Drafting an Inspection Contingency

By James L. Goldsmith, Esq.

The inspiration for this article was a Hotline call having to do an agent-drafted inspection contingency. The offer was written on the PAR Standard Agreement for the Sale of Real Estate (ASR). A number of the inspections listed in Paragraph 12 were elected and others waived. At the end of the list where one can add additional inspection contingencies, the buyer agent entered "swimming pool inspection contingency." The seller accepted the offer.

As this deal was struck in early April, the swimming pool remained under cover and in its winterized condition. After making arrangements with a contractor to inspect the pool, the buyer's agent "reminded" the listing agent to have the pool cover off, the equipment de-winterized, the heater on and the pool ready for use. The seller, in his 90s, had not contemplated doing any of this and was in no shape to remove the cover or do any of the tasks requested. The question posed by listing agent is whether the seller has any responsibility for hiring a swimming pool company to de-winterize the pool and have its systems on and running for the buyers' inspector.

The place to begin our quest for an answer is in the agreement of sale, specifically with the contingency clause in question. Unfortunately, the phrase "swimming pool inspection contingency" does not a contingency make! These words, on their own, do not establish the details of the contingency and the prep work required.

The boiler-plate language found in the first several paragraphs of the Inspections clause (Paragraph 12) provides general provisions that are part of all inspection contingencies. For example, Paragraph 12(B) provides that the inspections elected by the buyer are performed at the buyer's expense; that the inspections are to be performed by properly licensed or qualified professionals; that within the contingency period buyer can terminate the agreement and so on. Another of the boiler-plate provisions is that seller will provide access to the inspectors and that the seller will have "all utilities on for all inspections." (See Paragraph 12(A).) Are these boiler-plate provisions sufficient to answer our question? Unfortunately, no.

It would seem that the boiler-plate provisions do not go far enough. Yes, the seller will provide access. Whether this requires the pool cover to be removed, I can't answer. Obviously the cover has to be pulled back in order to examine the interior of the pool and its liner, stairs and other parts of the pool. But presumably, the inspector would also want to examine the cover and how it fits on the pool.

As for having the utilities on, seller is going to argue that heat refers to the heat provided to the home and not to a pool that is not being used in early April! Again, I would hate to predict with certainty what a court would do and I would hate to see a matter this inconsequential get to a court to begin with. Is it enough to have the heat available at the flick of a switch? Is it enough to have the electric current available so that the pump can be tested, again, at the flick of a switch?

And even if you conclude that the heater has to be on for a sufficient amount of time to have heated the water and the cover removed, what about all of the other things that go into opening a swimming pool for the season? Who is responsible for assuring that the alkalinity and calcium hardnesses are properly set? Who is responsible for restoring chlorine levels to normal and adding algaecide to remove any bio materials that have found their way into the pool; who is responsible for restoring the ladders, railings, chemical feeders, restoring the water level to normal, cleaning walls, floors and the removal of leaves and silt? Is it the seller's responsibility to add water to the pump filtering and heating systems that was drained for the winterization process?

If you look at the on-lot sewage contingency on Page 6 of the agreement, you will see that, if necessary for the inspection process, "seller, at seller's expense, will locate, provide access to and empty the individual on-lot sewage disposal system." And similarly, seller is obligated to restore the property after the inspection and prior to buyer's purchase. Why wasn't specific language like this crafted by the buyer's agent as part of the swimming pool inspection contingency? In the absence of specific requirements in the contingency clause or in the boilerplate language that precedes it, the expense and tasks of the inspection fall upon buyer.

Drafting contingencies is detailed work. Great consideration should be given to the specifics of the inspection (what and by whom) and the responsibility for inspection preparation, if any is required.

A viable legal doctrine that will have bearing on the interpretation to be given to this poorly drafted contingency provides that ambiguities are construed against the drafter. I think we can safely agree that the contingency drafted by the buyer agent is ambiguous. And because the buyer agent had the pen and could have controlled the language to address all aspects of the contingency, any doubt will be resolved against that agent. And who does the buyer agent represent? Hence, the language is that of the buyer and the meaning to be applied to this vague clause would be that which most benefits the seller.

Fortunately, PAR provides preprinted addenda that cover 90% of our members needs. For those few occasions where specific language is needed, engaging counsel or having your principal (buyer or seller) engage their attorney to draft the contingency are good calls. When you do have to draft a contingency, assure that it addresses any possible question that could arise.

Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2014

All Rights Reserved

Jim Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com.