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(A version of this article appears in the California Construction Law Reporter, published by the West Group.)
By James E. Acret
Buyers presented an offer to purchase a 49-year-old home in Whittier, and sellers accepted the offer but changed their mind when they learned buyer was an attorney, court commissioner and licensed real estate broker. Buyers threatened suit, and after negotiations, the parties entered into a new purchase and sale agreement that specified buyers had seven days to inspect the property. Buyers signed an agreement employing defendant inspector. The pre-printed form contained a liquidated damages clause and a clause requiring that any lawsuit be filed within one year from the date of inspection.
Buyers negotiated and inspector agreed to strike the liquidated damages clause but would not strike the statute of limitations clause. The contract excluded from the scope of the inspection concealed or inaccessible conditions, soil conditions and asbestos. The inspection was conducted between 4 p.m. and 6 p.m. on August 18, 1998.
Small print on the inspection form advised that asbestos materials commonly had been used in heating systems and that determining the presence of asbestos was beyond the scope of the inspection. The inspector suggested the buyers clean out the entire heating and cooling system but noted the heating ducts were "serviceable." The box indicating a discovery of "asbestos-like materials" was not marked.
Having become ill, buyers employed experts who discovered asbestos and an unsealed air return that permitted the blower to draw dust, dirt and rust into the system. Buyers also discovered that 21 windows had been nailed or painted shut and that the property was built on expansive soil. They filed suit alleging breach of contract, negligence and negligent misrepresentation.
The inspector demurred based on the contractual statute of limitations, and it was sustained. The Court of Appeal reversed the trial court. Moreno v. Sanchez, 106 Cal.App.4th 1415, 131 Cal.Rptr. 2d 684, 2003 DJDAR 2997 (2003).
Public policy calls for the statute of limitations to commence on an action by a homeowner against an inspector when the homeowner discovers or reasonably should have discovered the cause of action. Purchasing a residence is the biggest investment many people make. Most homebuyers are ill-equipped to know whether an inspector in fact discovered and reported all material defects until something goes wrong. A homebuyer may not recognize a home inspector's negligence until long after the inspection date.
Such public policy considerations are sufficient to overcome ordinary statutory time limits enacted by the Legislature that are based on when the harm occurred. If legislated limitations must yield to the delayed discovery rule, a contractually agreed limitations period also must yield. For there to be an effective judicial remedy against professional or skilled craftspeople, the accrual of the cause of action must occur upon discovery of the breach. Therefore, the law will not tolerate contractual nullification of the discovery rule in such cases.
Business and Professions Code §7196 imposes an unwaivable duty on home inspectors to perform with a degree of care that a reasonably prudent home inspector would exercise, providing a tort remedy.
The dissenting justice asserted that parties have freedom to modify the length of the statute of limitations and that their agreement should be enforced.
Business and Professions Code §7199 places a time limit on suits against home inspectors of four years from the time of inspection.
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©2004 Howrey LLP
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