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Recent Case Expands Broker’s Duty to Warn

Breach of Contract and Real Estate Law by Simon Offord, Esq.

The recent case of Hall v. Aurora Loan Services, LLC, 2013 DJDAR 5460 (April 26, 2013) has expanded the real estate broker’s duty of care to include an express disclosure and warning of matters included in a home inspection report to visitors of the property (ie agents and potential buyers).

The plaintiff in Hall is a real estate agent.  While showing the property to her clients, Hall inspected a stairway ladder that led to a bonus room attic.  Thinking it looked safe, she climbed the ladder to access the attic’s bonus room when and a hinge broke, causing the stairway ladder to fail, and Hall fell to the ground and broke her leg.  Hall subsequently filed suit against the listing broker.

As part of preparing the property for sale, the listing agent obtained a garden-variety home inspection report.  Like most inspection reports, the report contained a lengthy list of commingled cosmetic and minor repair items.  Included in the “Health and Safety Required Repairs” section there was a recommendation to repair and replace the attic stair. The inspection report was provided to the listing broker, however the listing broker alleged to have had no actual knowledge of any dangerous conditions and did not discuss the report with the contractor who prepared the report.

The trial court dismissed the case because the listing broker and the owner had no actual notice or knowledge of a defect in the stairway ladder (notwithstanding the contractor’s inspection report). The Court of Appeal reversed, holding that there was sufficient evidence for a jury to conclude that based on the “remove and replace” reference in the inspection report, the listing agent had reason to know that the stairway ladder was potentially dangerous because it was in disrepair, and should have warned of the condition.

This ruling creates a very difficult standard for listing brokers to comply with as it will require them to go further than merely providing a copy of the inspection reports to other agents and visitors.  Instead, the prudent broker will carefully review the inspection report, provide it to all visitors, discuss any concerns with the preparer of the report, and then specifically warn visitors of dangerous conditions.

It will be interesting to follow future cases and decisions in order to further define what is a dangerous condition and whether the courts will further broaden or define the broker’s duty to warn.  We will be sure to update our readers of any such additional developments.

If you have any questions about a real estate broker’s duty to warn, or any real estate related legal issue, please give us a call at (650) 327-2900, or visit us on the web at www.brewerfirm.com.

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