Third Party Liability: 2018 Yearly Update

In this section, we examine the liability of inspectors, appraisers, and other third parties involved in real estate transactions. Many of these cases involve claims against appraisers.  As demonstrated in the cases below, courts frequently consider whether the appraiser’s duty extends to the purchaser of a property, and whether the complaining party could reasonably rely, and did in fact rely, on the appraisal.  In another case, the court examined the duty of an escrow agent to the purchaser of a property.

A. Cases

1. Deutsch v. Imperial Realty Appraisal, LLC, No. 3762 EDA 2017, 2018 WL 3372633 (Super. Ct. Pa. July 11, 2018)

Disagreement with appraised value does not create a cause of action against the appraiser.

Co-owner of property initiated an action for breach of contract and negligence, alleging that the appraisers were liable for inaccurate property appraisals performed in connection with an earlier partition action between co-owner and his former business partner. In a bench proceeding, the trial court concluded the appraisal was reasonable and appropriate.

On appeal, property co-owner contended that the appraisers lacked the necessary licensure and legal authority to independently perform appraisals of non-residential property without the statutorily required supervision of the Certified General Appraiser, and therefore were negligence per se. The appellate court affirmed the trial court’s finding that the appraisers were properly supervised, and that the appraisal was reasonable and appropriate. The court ordered partition based on the appraiser’s valuation of the properties.

2. Ilkowitz v. Durand, No. 17-CV-733, 2018 WL 1595987 (S.D.N.Y. March 27, 2018) 

Court held title insurer was not liable for failure to disclose presence of lead in home because insurer had no duty to determine whether the home was contaminated.

Homebuyers asserted claims against all parties involved in the purchase of a home, including the seller, seller’s real estate representative, seller’s attorney, the buyer’s real estate broker, the title insurer, and the inspector, alleging failure to disclose the presence of lead in the home. 

The court dismissed claims against the seller’s attorney as she was not acting as an agent for the buyer, and granted summary judgment for the title insurer on the basis that there was the title insurer had no duty to determine whether the home was contaminated. 

3. Grogan v. Ugglam, No. M2014-01961-SC-R11-CV, 2017 WL 5614594 (Tenn. November 21, 2017) 

Home inspector did not owe or assume duty of care towards a social guest, and therefore is not liable for injuries sustained by the guest.

Plaintiff was a guest in a recently purchased home where she suffered severe injuries after the railing on a deck collapsed. Plaintiff sued the home inspector and franchisor for the injuries sustained, alleging they negligently gave false information to homeowner regarding safety of the railing on the deck.

The trial court granted summary judgment for the home inspector, finding that the home inspector did not owe or assume duty of care toward guest, and thus home inspector was not liable for performing allegedly negligent inspection. The appellate court affirmed summary judgment. 

B. Statutes and Regulations

North Carolina

North Carolina enacted several statutes pertaining to third-party liability. One statute eliminates the exemption for property worth less than $10,000 from the requirement that an appraisal of real estate or an interest in real estate made before acquisition of the property be made by a real estate appraiser licensed or certified by the State.1 Another statute exempts a person who prepares a right-of-way claim report from appraiser licensing requirements.2

Also in North Carolina, a statute states that where an appraisal of real estate or an interest in real estate is required by law to be made before acquisition of the property, the appraisal shall be made by a real estate appraiser licensed or certified by the State.3

Finally, North Carolina a statute confirms that a registered trainee or licensed or certified real estate appraiser may render appraisals for or on behalf of a partnership, association, corporation, firm, or group, provided the appraisal report is prepared by a licensed or certified real estate appraiser or by a registered trainee under the immediate personal direction of the certified real estate appraiser and is reviewed and signed by that certified appraiser.  

C. Volume of Materials Retrieved

Third-Party Liability issues were identified 6 times in 6 cases in this quarter. (see Tables 1, 2).  Over the past twelve months, Third-Party Liability issues were identified 13 times in 13 cases (see Table 4 and 5). Four statutes regarding Third-Party Liability were retrieved in the past twelve months. 

1 N.C.G.S.A. § 146-22.2 (2018)  

2 N.C.G.S.A. § 93E-1-3 (2018)

3 N.C.G.S.A. § 146-22.2 (2018)

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State Law Based Changes

NAR's State Law Based Changes is a compilation of new types of laws collected over the past few years. This resource is helpful to guide states that may want to adopt similar laws in their state.

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Read a summary of this quarter's additions to the State Law Based Changes.