DTPA IN REAL ESTATE III: INSPECTIONS
How do inspections apply to the Texas Deceptive Trade Practices Act when you are buying residential real estate?
Put another way, does getting an inspection relieve the seller from non-disclosures or misrepresentations?
Technically, the answer is first no. But of course it depends on a lot of factors. For one, "Fraud vitiates everything it touches."
Our courts have consistently held that fraud vitiates whatever it touches, Morris v. House, 32 Tex. 492 (1870).
ESTATE of L. W. STONECIPHER v. ESTATE of THOMAS BUTTS, 591 S.W.2d 806 ( Tex. 1979)
This has been the law in Texas for 147 years and was re-affirmed 109 years later by the Texas Supreme Court. (The Stonecipher case was one where my father represented the party resisting this principle. So what was not good for my father was good for Texas.) That is how black letter this is. So where a seller conceals something, the buyer does not lose her right to sue. And the buyer is not precluded from suing by a statute of limitations until she discovers the fraudulent concealment.
But what about where the issue is something the buyer learns from her inspector? Let's say a seller says there are no live termites in a home. But the buyer's pest inspector discovers termites on inspection. The buyer now has knowledge of the live termites regardless of whether the seller knew or disclosed the termites.
But what if the seller has knowledge of water rotted wood behind a wall and has covered that rotted wood up without repairing it? That would be fraud. What happens if the buyer's home inspector somehow finds that rotted wood and tells the buyer before closing? Can the buyer close on the house and then claim she was defrauded when she opens up the wall? Probably not.
The buyer was originally relying on the representation by the seller that the house did not have rotted wood needing repair. If her inspector informs her that the house has rotted wood needing repair, she is no longer relying on the representation - wrong as it is - by the seller. She is relying on the information from her inspector.
In that situation the buyer should either require the seller to make repairs, pay restitution or terminate the contract based on the fraud. Buying the house will interrupt the fraud and she will buy the problem with it.