Best of the Hotline: Potability issues

January 22, 2014

90205412Facts: A water potability assessment revealed high levels of coliform in the well water serving a property that had recently come under agreement. The sellers were unaware of this problem prior to their receipt of the test results and they were willing to entertain any reasonable corrective proposal.

The buyers elected not to terminate the agreement and instead submitted a corrective proposal which essentially involved “shocking” the well and retesting for coliform. As pleased as the sellers were to receive this rather inexpensive proposal, they had lingering concerns about their potential liability in the event buyers experienced coliform problems post-settlement. They had this concern because the seller husband, a biology teacher, suspected that the well may have been contaminated because the well cap was below ground level and he posited that perhaps contaminated surface water was draining directly into the well. He wondered whether shocking it would lead to good results, but only for a short time.

Q. Do the sellers have an obligation to share this untested, unconfirmed suspicion they have regarding a potential problem to the water source?

A. It depends! (What did you expect?) Before venturing an answer, I would want to question the seller on his theories of contamination. Does he have a pretense of knowledge or is this speculation on his part? Assuming his expertise is extremely limited, or nil, when it comes to wells and potability issues, it would seem that he is insulated from liability even if he does not share his concerns.

There are several compelling reasons why I reach this conclusion. First, the sellers were living in the property at the time the contamination was discovered and therefore had been drinking the contaminated water. Would anyone do so as a ruse to convince buyers to proceed with a purchase? Clearly the sellers had no prior knowledge of potability issues. This is important because the buyers, by testing and engaging the services of an expert, had as much or more information than did the sellers.

Another reason why I think the sellers would not be held culpable if contamination again arises is because the buyers had the right to investigate the contamination to their hearts’ desire and had the ability to submit any corrective proposal. The duty to determine how to treat the contamination was squarely on the buyers and not the sellers. For the sellers to be held liable they would either have to be found to have breached a duty (nonexistent here) or misrepresented a condition (also not present here).

The law in Pennsylvania is that a seller has no obligation to assess the condition of any property before marketing it for sale.  Yes, seller must disclose all known material defects, but the seller does not have to take affirmative steps to determine the condition of matters unknown.

The agreement of sale is replete with protection for the seller in cases such as this. The release, while not effective for all situations, is designed to protect seller once an issue is known and once the buyer determines to proceed with knowledge of the condition.

Suits alleging failure to disclose are the most frequently filed suits in the real estate litigation arena.  Unless the sellers had actual knowledge of a defect not disclosed, sellers are rarely found culpable. The standard transaction involves home inspections where buyers are given the unfettered right to engage any number of inspectors to assess the quality of the property and its systems. A seller has no duty to actively participate in this due diligence other than to provide access to the home and to respond to relevant questions. The agreement clearly provides that all risks pass from the seller to buyer on the date of settlement and for that reason the buyer is encouraged to undertake all scrutiny beforehand. In the face of a defect discovered by inspection, buyers are responsible for investigating the appropriate fixes and deciding the appropriate solution.

For the question at hand, the buyers engaged the expert to test the quality of the water and presumably relied upon those experts in determining an appropriate fix. A seller with the slightest pretense of knowledge or speculation is hardly the equivalent of an expert who holds himself out to the public as such.

Buyer agents, for all of the reasons discussed above, your advice to buyers has to be to test and question. In the face of a home inspection that discloses adverse conditions, council your buyers to make wise choices.  Follow-up inspections by experts are appropriate. Also consider having your buyers fully engage in the process of investigating appropriate solutions.

About James L. Goldsmith, Esq.:
Jim Goldsmith, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline.