Inspector Reports Septic Failure

Inspector Reports Septic Failure

Health Dept. OKs System
Seller Wants to Sue

     A home owner asked about suing a home inspector.  

Photo from website

Photo from website

Her beef?      Basically, the home inspection report killed a deal to sell their home.
The inspector said the septic system had failed.  But there was an odd twist.  The septic failure was not mentioned in the inspection report.  It was in a separate email the inspector sent the buyer.
The second twist was that this was not the first home inspection of the couple’s home.  It had been under contract twice before.  So other home inspectors had written reports on the same home before.  The most recent prior report was only a few weeks ago.  Both prior deals fell apart because the buyers had mortgage problems.  But the listing agent got copies of both reports along with requests for minor repairs, like a loose gutter.
The two prior, but recent, home inspection reports both said the waste system was OK.
So here’s a fresh home inspection that finds septic failure right after two other inspectors said the same system was fine.  Maybe it just broke.  Maybe not.
It gets better.  The consumer had the septic tank and laterals dug up just three ago.  They had a 5-year warranty for the work.
So she called the local health department to check the septic system.  The health department inspector came out and told her it was OK.  Then he came back the next day and did a dye test to double-check.  The health department gave her a written report saying the septic system was just fine.
But that was too late to save the sale.  The buyers had bailed.  It threw cold water on their Christmas.  And at Christmas, no new buyer was likely anytime soon.  To make matters worse, they had planned a trip to Florida to buy their new retirement home.  That would have to wait.
They were mad, and hurt.
They did what mad, hurt home sellers do.  They called their agent.  Their agent sympathized.  The inspector was just plain wrong about the septic system, the agent said.  But she also said she could not give legal advice about suing him.  The agent said “Why not ask Steve?  He’s an expert who also teaches home inspection law and regulations.  Maybe he can help you think it through.”  (You have to appreciate the flattery when you hear this, even though you also can hear the sounds of an agent sliding off the hook and a hot potato tossed your way.)
“And, by the way,” the agent added, “I noticed the home inspector did not put his license number on the report.  That’s required.  You could complain to the home inspector licensing board, whether or not you sue the inspector.”
That prompted the consumer to nit-pick the home inspection under a microscope.  She came up with a handful of additional criticisms she could throw in.
Her story finished, finally, she felt sure she and her husband were damaged by losing the sale of their home.  To her, it came down to a basic question: Could she collect?  In other words, should she sue the inspector, or file a complaint with the licensing board, or both?  Or just take her licks and move on?

 ANSWER

For starters, we had to explain Steve would not be for hire in this.  He could not be her lawyer either.  But we could think out loud with her in general about the question.  Specific legal advice would have to come from her lawyer, if she went there.  So this is general principles, not legal advice, and Steve stays a teacher, not her lawyer.

Still, any lawyer’s first question would be whether the home inspector was licensed at all.  If not, there was no license number to put on a report in the first place.  The problem at the licensing board would be completely different.  So would any lawsuit.
A quick check at the Board’s web site said he was licensed, and it was “active.”
So, sure, he probably should have put his license number on the inspection report.
But not necessarily.  If the inspector did not sign the report, then the rule does not apply.  The rule, at 815 KAR 6:030 Sec. 1(5), says a home inspector shall “provide the license number, following the inspector’s signature, on any document signed by the home inspector pertaining to the home inspection.”
She did not think the inspector “signed” the report.  The inspector may or may not have “signed” the email where he actually said the septic system failed.  Technically, the license number was not required on the report then.  There is no express, clear rule on license numbers in emails.
On the other hand, the Board is not in the habit of reading its rules that precisely.  It might criticize the inspector anyway.  Even so, it would not be a huge deal.  It’s happened to every inspector sometime over the years.
But if her real goal is to get money, then a complaint to the licensing board will not get it.
The main thing to keep in mind about all complaints to the licensing Board is that the Board cannot pay out money, or order the home inspector to pay her money either.  Only a court can do that.  Other licensed professionals, like the realtors, appraisers, and lawyers, have client protection funds to cover losses caused by their licensees, but the Kentucky Board of Home Inspectors decided not to try to set one up.
To get money, she needs to get a lawyer.  Lawyers who have sued home inspectors are pretty scarce.  The one in her area probably would charge her $500 to $1,000 to “get started.”
Could she get her legal fees paid if she won?  Probably not.  Almost always, everyone pays their own lawyers in these cases.  She should count on spending money out of pocket to chase the money she wants.
Then the question will be how big are her damages?
The main damages item here is money “lost” from losing the sale of her house.  But that is a “paper” loss.  She will still sell her house – to move to Florida.
That means the real question is whether she gets the same money then – when she sells later – that she was counting on getting this time.  The difference between the actual sale price, when it closes, and the contract purchase price that they lost, when the inspector erred about the septic system failure, will be the real measure of those “actual” damages – if the closing price is lower.  On the other hand, as a general rule, if the closing price is the same or higher, then those “actual” damages go away.
The most likely result in that case is “no harm, no foul.”

 

There are a few other points worth mentioning:
Since she has not spoken to the buyer who walked away, she also needs to remember that the buyer may have ditched the deal for other reasons.  She saw a conversation that makes her pretty sure the septic report killed the deal.  But until someone finds out, for sure, why the buyer decided to back out, there always is a possibility that the septic system had nothing to do with the buyer’s decision, or was only a part of the decision.
Last, everyone needs to keep the statute of limitations in mind.  The Kentucky statute of limitation requires that a lawsuit be commenced no later than one year after the date she “knew or should have known of a deficient home inspection and damages and injuries resulting therefrom.”  KRS 413.246.
She knew the inspection report was deficient no later than when she got in touch with Steve.  Probably she knew before then, when she talked to her agent.  Maybe she knew when she got the Health department report, even earlier.
The trick here is when she knew of damages.  It could be she had some small amount of damages just from the time required to find out the inspection report was mistaken.  But not likely.
Most likely, the date she actually finds out if she has any real damages is the day she closes on the sale of her house.  If it sells for more than the contract price she “lost” this time, her main damages go to zero.  If it sells for less, then she gets an actual number for damages.  That probably will be months from now.
We can all learn a little from this one.

 

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