by: Chris Moles, General Counsel, Intero Real Estate Services, Inc.
Agents frequently come across a dilemma when they possess property inspection reports which were initially created and paid for by a third party. Often the report’s purchaser is not in contract with the seller or the listing agent and objects to use of the report. Sellers and their real estate agents have a duty to disclose prior inspection reports they possess regardless of who initially paid for the report, and the Legislature has reflected the courts’ position in the California Civil Code.
Disclosure of Prior Inspection Reports in the Civil Code
California Civil Code section 20179 (a) states:
“It is the duty of a real estate broker or salesperson…to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal, if that broker has a written contract with the seller to find or obtain a buyer or is a broker who acts in cooperation with that broker to find and obtain a buyer.”
Prior inspection reports constitute material facts concerning the property. A purchaser is entitled to disclosure of these facts. If the listing agent has knowledge and possession of the report, then they have an affirmative duty to disclose its contents.
Further, California Civil Code section 1102.1(a) states:
“In enacting Chapter 817 of the Statutes of 1994, it was the intent of the Legislature to clarify and facilitate the use of the real estate disclosure statement, as specified in Section 1102.6. The Legislature intended the statement to be used by transferors making disclosures required under this article and by agents making disclosures required by Section 2079 on the agent’s portion of the real estate disclosure statement, in transfers subject to this article. In transfers not subject to this article, agents may make required disclosures in a separate writing. The Legislature did not intend to affect the existing obligations of the parties to a real estate contract, or their agents, to disclose any fact materially affecting the value and desirability of the property, including, but not limited to, the physical conditions of the property and previously received reports of physical inspections noted on the disclosure form set forth in Section 1102.6 or 1102.6a, and that nothing in this article shall be construed to change the duty of a real estate broker or salesperson pursuant to Section 2079.”
Civil Code section 1102.1(a) specifically states that prior reports contain material facts effecting the desirability of the property. This reaffirms that sellers and their agents are required to disclose all prior property reports in their possession to potential buyers.
When in doubt, always disclose.