Who may have a copy of the inspection report?

By James L. Goldsmith, Esquire

This question gets lots of playtime on the Legal Hotline. The inspector was hired to perform an inspection for a specific buyer and can understandably take umbrage to find out that the seller gave copies of his report to umpteen other prospective buyers who never paid a dime. Then again, I have run into inspectors who take umbrage when the buyer for whom it was performed gives a copy to the seller.

How is it that inspection reports grow wings and fly to so many places? There are quite a few reasons and ways that these reports travel, but the typical patterns are these. The buyer uses a report to terminate an agreement or as a basis for a corrective proposal that never is accepted. After the transaction fails, the seller sees the inspection report as an advantage. She can correctly claim that the property has already been inspected and use the report to substantiate its condition.

Reports are also quoted by sellers who have a need to update their seller's property disclosure statement by what the buyer's inspector has reported. Frequently these sellers cut and paste from the inspector's report rather than paraphrase his findings somewhere on the disclosure form.

So, what duplication/distribution is lawful and what is not? Pennsylvania's Home Inspector Law addresses the seller's right to a copy. And it is just that, the seller has an absolute right to a copy of the home inspector's report (from the person for whom it was prepared) despite the fact that the seller didn't hire the inspector nor pay for the report. The seller's right to a copy is also found in the agreement between the buyer and seller (PAR's Standard Agreement) which assures that a seller has a right to a copy of any inspection report, not just that of a home inspector.

Neither the law nor the agreement restricts the seller's use of the report, but that does not necessarily mean that there are no limits. Clearly within the limits, is the seller's right to duplicate provisions of the report that identify a problem. Of greater risk to the seller than a complaint from a home inspector, is the risk that a seller "waters down" an inspector's report of a problem. Quoting an inspector minimizes any risk that the seller was not fully disclosing the known material defects.

What about giving copies of an inspection report to other prospective buyers? The inspector has a legitimate complaint that by exposing his report to non-intended parties, his risk of being charged with failing to adequately perform an inspection is far greater. Persons who did not engage the inspector nor pay him may be relying on his report despite the lack of consideration given when it was obtained. Should these persons have a right of action against an inspector who unfortunately, but unintentionally errs in his findings?

"Privity" is a term to describe a formalized relationship between a contractor and purchaser where the solemnity of the bargain and the exchange of a fee entitles the purchaser with the benefit of justifiable reliance and the right to pursue an action when the vendor has failed. I think it is fair to state that home inspectors do not reasonably anticipate that their limited, non-invasive inspection of the readily accessible and visible aspects of a home on a given date and at a given time will be relied upon by others on a later date who have not paid for the privilege of reliance. Buyers who accept a previously prepared report performed for another should be forewarned that their reliance may not be justified. They can expect no recourse against the inspector and should be so advised.

Inspection reports are prepared for transactions and the host of persons directly involved. It should be expected that their contents will be quoted to others who rely on sellers for candid and complete disclosure of material defects. Even if prospective buyers view them, they should not be relied upon for a subsequent transaction; the buyer should engage his/her own inspector for a report upon which he/she can rely with the satisfaction of knowing that there may be recourse.

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.