The Second Appellate District of California found that a realtor may hold an inspection company liable for negligently failing to disclose construction defects. In Leko v. Cornerstone Home Inspection, 2001 Daily Journal D.A.R. 1247, the plaintiff sued the realtor for allegedly failing to disclose structural damage to the home they purchased caused by the Northridge earthquake. The realtor then sued the inspection company that had been hired by the plaintiff and an inspection company hired by another prospective purchaser to perform a general inspection of the property before sale.
Real estate agents and brokers involved in the sale of residential property owe a purchaser of that property a duty to conduct a reasonably competent inspection and disclose all material facts affecting the value and desirability of the home.
Similarly, a home inspection company retained by a purchaser owes the purchaser a duty to conduct a home inspection in the degree of care a reasonably prudent home inspector would exercise. Thus, both the realtor and the inspection company, acting independently of one another, caused the plaintiff's home to be worth less than the plaintiffs believed and were potentially liable.
Furthermore, the Court recognized that when a purchaser of residential property is damaged by the nondisclosure of a defect and both the inspector and realtor were obligated to discover and disclose the defect, it is fair to apportion the damages among the two.
In this case, the home inspection company hired by the plaintiff can be held liable for it's failure to disclose defects in the home when it knew or should have known of the defects and should have disclosed the defective condition caused by the Northridge earthquake.
Holding the inspection company hired by the previous prospective purchaser is a little more difficult. The Court, however, found that while an independent inspection company does not owe a general duty of care to this plaintiff with respect to it's reports, it may be liable if they knew those reports would be transmitted to this plaintiff and this plaintiff would rely on those reports for their decision.
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