Q: We have a problem that seems simple, but has been perplexing us for some time. We are in the process of buying a house, and hired an independent housing inspector to look over the entire property. Basically, the inspection report indicated that the house was in good shape. However, since the inspector took place on a snowy day in December, the inspector was unable to evaluate the condition of the central air-conditioning system. While we assume that it is working, is there any way we can protect ourselves in the unlikely event that when summer comes, the air-conditioning system will be in serious need of repair? Settlement is scheduled for February.
A: That's a very interesting question, which can be repeated in the summertime for the heating system.
The most important document in any house purchase is the contract. In most standard real estate form contracts, there is language on the reverse side of that form dealing with the condition of the property. Usually, the contract states that "plumbing, heating, air-conditioning and electrical systems will be in operating condition at settlements."
If you are lucky and able to convince the seller to change the concept to "good operating condition," this will give you even greater protection. But it still does not respond to the fact that settlement will take place before you are even able to turn the air-conditioning system on to check whether it is operating or not.
There are several possible solutions.
First, try to have the seller agree to escrow some money at the settlement until you are satisfied that the system is operating. The title attorney or title company conducting the settlement will be able to prepare a form escrow agreement, whereby the money is held pursuant to the terms of that agreements.
However, it is doubtful that your sellers will go along with this arrangement. They know that the system works, and they don't want to leave money with the title attorney pending your determination of future facts. After all, the contract only called for the air conditioning to be operating at settlement. It does not make any reference to a continuing warranty that the system will function beyond that date.
If an escrow arrangement is not possible, inquire whether the seller has a service contract on the air-conditioning system. If such a contract exists, you should contact the service company to determine when they last inspected the system, and obtain their assurances that if problems arise in the future, the tract. You should also determine the cost of this continuing maintenance service.
You may also want to obtain a notarized statement from the seller that the system is in operating condition as of the date of settlement. If it later turns out to be untrue, at least you will have grounds for filing a breach of contract lawsuit. This is not necessarily recommended, however, because of the time considerations and the costs of any such legal action.
In the final analysis, you should recognize the fact that when you buy an older home, you will expect to have periodic problems. Indeed, if the air-conditioning system actually was working on the date of settlement but conked out five days later, unless you obtained a guarantee, in writing, from the seller, the responsibility for repairing the system would, unfortunately, be yours.
Finally, it is strongly recommended that you review the contract provision dealing with the property condition. If there is equipment that you want to be operating at settlement, make sure they are spelled out specifically in the contract.
Don't leave matters to vague language or to verbal understandings. You are dealing with a legal contract, and it must be in writing.