June 24 2020
Despite the ongoing pandemic, the real estate market remains hot in the Commonwealth – with buyers aggressively competing over a limited supply of inventory. In order to win favor with a seller, a buyer may limit or even waive certain contingencies – including a home inspection. If a buyer agrees to waive a home inspection, does she have any recourse when a major deficiency is discovered after closing?
If a buyer agrees to waive a home inspection, does she have any recourse when a major deficiency is discovered after closing?
The Appeals Court – in Cance v. Carbone, 97 Mass.App.Ct. 1122 (June 5, 2020) – found that a condominium unit purchaser could recover damages from the seller based upon misrepresentations made by the seller both in the property sale listing and during an open house, despite the facts that (1) the purchaser had waived a home inspection, and (2) the purchase and sale agreement included language acknowledging that the purchaser was not relying upon certain prior representations. The case involved a roof deck, which had served as a key selling feature of the unit but was found to be structurally deficient after the closing. The Appeals Court reversed the trial court finding that it was reasonable for the purchaser to have relied upon the seller’s statements concerning the roof deck.
In March of 2015, Heather Carbone listed her South Boston condominium unit for sale. Two years earlier, Ms. Carbone had decided to add a roof deck to her penthouse unit. She hired an architect to design the structure and submitted his plans as part of her permit application to Boston’s Inspectional Services Department (“ISD”), which approved the application and issued a building permit in Ms. Carbone’s name. Thereafter, Ms. Carbone posted the permit in her window and hired a contractor to build the deck.
The multiple listing service (“MLS”) description of Ms. Carbone’s South Boston condominium unit prominently featured the roof deck, including a photograph, with the following description:
STUNNING VIEWS ABOUND! Sun drenched penthouse unit with private double decks. Entertain in style on the massive 14’x18’ roof deck while overlooking Dorchester Bay! Roof deck has running water and electricity to make it truly an outdoor oasis! Roof deck new as of May 2014.
Ida Cance, a recent college graduate who was in the market for a condominium unit, became smitten with the roof deck and believed that Ms. Carbone’s South Boston property was “exactly what [she] was looking for.” Given that the deck was recently constructed, Ms. Cance believed that “it would be up to the latest kind of code standards.” At the open house, Ms. Carbone – a licensed real estate agent who was serving as her own broker – told Ms. Cance that she had “built [the deck] because of the view” and “had multiple parties with multiple people up [there]” without any issue.
Ms. Cance eventually made an aggressively priced offer for the unit, which included a waiver of her right to a home inspection. Ms. Carbone eventually accepted an increased offer from Ms. Cance, who had become involved in a bidding war, and the unit was sold in June of 2015.
After purchasing the condominium unit, Ms. Cance met with a contractor to discuss remodeling her kitchen. That contractor raised immediate concerns about the structural soundness of the roof deck, which were later confirmed by an architect and engineer hired by Ms. Cance. At that point, Ms. Cance learned that ISD had never inspected or approved the deck. ISD thereafter issued a violation notice to Ms. Cance, which stated that the deck was not constructed in accordance with the plans that had been submitted with the permit application and required Ms. Cance to remedy the violation.
The Appeals Court found that the statements made by Ms. Carbone – in both the MLS listing and during the open house – constituted negligent misrepresentations to Ms. Cance. The Court overruled the trial court’s determination that Ms. Cance did not “reasonably and to her detriment rely upon” any of the false statements. The Appeals Court reasoned that Ms. Cance could indeed reasonably have relied upon Ms. Carbone’s representations about the new and usable roof deck.
Ms. Carbone argued that she should not be liable for her representations because Ms. Cance chose to waive a home inspection and, therefore, Ms. Cance could not claim that she justifiably relied upon the representations concerning the roof deck. The Court, however, noted that Ms. Carbone’s argument was not consistent with the settled principle that a failure to conduct an investigation of a false statement does not negate the reasonableness of the reliance. The Court determined that it was reasonable for Ms. Cance to accept Ms. Carbone’s representations without an investigation because the MLS listing was not “preposterous or palpably false” and the roof deck deficiencies were not obvious. Additionally, because Ms. Carbone was the actual owner, her statements about the roof deck were deemed to be particularly credible. In other words, where Ms. Carbone herself had hosted multiple parties on the new roof deck without issue, the Court found that it was justifiable for Ms. Cance to rely upon Ms. Carbone’s representation that the roof deck was usable without being obligated to further ascertain the truth.
The Court similarly found that language in the purchase and sales agreement – in which Ms. Cance acknowledged that she did not “rel[y] upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing” – did not make Ms. Cance’s reliance upon Ms. Carbone’s prior statements unreasonable. The Court – focusing on the words “or previously made in writing” – pointed to the fact that the MLS listing was clearly made in writing (and the statements made during the open house provided additional support for the claim of justifiable reliance).
Curiously, the decision spent little time addressing the plaintiff’s G.L. c. 93A claim, curtly noting that “a violation of G.L. c. 93A requires, at the very least, more than a finding of mere negligence.” A finding that Ms. Carbone had violated Chapter 93A could have entitled Ms. Cance to multiple damages, as well as her attorney’s fees.
It is a violation of G.L. c. 93A, under 940 Code Mass. Regs. § 3.16(2), for a real estate professional to fail to disclose to a buyer any fact, the disclosure of which may have influenced the buyer not to enter into the transaction.
The failure of Ms. Carbone, who was a licensed real estate agent, to disclose facts concerning the deck would likely be actionable under G.L. c. 93A, as Ms. Cance presumably would not have purchased the unit if she knew the roof deck – a key feature of the unit – needed to be removed and replaced.
In this case, it appears that the plaintiff asserted a claim based on § 3.16(3) – rather than § 3.16(2). That particular regulation of the Attorney General allows for potential 93A damages premised upon code violations.
The Court, which did not need to address Ms. Cance’s fraudulent misrepresentation claim as any damages associated with that claim would have been duplicative, nonetheless agreed with the lower court in concluding that Ms. Carbone’s statements were merely negligent, not fraudulent. Accordingly, it is certainly possible that the Court would not have found that Ms. Carbone’s conduct rose to the level of a Chapter 93A violation. However, where Ms. Carbone was both a real estate professional and the individual who pulled the permit for the roof deck project, any contention that she was unaware that she was responsible for obtaining final approval of the deck from the ISD does not appear to be completely credible. A 93A claim – premised upon Section 3.16(2) – certainly appears that it would have been worth pursuing.
In any event, while Ms. Cance was victorious on appeal, this case should actually serve to caution against waiving a home inspection contingency. Ms. Cance recovered $36,500 – an amount that, based on her own estimates, will barely cover the construction costs for the necessary removal and replacement of the roof deck. That sum would not cover the additional sums necessary for engineering, architectural and masonry costs. Also, as this case was litigated through trial and taken up on appeal, Ms. Cance’s legal fees likely eclipsed the amount she recovered to fix the roof deck.
While the waiver of a home inspection is one way to make an offer more attractive in a seller’s market, it is a major gamble. A home inspection is conducted by a licensed home inspection professional who performs a visual inspection of the home and provides a written report to the buyer concerning the condition of the property. In Ms. Cance’s case, a home inspection likely would have revealed the structural issues with the roof deck and she could have either backed out of the deal or requested that Ms. Carbone pay for the necessary repairs prior to the closing. Indeed, the contractor that Ms. Cance met with to discuss remodeling her kitchen became concerned about the deck upon first observing it. Waiving the home inspection should only be considered when a buyer has the funds available to address any issues that may arise with the home. This might be the case with a “fixer-upper”, where the buyer purchases the property knowing that repairs will be necessary. It is unlikely that Ms. Cance believed that she was purchasing a “fixer-upper” when she closed on her penthouse unit in South Boston.