Inspector claims in NJ

[James A. Levy]

Interesting article from the NJ Law Journal:

Unique Issues Arising in Claims Against Home Inspectors
John B. Mullahy and John J. Leo III
01-05-2011
Frustrated homebuyers increasingly resort to litigation and include home inspectors among the parties they sue. New Jersey courts have recognized home inspectors' professional status, required expert testimony to prove they were negligent, and included them as professionals exempt from the Consumer Fraud Act (CFA).
Courts have also enforced arbitration agreements between inspectors and homebuyers, permitted shortening the statute of limitations for claims against inspectors, and would likely permit a reasonable limitation of liability as to those claims.
Standards of Practice
The American Society of Home Inspectors (ASHI) and the National Association of Home Inspectors (NAHI) have established Standards of Practice and a Code of Ethics in response to homebuyers' demand for professional expertise distinct from construction, engineering, architecture and municipal building inspections.
According to these professional standards, home inspectors must: (1) examine readily-accessible and visually-observable systems and components; (2) report systems and components that are not functioning properly or are deficient, unsafe or near the end of their service lives; (3) recommend that homeowners correct (or monitor for future correction) the deficiencies reported or items needing further evaluation; and (4) identify systems and components that were not inspected and the reasons they were not inspected.
The standards also state that home inspections apply to the following 10 broad categories: structural components, exterior, roofing, plumbing, electrical, heating, air conditioning, interiors, insulation and ventilation, and fireplaces and solid-fuel burning appliances. Inspectors discuss all of these areas in their written reports. See ASHI Standards of Practice and Code of Ethics, at 2.2; www.homeinspector.org.
A few examples of the things inspectors examine include the foundation, framing and grading; roofs and decks; the water supply and drainage systems; the heating, air conditioning and electrical systems; and all interior structures and installed appliances. Inspectors are not required to operate central air conditioning equipment when the outside air temperature is below 60 degrees (or when conditions could damage the equipment), or to activate heating systems when ambient temperatures (or other circumstances) are not conducive to safe operation. See NAHI Standards of Practice, at 12.3.5, 11.3.8; www.nahi.org. Nor are inspectors required to offer or perform engineering or architectural services, to discuss the adequacy of structural systems, or to identify concealed conditions or latent defects. See ASHI Standards of Practice and Code of Ethics, at 2.2.B-C, 3.2, 13.
In cases against home inspectors, the plaintiffs must prove that the inspectors were required to inspect the defective parts of the homes in question, that the inspectors deviated from ASHI or NAHI standards (or another appropriate standard), and that those deviations caused damages. See Grzymala v. McKeon , 2007 WL 2188633 *4 (N.J. App. Div. July 31, 2007).
The Consumer Fraud Act
The CFA outlaws commercial practices involving deception, fraud, false pretense, misrepresentation, or the knowing concealment, suppression, or omission of any material fact concerning the sale or advertisement of merchandise. The statute penalizes violators with treble damages and liability for the aggrieved consumer's reasonable attorneys' fees and costs. See N.J.S.A. 56:8-1 to 20. Brokers, agents and persons representing sellers of real estate are subject to the CFA. Strawn v. Canuso , 140 N.J. 43, 60 (1995).
However, the CFA exempts licensed professionals and semi-professionals subject to testing and regulation under statutory and administrative code provisions. And at least one lower court has ruled that home inspectors are learned professionals and that when they act in their professional capacity, they are not subject to CFA claims. See Cheret v. Sure Home Inspections, et al. , 2009 WL 1641441 (N.J. Super. Ct. Law Div., May 15, 2009) (finding that home inspectors are subject to testing, licensing, regulations and other legislative provisions that ordinary commercial sellers of goods and services are not).
Arbitration Clauses
An arbitration clause in the home-inspection agreement is enforceable and arbitration is binding where the controversy falls within the scope of the agreement and its terms are unambiguous. See Meglio v. Taylor Real Estate, Inc. , 2006 WL 31534326 (N.J. Super. Ct. App. Div. Nov. 6, 2006). In Meglio , the plaintiffs were provided a home-inspection report indicating the home had no major structural concerns. The report was attached to a contract that included language for binding arbitration to resolve all relevant claims.
After closing, the plaintiffs started remodeling the home and discovered evidence of fire damage. They sued for the difference between the initial estimate and the estimate after discovery of the damage. The lower court issued an order compelling arbitration, and the plaintiffs appealed, arguing that the agreement was unfair and contained no language stating that they waived their right to a jury trial. The Appellate Division ruled the agreement was enforceable because the intent to arbitrate was clear, the claims fell within the parties' agreement and the parties made no showing of fraud or unconscionability.
Shortening of Statute of Limitations and Limitation of Liability Clauses
Claims against home inspectors fall under the six-year statute of limitations for claims based on contracts or injury to real property. Such claims are enforceable and the agreed-upon time (even one year) is reasonable, provided the court views the parties as being at arm's length in negotiating them. See N.J.S.A. 2A:14-1; A.J. Tenwood Associates v. Orange Senior Citizens Housing Co. , 200 N.J. Super. 515, 523-524 (App. Div. 1985) (finding one-year limitation period in construction contract valid and enforceable).
Courts have also used the reasonableness standard in ruling on limitation of liability clauses in home-inspection agreements. See Lucier v. Williams , 366 N.J. Super. 485 (App. Div. 2004). In Lucier , the home buyers hired an inspector, agreed to limit his liability to the lesser of $500 or 50 percent of the fees they paid him, and then sued to recover around $10,000 in costs to repair the house's roof. The Appellate Division found the provision limiting the inspector's liability unenforceable as written and under the facts there. However, a more reasonable damages clause could pass judicial scrutiny.
New Jersey courts recognize home inspectors as professionals. Home buyers bringing suits against them will encounter statutory, procedural, evidentiary and substantive hurdles to imposing liability on them. Counsel representing homebuyers and home inspectors should be prepared to address home inspection agreements, especially clauses mandating arbitration and limiting both the time to file a claim and the inspectors' liability. Counsel should also be prepared to address the CFA and the need for expert testimony to prove such claims.

[James A. Levy]

What I find interesting is NJ has their own SOP, and this article promotes ASHI and NAHI?????

[Gary Farnsworth]

No mention of what a "representative number" is, that is in most SOP's. Biased article, IMO. If home builders only give one year warranties, why do our reports have to last five, even six years. Finger pointing.

[Joe Farsetta]

A state-mandated SOP is an inspector's best defense. This is why it is critical to color within the lines, and when you venture beyond, do it in a justified, consistent, and documented manner.

[Gary Farnsworth]

I think someone wrote a blog on that subject.

http://homeinspectorlawyer.blogspot.com/

[Joe Farsetta]

Gary,

I have been saying this for years. "Exceeding" the SOP can quickly backfire, especially if done in a haphazard manner.

[James A. Levy]

Joe, according to the article arbitration services do help.

[Brian E. Kelly]

Originally Posted by jlevy1

Joe, according to the article arbitration services do help.

Where does it say this?

[James A. Levy]

Originally Posted by bkelly2

Where does it say this?

New Jersey courts recognize home inspectors as professionals. Home buyers bringing suits against them will encounter statutory, procedural, evidentiary and substantive hurdles to imposing liability on them. Counsel representing homebuyers and home inspectors should be prepared to address home inspection agreements, especially clauses mandating arbitration and limiting both the time to file a claim and the inspectors' liability. Counsel should also be prepared to address the CFA and the need for expert testimony to prove such claims.
Sorry, it's not an endorsement. It rather states them as an added hurdle to deal with. If you were to use Joe's service, without making it a clause in your agreement.....well that's just dumb.

[Brian E. Kelly]

That is how I initially read it as well James. Correct James, if you want Arbitration it had better be clear in your contract.

Arbitration may or may not be a good thing. No real evidence I have seen either way.

I would rather have a Competent Attorney Defend me, if push comes to shove.

[Michael Larson]

Originally Posted by bkelly2

That is how I initially read it as well James. Correct James, if you want Arbitration it had better be clear in your contract.

Arbitration may or may not be a good thing. No real evidence I have seen either way.

I would rather have a Competent Attorney Defend me, if push comes to shove.

I'm sure Joe Farsetta has many examples whee arbitration has saved HIs plenty.

Let's hope he shares a few stories here.

[Brian E. Kelly]

Originally Posted by mlarson

I'm sure Joe Farsetta has many examples whee arbitration has saved HIs plenty.

Let's hope he shares a few stories here.

I am sure he does, but Joe has also made it clear he is not on the Home Inspectors side.

And as for "Stories", that is all the will be no matter who tells them.

[Michael Larson]

Originally Posted by bkelly2

I am sure he does, but Joe has also made it clear he is not on the Home Inspectors side.

And as for "Stories", that is all the will be no matter who tells them.

Arbitration is not about being on someones side.

Would you rather have the arbitrator be someone with an understanding of Home Inspections or someone else?

[Joe Farsetta]

Brian,

Let's not forget your personal situation from a few years back. Was your attorney able to save you?

Arbitration is not about taking sides. That is why the person reviewing the facts is called a neutral.

As to not beiing on the inspector's side, perhaps you'd like to see testimonials from those inspectors I have personally helped. I am far too biased in favor of good inspectors to serve as a neutral, because typically I am not. There are also a lot of bad inspectors out there.

I have dealt with complaints about inspectors for many years, within this very association. Let's not try and pretend that inspectors walk on water.

As to arbitration, we allow attorneys to participate in the process. However, we do not allow procedural mumbo-jumbo stand in the way of fair outcome.

As to statistics on arbitration, the general concensus is that arbitration is often superior to dragging things out in a traditional court of law. The problem with arbitration can sometimes boil down to cost. In many instances, arbitration can cost thousands.

Our service is a flat $350.

As to the effectiveness of my involvement and my services, here are two real-life examples:

FROM AN ASHI INSPECTOR...

"Inspeciton Arbitration Services has helped me to settle a suit that was filed against me for an inspection I performed. They worked along side my attorney to quickly resolve the issue once we got to the arbitration process. The suit had taken more than 2 years of filings to finally get to the arbitration process costing legal fees and times of stress to my company and family. I state in my home inspection agreement that all suit would be settled by binding arbitration and my insurance company prefers that I state that as well.

The arbitrator was a home inspector who understands the limitations we have and what the scope of practice is during a home inspection. This is extremely important to me as someone who does not fully understand our business could easily misinterpret the information in our reports. The arbitration process took all information from the buyer's attorney and my attorney and settled it quickly and efficiently without continued legal fees.

I was thrilled with the expedited process with the truth finally getting out about the issue. I currently have and will always use IAS in my agreement to help protect myself, my family, and my company. Our society has many people who are litigious and know they can sue inspectors over the smallest issues even if it not our fault. It makes sense to have an extra layer of protection to ensure we remain true to our home inspection scope of practice."


and...

FROM OUR OWN RUSS SPRIGGS BACK IN JULY

Oh, sweet Maria, Gesu & Guiseppi . . .
Having Farsetta behind you is like using a nuke to kill a wasp nest.
If he ever offers to write a"scathing" letter, read it with a fire extinguisher in your hands.
I had a PITA client that was egged on by an agent, & I just wanted her to go away. I actually had to tone down Joe's letter a little bit!
I grew up in Jersey, so I understand that the best defense is a great offense, but Madonn'!
Anyway, that's whiskey under the bridge, cuz she's long gone . . .
Thanks again, www.inspectionarbitrationservice.com!

[Gary Farnsworth]

Issues such as this discussed on this thread are the result of the differences in states that have their own separate home inspection laws and SOP's. When litigation hits you, attorneys look to other states to "see what they do". Example, an attorney in Missouri (and unlicensed state) will look to other licensed states to see if there is anything that can benefit his client, by presenting the other state's laws. It is nothing but spin. Problem is that all states have different laws. Egos play a big part in the political arena, because each state wants to do it better than the other, hence all of the differences.

Until there is some continuity between the states, attorneys will be filling their bank accounts, because most all are clueless when it comes to home inspections. They will drag out litigation as long as they can, as long as the home inspector pays their bills. Joe Ferry and Joe Farsetta are our best representatives for our industry. Listen to them.