Professional Services Network, Arizona, Legal

 

Arizona Revised Statutes (“A.R.S.”):

§ 32-101(b)(18) - definitions

§ 32-111

§ 32-121

§ 12-552

Maycock v. Asilomar Development, Inc., 88 P.3d 565, 568 (Ariz. App. Div. 1 2004)

S Development Co. v. Pima Capital Management Co., 31 P.3d 123 (Ariz. App. Div. 1 2001)

 

 

Causes of Action:

 

Defenses:

 

            Arizona home inspectors must register with the Arizona State Board of Technical Registration. www.btr.state.az.us/ A.R.S. 32-121.  Rules promulgated by the board are available on line at http://www.btr.state.az.us/rules.htm

 

            Home Inspector registration requires several things, including an exam, a certain course of study, payment of a fee, no revocation of a previous license within one year, “good moral character and repute,” completion of any felony sentence at least five years prior to application, and “errors and omissions” insurance, a bond, or another “financial assurance mechanism” to cover claims of negligence.  A.R.S. 32-122.02.  Arizona currently requires the “National Home Inspector Exam,” administered by the Examination Board of Professional Home inspectors.

 

            Home inspection is defined by statute at 32-101(b)(18) et seq.

 

            “Standards of Professional Practice” for Arizona Home inspectors were adopted with some modification from A.S.H.I.’s 1992 Standards of Practice. Id.. The board has a “Home Inspector Rules and Standards” subcommittee, partially composed of professional home inspectors who have been nominated by “home inspection organizations.” A.R.S. 32-111. Among other things, these standards provide that a home inspector is not liable for failure to detect “concealed conditions or latent defects.”  Arizona Standards of Professional Practice § 3.1.A.

 

 

            In 2000 Arizona added home inspectors and landscape architects to the class of professionals that were required to register under Arizona Revised Statutes title 32 (“architects, assayers, engineers, geologists and surveyors”).

            It is unknown what caused the Arizona legislature to begin licensing its home inspectors.  Concurrent with the legislative process, however, a related question was making its way through the courts in S Development Co. v. Pima Capital Management Co., 31 P.3d 123 (Ariz. App. Div. 1 2001).  In S Development, an “as is” clause in a contract for purchase of two apartment buildings was found to apply only to “patent” defects in construction, rather than “latent:”

“Prior to the close of escrows, the appellees retained two engineering firms to inspect each of the buildings to be purchased. The inspections did not reveal any substantial problems with the plumbing in the buildings. Approximately two years after closing, however, the appellees learned that polybutylene pipe (PB pipe) had been used in both [buildings]. PB pipe is a defective type of flexible tubing that will fail and leak when it is used to transport warm water under normal water pressures.  The appellants claim that they were not aware that PB pipe had been used in the buildings when they sold the buildings to the appellees and, therefore, they could not and did not disclose that condition to the appellees prior to the sale.”

S Development Co. v. Pima Capital Management Co., 31 P.3d 123, 127 (Ariz. App. Div. 1 2001).

            The S Development court ruled noted that “an ‘as is’ clause shifts the burden of discovering those facts that are basic to the transaction” onto the purchaser only when those facts are “patent . . . [e.g.] discoverable upon a reasonable inspection.” S Development Co. v. Pima Capital Management Co., 31 P.3d 123, 129 (Ariz. App. Div. 1 2001), quoting (id. at FN5) Black’s Law Dictionary 779 (Abridged 6th ed. 1991).  The court remanded several fact questions regarding the “as is” clause, including whether the buyers “undertook a reasonable inspection.”  S Development Co. v. Pima Capital Management Co., 31 P.3d 123, 131 (Ariz. App. Div. 1 2001).  [What happened back at the trial court?]  The possible inadequacy of the two engineering firms’ inspections seems to stand out against the backdrop of Arizona’s new licensure requirement for home inspectors, passed the year before S Development was decided.

 

Causes of Action:

 

Defenses:

 

            Maycock is about Arizona’s statute of repose, barring tardy claims against builders.

 

            After purchasing their home from its original owner, Mr. and Mrs. Maycock noticed “buckling in walls and sagging and cracking of the garage floor.”  Maycock v. Asilomar Development, Inc., 88 P.3d 565, 568 (Ariz. App. Div. 1 2004).  After learning that the problem was likely caused by a mistake in construction, the Maycocks sued the builder for negligence in construction and breach of express and implied warranties. Id. at 566.  The Maycocks made their claim in the 9th year after construction was completed.  Id. at 568.  The builder asserted Arizona’s statute of repose that bars contract claims against builders made eight years after construction, unless a “latent defect is discovered during the eighth year.”  Maycock, 88 P.3d at 567, citing A.R.S. § 12-552, Actions Involving Development of Real Property Design, Engineering and Construction of Improvements.  The Maycocks claimed that the defect was “latent,” and not discovered until the 8th year after completion.  Id. at 568.

 

            The court defined ‘latent defect’ as a “‘hidden or concealed defect’ that ‘could not be discovered by reasonable and customary observation or inspection.’”  Maycock v. Asilomar Development, Inc., 88 P.3d 565, 568 (Ariz. App. Div. 1 2004), quoting S Development Co. v. Pima Capital Mgmt. Co., 31 P.3d 123, 129 (App. 2001).  The case therefore turned on whether the original owner of the house could have been said to have had knowledge of the defect.  If he did have such knowledge, the court ruled that the Maycocks also had that knowledge as a matter of law because “the knowledge of a prior owner is imputed to the current owners to determine application of § 12-552(B).” Maycock, 88 P.3d at 569.

 

            The Maycocks may have also sued their home inspector in separate litigation, asserting that “the defects should have been discovered through inspection.” Id. at 567. The result of that case is unknown but it suggests that, where a home inspector negligently fails to discover a construction defect within the eight year § 12-552 limit, his or her negligence could be seen as the proximate cause of a homeowner’s damages.  If, however, the defect was truly “latent,” as asserted by the plaintiffs in Maycock, a home inspector may not be responsible for detecting it.  See Arizona home inspectors’ Standards of Professional Practice § 3.1.A. 

 

            If a home inspector fails to detect a genuinely latent defect within eight years of the home’s construction, the homeowner’s action against the builder will be barred by the statute of repose. This might induce a home inspector to put extra effort into the detection of construction defects but, if (s)he finds a defect, the homeowner may choose not to pursue a remedy against the builder and if the home is subsequently sold, knowledge of the home inspector’s discovery of a construction defect will be imputed to the new owner as a matter of law, whether or not actual communication of the information occurred.

 

            Currently the rule imputing knowledge from the seller to the buyer of a home is only for purposes of A.R.S. § 12-552.  Maycock, 88 P.3d at 569.  However, the imputation of knowledge from seller to buyer may be a viable argument in defense of home inspectors more generally, where the reasoning of Maycock applies.

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