Red Book on Real Estate Contracts in Georgia (eBook)

OVERVIEW

This chapter covers a variety of topics that, although of the utmost importance to real estate transactions, are not directly related to real estate contracts themselves. These topics include some of the legal issues involved with showing a house, as well as a brief overview of some problems that have recently arisen in the real estate market pertaining to persons outside of the contract.

§1.1The Open House

§1.1.1Injury While Viewing Property

In general, homeowners are responsible for exercising reasonable care to make a property safe for those invited onto it. This general duty to make a property reasonably safe includes repairing dangerous conditions that are known or could be reasonably discovered by the homeowner or warning guests of their existence.1 The simple caveat to the above is that to recover for an injury suffered on and because of someone else’s property, the injured party must have been exercising “ordinary care” when they were nonetheless hurt.

This stems from the fact that Georgia common law follows a modified comparative theory of negligence, where the law aims to place the burden of an injury on the party best situated to have avoided it. In other words, an injured party can only recover damages for an injury if the party was comparatively less at fault for the injury than the person being sued (i.e., if blame for an accident is split 50/50, in most cases the injured party cannot recover at all)2 In addition, if any portion of the blame for the plaintiff’s injury can be attributed to the plaintiff’s negligence or fault, the court will correspondingly decrease any allowable recovery. For example, if a plaintiff was 30% responsible for an accident that caused $1,000 of damage, the plaintiff could only recover a maximum of $700.3 A jury determines each party’s comparative percentage of fault.

As this applies to open houses, premises liability law in Georgia does not require an owner or occupier of land to make the property so safe that no one could hurt themselves. The law only requires that the owner or occupier of land ensure that the property is safe enough that a person who does manage to hurt herself is comparatively more to blame for her injury than the owner or occupier of the land.

To illustrate this idea, in one Georgia case a landowner rented rooms on his property to various tenants, all of whom were allowed to use the unlighted basement/crawlspace of the house as storage. On one particularly dark and cloudy day, one of the tenants of the house went down into the crawlspace to retrieve some firewood but neglected to bring a flashlight or other source of illumination. While proceeding into the crawlspace looking for the wood, the tenant then fell into a six-foot-deep pit and hurt herself. Although the owner was well aware of this pit underneath the property, the tenant had never been warned of it.

In the suit that followed, the court found that the owner could not be punished for the tenant’s injuries. The court reasoned that proceeding approximately 15 feet in the dark in an unfamiliar space was not “an exercise of ordinary care.”4 In other words, a normally cautious person would not walk recklessly forward into a dark, unknown space, at least without bringing a flashlight. Thus, the plaintiff’s negligence outweighed any negligence on the part of the property owner in failing to warn his guests and invitees about the pit under the house. Put another way, the tenant was more than 50% responsible for her own injury and therefore was not entitled to recover any of the damages flowing from that injury.

This an essential rule for sellers’ agents and brokers to pay attention to, particularly when hosting an open house. If a guest present at an open house were to get hurt as a direct result of some dangerous condition on the property that the homeowner either knew or should have known about, the injured party could almost certainly sue the homeowner under a theory of “premises liability” for any damages suffered.

An interesting question in this regard is whether a property owner owes any special duty to someone who may come on to listed real estate solely because of having seen a “For Sale” sign. This issue came up recently in two separate instances in which homes were listed for sale and “For Sale” signs were placed in the yards. Two different buyers saw the signs and decided to walk onto the properties on their own to have a look around. Both suffered significant injuries when, for one a deck, and for the other a stairway, fell down. They both sued, claiming that the owners owed them a duty to warn about the defective conditions; even though the owners had no idea, these prospective buyers were on the properties. As if often the case, there are two appellate decisions in Georgia addressing similar issues, both of which reach opposite conclusions.5 The safest course, therefore, is for owners to post warnings or rope off areas of the property that might be unsafe, no later than when a “For Sale” sign is placed on their property.

§1.1.1.1Liability of Agents and Affiliated Agents

Many states have extended the obligation to make a property safe for those invited onto it to brokers and their affiliated agents showing a house for sale.6 As a result, brokers can be held personally liable for injuries suffered by those viewing a property if the broker or his or her affiliated agent failed to exercise reasonable care to make a property safe for those invited onto it. Courts around the United States have begun to classify sellers’ agents and brokers as “possessors” or “occupants” of properties, at least while those properties are under listing or specifically being shown to prospective buyers.7 Although the state of Georgia has yet to make this extension of “owner/occupier” liability explicit to brokers and their affiliated licensees, existing case law suggests that a Georgia court would likely not hesitate to do so if presented with the correct case.8

Therefore, to be protected from this potential liability, a prudent Georgia broker or agent should perform a thorough visual inspection of the property before inviting anyone to view it. A broker or real estate licensee who identifies any potentially hazardous conditions during this inspection should then require the seller to make all such hazards reasonably safe in light of their foreseeable future uses. A broker or owner is not required to discover nor disclose every possible latent defect in the property during this inspection. Instead, he must exercise “reasonable care” to make the property safe in light of the foreseeable use thereof.9

One area where there is a heightened risk of injuries to people is houses that are still under construction (See §1.1.3 of this work (“Selling New Construction Homes Where Not Everything Is Finished”). One case -which the authors are aware of occurred when a person touring the house opened the door to the garage from the central part of the house and fell and broke her leg because the steps leading into the garage had not yet been constructed. Most builders will not let buyer’s tour homes under construction until the house is almost complete to avoid the risk of these types of claims. Real estate licensees should take a lesson from builders and follow suit wherever possible.

Examples of potential hazards to look for during this initial inspection include things like rotten stair treads or decking, broken or loose railings or burned-out lights, loose carpet or hanging fixtures, tripping hazards such as uneven sidewalks, exposed wires, and any other conditions on the property that could foreseeably lead to injury. The prudent broker should then encourage the owner to fix all of these issues prior to inviting potential buyers onto the property, to ensure that no liability arises.

Brokers should perform this preliminary inspection for hazards irrespective of any disclosures or promises of the owner, as the “duty to inspect” is imposed on both the owners and the occupants of the land, and as discussed above, the latter category probably includes sellers’ brokers and their affiliated licensees.10 Even if a homeowner promises there is nothing wrong or dangerous on the property, if a condition that should have been discovered by a reasonable inspection (which could be as simple as a burned-out light bulb on a dark set of stairs) later causes an injury and the broker failed to warn potential buyers about the danger, the broker could be held personally liable for the entirety of the damages.

In addition to performing a thorough inspection for dangerous conditions, brokers should make sure to give enough warning about any lingering dangers the owner neglects to fix so that those invited onto the property can easily avoid those dangers. If, for example, before an open house a broker notices that a two-story deck has rotten floorboards, that broker should make certain that no one who attends the open house goes out on the deck, or if the buyer is insistent, at least does not go without first being warned of the potential danger.

The broker could communicate the warning in several ways, including posting a written sign, verbally warning potential buyers,...