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A New Jersey appellate court has considered a purchaser's lawsuit against a real estate salesperson, among others, for problems related to the property's septic field.
Juanita Mango ("Purchaser") contacted real estate salesperson Mary Dean ("Salesperson") about her interest in purchasing a home. At around the same time, Katherine Pierce-Coombs ("Seller") had listed her home for sale with the Salesperson's company. On the property condition disclosure form, the Seller answered "no" to the question on the form about whether she knew of any problems with the property's septic system.
The Salesperson took the Purchaser to the Seller's home, and the next day the parties entered into a purchase agreement for the property. The Salesperson acted as a dual agent in the transaction. The purchase agreement stated that the Seller would pay for a septic certification from a qualified company chosen by the Purchaser.
The Purchaser asked the Salesperson to arrange the inspection of the property's septic system, and so the Salesperson arranged for M. Streets Cesspool Service ("Company") to test the property's septic system. The Company tested the property's septic system and did not discover any problems. Thus, the Company provided the required certification ("Certification") of the septic system. The Certification also contained a number of disclaimers, such as stating that the certification only applied to the day on which the tests were performed and that the certification was only effective if it was signed by both the Purchaser and the Seller.
Shortly after the closing, the Purchaser began experiencing problems with the property's septic system. The Purchaser contacted the Salesperson, who contacted the Company and the Company re-pumped the septic tank. However, this was only a temporary solution. The Salesperson recommended another company to perform repairs on the septic tank. When the repair work began, a local official inspected the septic system and told the Purchaser that the system needed to be redesigned. The Purchaser then hired her own contractor to redesign the septic system, and filed a lawsuit against the Seller, the Salesperson, the Company, and the construction company recommended by the Salesperson. Before the case went to trial, the lower court dismissed all of the parties except the Seller. The Purchaser appealed this ruling.
The Superior Court of New Jersey, Appellate Division, partially affirmed and partially reversed the trial court. The court considered the allegations against the Salesperson. The Purchaser made two allegations against the Salesperson: first, the Salesperson had violated the state's consumer fraud statute by recommending that she hire the Company; and, second, that she breached her fiduciary duty to the Purchaser by recommending to her that she hire the Company.
The Purchaser's consumer fraud allegations stated that the Purchaser believed that the Salesperson and the Company had an arrangement where the Company would perform inadequate tests of the septic systems but would certify the systems as working properly, in order to help the transactions close quickly. The trial court had rejected these allegations, finding the Purchaser had produced no evidence that the Salesperson knew that the septic system was defective. The Purchaser had also not provided any evidence which demonstrated that the Salesperson and the Company had a fraudulent relationship. While the Company did perform a number of inspections a month for the Salesperson, there was no evidence of an improper scheme between them. Thus, the court affirmed the dismissal of the consumer fraud allegations. The court also affirmed the dismissal of the breach of fiduciary duty allegations, as there was no evidence that that the Salesperson had any reason to believe that the Company was not qualified to perform the inspection.
The court also considered the consumer fraud allegations against the Company. In dismissing these claims, the trial court had determined that the disclaimers contained in the Certification warranted dismissal of the claims against the Company. New Jersey courts have held that certain disclaimers made in a home inspection contract are unenforceable and against public policy because the disclaimers undermine the purpose of the inspection, which is to provide consumers with reliable information about the quality of the home being purchased. Similarly, the court found that the disclaimers in the Certification, such as limiting the report to the day of the testing, made the Certification of little value to the home buyer. Thus, the court eliminated the disclaimers from the Certification and sent the case back to the trial court so that a jury could consider whether the Company had properly tested the septic system.
Mango v. Pierce-Coombs, 851 A.2d 62 (N.J. Super. Ct. App. Div. 2004).