Error in property diagnosis: a prejudice but which one?
Buyers, sellers, do you think you are sufficiently informed about mandatory property diagnoses and protected if you discover termites or even asbestos after signature of the deed? Who covers the financial risk in the event of an error: The surveyor/inspector? The seller? The negligent buyer?
Since 1996 and the multiplication of diagnoses imposed by the laws and decrees regulating property transactions, numerous disputes between buyers and sellers have appeared as a result of errors committed by surveyors. Even though these disputes have been referred to the highest court, the liability of the different intervening parties has not ceased to develop with the fluctuating regulations, creating uncertainty in the assessment of prejudice by the parties and their insurers. A recent decision of the French Court (Cour de cassation) has again radically changed the situation!
Property diagnosis: a limited information tool
At the end of the 1990’s, the legislator creates a new profession, that of the property surveyor/inspector. Objective: “clean up” property transactions and limit congestion in Courts caused by proceedings opposing sellers and their unhappy buyers. This profession is presented as a means to avoid detection of problems (presence of termites, over-consumption of energy, etc.) or pollutants (lead, asbestos, etc.) after signature of the deed of sale.
Very quickly, the first diagnosis obligation relative to asbestos sees the light of day following the ban on marketing and installing materials containing asbestos. This first property diagnosis then paves the way for a major regulatory development multiplying mandatory diagnoses.
- Carrez (1997): Measurement of the surface area of a condominium lot.
- Lead (1998): Assessment of the risk of accessibility to lead.
- Parasite status / Termites (1999): Search for infestation by wood pathogens.
- DPE (2006): Classification of the property according to its energy consumption.
- Gas (2007): Inspection of the condition of the interior gas installation.
- Electricity (2009): Inspection of the condition of the interior electricity installation.
However, these inspections do not give the buyer any certainty because they are based on standards and implementing decrees defining the diagnostician’s scope of intervention, sometimes in an unclear manner and for the most part based on visual, non-invasive findings. The real extent of the diagnosis is often seen by buyers only in the event of a dispute following detection of elements not indicated in the report submitted by the service provider.
Establishing liabilities: and the causal link your Honour?
With the appearance of diagnoses, the surveyor/inspector becomes a new piece on the chessboard and his/her liability is regularly sought. Thus, they regularly find themselves called into question by the buyer who considers him/herself injured on discovery of a reality that differs from the diagnosis and also by the seller who seeks the warranty of the professional he/she appointed.
There then follows abundant jurisprudence relative to the consequences of an incorrect diagnosis.
- Initially, the Courts considered that the offending diagnostician had only deprived the buyer of the chance to negotiate the sale price downward or abandon purchase of the property. Cover of disorders was not then attributed to the surveyor for lack of a causal link.
- Going against these decisions, although well established, the French Court ruled for the first time in 2012(1) that the surveyor/inspector, who had not detected the terminates although they were present in a property at the time of sale, was bound to cover the entirety of the repair work in the property and, if necessary, its reconstruction since his/her “error” had made this work necessary. This decision, although surprising, since it seems to give the surveyor/inspector a duty to advise on the condition of the structure, has nevertheless been confirmed several times(2) and presaged real uncertainty with regard to the limits of diagnoses.
- Recently, the Courts seem to have returned to better intentions. In a recent decision of 7 January 2016(3), The French Court (Court of Cassation) considered that the property surveyor’s fault was not at the source of the disorders and that no causal link could be established. The sole prejudice attributable to an error on the part of the surveyor resides only in the increased amount of work to be carried out as a result of belated detection. This new position appears more adapted since the surveyor/inspector can not bear the financial cost of repairing disorders he/she did not cause!
Encouraging prospects… or not
These jurisprudential developments have a diametrically opposed scope depending on the party concerned. Private individuals, thinking the cost of their work will be covered, now risk having to content themselves with proving an increased amount of work or loss of the chance to have been able to negotiate the price in consequence.
Property diagnosis professionals, who are not necessarily insured for very large sums, legitimately see sentences of several hundreds of thousands of Euros in the case of dispute moving further away. Insurers can also be pleased with this recent development, which reduces the financial risk… until the next change.
This change has already occurred while we were writing this article and just before its publication, the French court’s 3rd chamber (3éme chambre civile de la cour de cassation) mentioned above as again issued a contradictory decision(4). The causal link has been retained between the mistakes made by a surveyor/inspector’s findings and the additional costs for asbestos removal.
Be that as it may, it remains very difficult for these different actors to identify the risks in a constantly shifting regulatory context. Hence the necessity to be well advised and up to date with one’s legal watch.
As proof, the official French Administration website that serves as a reference to the non-knowledgeable still indicates
Effectively, the French authorities official site which serves as a reference for unknowledgeable persons about these issues still indicates, based on the jurisprudences of 2015, that the property surveyor/inspector must compensate for the cost of repair work(5)… Would this legislation still be current at the time of publishing our newsletter?
Regulated professions loss adjuster, GM Consultant Group
Financial risks loss adjuster GM Consultant Group
1 – Cass. Civ. 3ème, 12 sept. 2012, n°11-18122
2 – Cf. Cass. Mixte, 8 juil. 2015, n°13-26686
3 – Cass. Civ. 3ème, 7 janvier 2016, n°14-18561
4 – Cass. Civ. 3ème, 7 avril 2016, n°15-14996
5 – https://www.service-public.fr/particuliers/actualites/008236 (last update on 20/07/2015)