BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Q: I am a listing agent for a lot in escrow. My seller informed me that he had an architect draw up plans and specifications for a new home to be built on the lot. Does the seller need to disclose the plans to the buyer? Also, if a seller has plans on a home that was built per those plans, does the seller have to disclose the plans? Is there anything I should be doing to protect the seller?
A: Yes, if the seller has plans for a home, whether or not built or remodeled per the plans, the plans should be disclosed to a buyer. Please consider the following scenarios:
- Plans show the setbacks that limit any structure that is to be constructed. Those setbacks were not otherwise disclosed to the buyer;
- Plans for a home built per the plans show the square footage, and a sump pump which as not disclosed by the seller. The seller’s representation regarding the square footage may well be different than on the tax assessor’s records; and
- The plans for a remodel shows a different structure than the one that was actually built and contain the architect’s recommendations for construction which were not included in the actual construction.
By providing the plans, lawsuits for non-disclosure in these situations would be avoided.
However, in providing architect’s or engineer’s plans to a buyer, seller should make some disclaimers before, or concurrent with, the delivery of plans and specifications. For, example, the seller would likely want to disclaim:
- That the property may not be able to be built or improved in accordance with the plans. A local building department may reject the plans, or require modifications.
- That the plans may not conform with all local and applicable laws, zoning and building codes. The seller likely has no independent knowledge of these laws, but instead relied on the architect or engineer.
- That the buyer has a right to use these plans for his/her own use. The architect or engineer may likely claim a copyright privilege in the plans, with permission only to the seller/client to use them on this specific property.
- That, if the property has been built or improved using the plans, the property may not have been built in exact accordance with the plans. Often, there are changes during the construction process that are not reflected in the plans. Thus, the plans do not reflect the property “as built.”
Other issues to consider:
COPYRIGHT PROTECTION: Architectural and engineering plans or drawings are generally protected by federal and state copyright laws. Architects’ and engineers’ contracts with clients typically grant only clients who retained them the right to use those plans, and do not allow third parties to use those plans without the written permission of the architect/engineer. Copyright laws generally protect their work product from such third-party use.
PUBLIC RECORDS: You did not say whether the plans had been filed with the local building department. If they were, then they generally become public records. California law allows for access to these public records but only allows a limited right to copy the plans. But, even if these plans become “public records,” this may not defeat an architect’s claim of copyright protection.
PRACTICE TIPS
- When your seller delivers to a buyer plans, specifications and/or drawings created for seller by an architect or engineer, advise your seller to consult with the architect or engineer, prior to agreeing to release those plans to buyer, as to seller’s ability to share those plans with buyers or other third persons.
- Include a disclaimer in the purchase agreement, such as the following:
“Seller is providing Buyer with certain architectural and/or engineering plans, specifications or drawing (the “Plans”) in conjunction with this sale transaction. Buyer is advised and agrees that seller does not warrant or represent that: (a) the improvements set forth in the Plans may actually be built on the Property or were built on the Property; (b) the local building department will allow or did allow construction on the Property in accordance with the plans; (c) the plans conform to all local and applicable laws, zoning and building codes; (d) the architect or engineer who created the plans has given buyer, or any third person, permission to use these Plans; and (e) if the improvements as shown in the plans have been made to the Property, the plans represent the Property “as built” and that changes may have been made from the plans during construction. Agents have not investigated or verified the plans, the status of construction or permitting with the local building department or the accuracy of the plans. The Buyer is advised to consult with buyer’s own qualified California real estate attorney and construction experts with respect to any and all aspects of these plans and their use.
- 3. BUYER’S AGENTS: If you are representing a buyer who is receiving plans from a seller, you should advise your buyer, in writing, to have the plans reviewed by their qualified California real estate attorney and construction professionals prior to relying on those plans for their personal use.
This Weekly Practice Tip is attorney- client privileged and for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.