visually inspect real property for conditions that materially affect the value or desirability of a property.  But the broker’s obligations to perform such inspection may not extend to all persons who may be affected by a defect in the property. When buying a property, Buyers can sometimes be concerned about inspection fees, but the risks of defective construction or conditions can be so great that the small cost savings of avoiding inspection can often be far offset by the amount of loss or damage if there should be a problem with property defects.  Buyers of real property may reduce their risk when they have their potential purchases fully inspected by licensed, experienced, qualified inspectors who are adequately insured.

In reaching its decision, the Court in this case analyzed and relied on complex principles of duty, negligence, and both case and statutory law. The court’s opinion did not discuss whether persons other than the selling brokers might potentially be liable to the Plaintiffs for their injuries. The Court’s decision in this case is no indicator of how a court may rule in any given situation.  Persons with potential legal claims should always consult professional, experienced, competent legal counsel when evaluating their claims or determining whether or not such claims have legal merit or validity.

Copyright 2017 ROBERT B. JACOBS