TURNING OVER REPORTS: A CAUTIONARY TALE

May 3rd, 2011 at 11:25 pm

I received the following call this morning. We had a listing in San Diego County. In the course of that listing, the seller provided us with two roof reports, one five years old and the other two years old. The reports both identified leakage problems with the roof, in the same general area. The seller also told us that all repairs requested by those reports had been made and that the roof had been leak free. The property eventually sold and, during the course of that escrow, a new roof inspection was prepared and the inspector declared the roof leak free and in good shape. Based on this set of facts, our agent did not turn over the two old reports to the buyer. She believed that they were too old and, according to the seller, identified defects that no longer existed. That fact was confirmed by the newest roof inspection. Of course, now, after close of escrow, the roof leaked in the same area as before. The buyer has told us that, if the existing leaks are not resolved to her satisfaction, she will file a complaint against us and the seller. The question posed by this story, very simply, is whether we should have delivered the old reports to the buyer.

Remember, my question is not whether we “must” turn over those reports, but whether we “should” do so. After all, given that the old reports were both more than one year old and the seller said all recommended repairs were performed, we could argue that the reports disclosed no presently existing material facts and therefore had nothing to disclose. Additionally, there was a new inspection performed and a new clearance given during the subject escrow. Those items should accurately describe the then existing condition of the property and should satisfy our duties. But despite that fact, the buyer is unsatisfied. They believe that we didn’t turn over the old reports because we were hiding something. They believe we were engaged in a conspiracy to defraud them with our seller. So, no matter how good our position might be, the failure to turn over reports may result in us getting sued.

So, what “should” we have done. As always, no matter how well we can excuse or defend it, the safe thing to do is turn over all reports, old or new, to the buyer. In our case, we should have given the 2 old reports to the buyer, and told her that the seller says the recommended repairs were done. That way we satisfy everyone. We turn over the reports, but relay the seller’s positive information with regard to repairs. Had we done that, the transaction would not have changed. With those facts in her possession, and the new report, the buyer still would have bought the house. Only one thing would have changed: No lawsuit.

So this is a easy example of a simple rule: No matter how old a report, or how many repairs have been performed, ALWAYS turn over all reports to the buyer. You can also talk about repairs, and make them a positive, but giving the reports always stops a lawsuit, while our defense for why disclosure may not have been necessary could be disputed. It is never worth the fight. So ALWAYS TURN OVER EVERYTHING.

As always, feel free to contact us with any questions you may have.

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