Urban Legends of Real Estate Law - The Myth of Governmental Responsibility

Urban legends are fascinating in their resilience.  Some have a grain of truth, while most are complete flights of fancy.  Many are entertaining, but others can be dangerous if believed.  The real estate profession is not immune, as there are a number of urban legends widely accepted by brokers, agents and the general public.

One of the most pernicious myths to plague the profession regards governmental responsibility.  It takes a number of forms, but the myths all center on a misunderstanding of the legal effect of a building permit, a Certificate of Occupancy, or the building official’s approval of construction in the field.  Belief in this is embodied in a number of common statements: It must meet the minimum standards of the applicable building code, since it was signed off by the inspector; the Certificate of Occupancy was issued, so any technical building code violations are rendered “legal”; and, when all else goes wrong and construction errors are found, “This is what we pay our permits for, we can sue the building department”.

In a major construction defect trial, a top executive for a major builder once testified in open court, “Why would we (inspect a particular structural element), that is what we have the building inspector for.”

The dispatch of these resilient myths begins in the model code, upon which the local building codes are based.  That model code is the California Building Code (CBC), found in Title 24 of California Regulations.

Building Inspector’s “OK” means it is OK

Can we rely upon building department inspections to prove that construction work is free of defect, or that the apparent code violation was authorized?  Not according to CBC §108.4.4, which states, in part, that “approval as a result of an inspection shall not be construed to be an approval of a violation of the provisions of this code.” This is fair, because an inspector cannot possibly inspect every board, every nail, of a building.

Certificate of Occupancy means it is OK?

At least we can count on a C of O for some defense from liability, right?  Not according to CBC §110.1, which states that “issuance of a certificate of occupancy shall not be construed as an approval of a violation of the provisions of this code.” That certificate simply means the building department will conduct no further inspections of the building, not that it is certified as correctly built.

Building Departments have some accountability, so it is OK?

There is no ability to hold building officials accountable for failing to catch defects.  As per Government Code Section 818.6, “a public entity is not liable for injury caused by its failure to make an inspection, or by reason of making an inadequate or negligent inspection ... for the purpose of determining whether the property complies with or violates any enactment or contains or constitutes a hazard to health or safety.”   This is reaffirmed by the Code itself, at IBC §104.8, which states: The building official, … charged with the enforcement of this code, while acting for the jurisdiction in good faith and without malice in the discharge of the duties required by this code or other pertinent law or ordinance, shall not thereby be rendered liable personally and is hereby relieved from personal liability for any damage accruing to persons or property as a result of any act or by reason of an act or omission in the discharge of official duties.” (emphasis added)

Building inspectors do not have the resources to accomplish more than spot inspections, and cannot fairly be expected to be a substitute for proper project management and quality control.  Their shortness of resources often means that inspectors have to make decisions on where to allocate their time.  Is it controversial to suggest that building officials actually spend less time per capita on major residential developments than on the amateur’s remodel/addition?  In fact, inspectors sometimes rely upon a professional developer, and pursue a less rigorous inspection as to the larger builders while at the same time may spend a disproportionate amount of time with the “amateur” adding onto their garage.

In summary, building officials have immunity, and cannot be held accountable to the building industry for inadequate or even careless inspections.  Such inspections specifically do not provide a defense to negligence claims.  However, so many in the industry still believe they are adequately protected by the local building and safety department.

So what does the Realtor® do with this information? First, remember that building codes are simply minimum standards, and builders should not be given more credibility because they promise to build to meet the “Code” – that is a legal requirement, and a builder should not be given a medal simply because they meet the minimum requirements of the law.  Second, try as we might, there is risk in real estate, and one cannot completely erase that risk.  Educate your clients that even with review of permits, even with a home inspector, there is still a risk that something inside the walls may have been built incorrectly – and educated clients, with reasonable expectations, are the clients of successful Realtors®.

 Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.