What to do about a home inspection that failed to disclose a major termite infestation?

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What to do about a home inspection that failed to disclose a major termite infestation?

I bought my house approximately 18 months ago. The inspection was done and it listed mostly dry rot and minimal termite damage. A year a a half later my house has literally started to fall apart from termite damage. Had I known the damage was so active I would have had the house tented prior to moving in because I still had my apartment. Also there was a very large amount of black mold in my daughter’s bedroom that was listed as minor water damage. Do I have any legal rights since I was given wrong information.

Asked on June 27, 2011 under Real Estate Law, California

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You could sue the home inspection company for negligence.  If this is a private company, you can proceed with your lawsuit.  If this home inspector is from the city or county, you will need to file a claim with the city or county and once that claim is denied, which is usually standard operating procedure, you can then proceed with your lawsuit for negligence.  If you miss the filing deadline on the claim against the city or county, you won't be able to proceed with your lawsuit for negligence.

If the home inspector is a private company, you should file the lawsuit as soon as possible because if you miss the statute of limitations, you will lose your rights forever in the matter.

As for the seller, if you can prove that the seller knew or should have known of the extensive termite damage and did not disclose it, you could sue the seller for fraud.  Fraud is the intentional misrepresentation of a material fact made with knowledge of its falsity and with the intent to induce your reliance upon which you justifiably relied to your detriment. You justifiably relied on the seller's disclosures in purchasing the home. It may be difficult to prove fraud because the seller will claim to have relied on the home inspector's assessment.  If you are able to prove fraud, your damages (the amount of compensation you are seeking in your lawsuit) would be either the benefit-of-the-bargain or out-of-pocket loss.

Benefit-of-the-bargain means the defrauded purchaser can recover the difference between the real and represented value of the property purchased regardless of the fact that the actual loss suffered might have been less.

Out-of-pocket loss is the determination of damages for fraudulent misrepresentations which is the recovery of the difference between price paid and actual value of the property acquired.

It would be easier for you to prove misrepresentation based on negligence against the seller instead of fraud because fraud requires proof of intent whereas with negligence you would only need to prove failure to exercise due care (that degree of care that in this case a reasonable seller would have exercised under the same or similar circumstances to discover and disclose the extent of the termite infestation).  To prove negligence, you would have to prove duty (discussed ), breach of duty (failure to disclose), actual cause, proximate cause and damages.  Actual cause means but for the seller's failure to disclose the extent of the termite infestation, would you have purchased the property?  If the answer is no, you have established actual cause.  Proximate cause means were there any unforeseeable intervening acts that would relieve the seller of liability?  If the answer is no, you have established proximate cause.

As a buyer, you would have a duty to discover items that could have reasonably been discovered and seller could claim not having to disclose said items.  However, you could argue that you relied on the home inspector's report and therefore could not have reasonably discovered the extent of the termite infestation.  The mold might be a problem depending on how extensive it was when the report only said it was minor water damage.

You would file one lawsuit against both the seller and home inspector.  You will need to file your lawsuit prior to the expiration of the applicable statute of limitations or you will lose your rights forever in the matter.


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