COURT LIMITS BROKER'S INSPECTION AND DISCLOSURE LIABILITY IN MOLD CASE
A recent case involving a real estate broker's duty to disclose mold contamination has resulted in a very favorable ruling for the real estate brokerage industry. In Coldwell Banker Residential Brokerage Co., Inc. v. Superior Court, the California Court of Appeal has ruled that a listing broker's duty to conduct a visual inspection of residential one-to-four-unit property and disclose material facts extends only to the buyers in the transaction, and not to third parties who might nonetheless be affected by the transaction.

The facts of the Coldwell Banker case were simple. A woman bought a house that was contaminated by mold, and her child developed asthma as a result of living in the house. Though not a party to the transaction, the child sued the listing broker on various grounds. The Court of Appeal rejected the child's suit, emphasizing that the broker's inspection and disclosure duties were based in Civil Code section 2079--the duty to conduct a visual inspection and disclose findings based on that inspection. That duty, as the court noted, is owed to a prospective purchaser--not the purchaser's child or other third parties.

This important case places reasonable and rational limits on a broker's potential liability. As the court stated, to rule otherwise could expose a real estate broker to infinite liability to present and future residents of a property--nannies, relatives, tenants, and others who weren't parties to a transaction.

For additional information, C.A.R. members may contact C.A.R.'s Member Legal Hotline at 213.739.8282, or 213.739.8350 for office managers, broker/owners, and Designated REALTORS®. Hotline access is also available through C.A.R. Online at http://www.car.org/.