A Leak, a Crooked Chimney And a Question of Responsibility

Q My wife and I made an offer for a property owned by a relocation company. The property, a 1990 rowhouse, has been vacant for several months. At the time of the offer, we received several documents from the company, including a home inspection report that noted some water damage described as "flashing damage" but stated that repairs were made and that there have been no subsequent leakage problems. However, there is a stain on the ceiling in the basement that looks fairly new.

We have a signed contract, and we had our own home inspection conducted. Our inspector determined that the cause of the leak was improper drainage at the rear of the house, at the base of the chimney. This has caused the chimney to settle improperly, with the base leaning slightly away from the home, while the upper portion has rather dramatically tilted toward the roof. Our inspector recommended that we have an engineer determine whether the chimney is structurally sound.

Is the relocation company required to repair the chimney, as it may be hazardous and could topple? If so, to what extent do we get involved in the repair process? If it fixes the chimney but does not address other related problems, what recourse do we have if we buy the home and discover additional problems?

A Working with a relocation company can be difficult. These companies are usually hired by large corporations to help sell the homes of employees who are being transferred. The company may even take title to the property, give the employee cash for its value and then market the house itself.

Because the company has no real knowledge of the houses' condition, they often will be sold "as is." This means you buy the house in its present condition, and the relocation company will not fix anything or give you any cash credits should you find problems.

However, from the facts you have described, it doesn't matter whether the seller is a relocation company or a homeowner of many years.

Does your contract contain a home-inspection contingency? The standard one used in the Washington area gives purchasers two options. If they are dissatisfied with the inspector's report and advise the seller, they can cancel the contract and get the earnest-money deposit returned.

Alternatively, they can present a list of defects to the seller, who has three days to advise the purchasers whether they will fix any of them. Unless the seller agrees to do all the work, the purchaser then has an additional three days to accept the seller's proposal or cancel the contract.

Read your contract carefully. Most inspection contingencies have strict time limits. If the purchasers miss deadline, the contingency is considered waived and they remain bound by the terms of the contract.

In your situation, if the contract requires the seller only to convey title to you as is, then the seller might not agree to fix the chimney. In that case -- assuming you have an inspection contingency that hasn't expired -- one option is to cancel the contract.

You have other options, however. If you can get a licensed contractor -- or, better yet, a city housing inspector -- to give you a statement that the chimney's condition is a housing-code violation, that will give you a lot of leverage. In some jurisdictions, such violations are grounds for canceling a sales contract. Discuss this option with a lawyer licensed to practice in the jurisdiction where the house is.

One other option may be available. The seller gave you an earlier inspection report that said all the leaks were corrected. While the relocation company did not specifically misrepresent anything, it gave you an inspection report on which you relied. If you do not have an inspection contingency in your contract and had the house inspected only for your own curiosity, then a legal argument can be made for misrepresentation, which could be yet another reason for terminating the contract. However, if there is an inspection contingency, you cannot use this argument

If the sellers agree to make repairs, here's a suggestion: Get a couple of bids from independent contractors, and tell the seller you would prefer a cash credit at settlement instead of having the seller do the work. Otherwise, the seller may not hire a licensed contractor and you may have problems in the future.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed, stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site,http://www.kmklawyers.com.