PROPERTY CONDITION DISCLOSURE FORMS: HOW THE REAL ESTATE INDUSTRY EASED THE TRANSITION FROM CAVEAT EMPTOR TO "SELLER TELL ALL"

Lawrence Schipper, sixteen months old at the time, was severely scalded by water from a spigot in the bathroom that flowed at 190 to 210 degrees Fahrenheit-well above the normal 140 degrees flowing from most domestic hot water taps.63 The injured infant spent seventy-four days in the hospital and underwent two skin grafts.64

All this would have been prevented if Levitt & Sons-the architect, engineer, planner, designer, builder, and contractor of the home-had followed the advice of the company that sold it the home's boiler. Levitt had been advised to install a mixing valve to cool the water as it flowed from the boiler to the bathroom sink six feet away. The valve wholesaled for $3.60, retailed for $9 or $10, and was ultimately installed after the accident by Lawrence Schipper's dad for $18 (for labor and materials).65

Levitt & Sons management had decided to save the cost of the mixing value and instead just warn homebuyers to cool the unusually hot water by always turning on the cold water spigot first. The Schippers had not heard this cautionary word-although at some point, the landlord had placed a written note in the bathroom warning guests of the danger.

The Schippers had leased the house for one year from the original purchaser and had no direct contract with the homebuilder-Levitt & Sons-from whom their landlord had purchased the home.66 For this reason, their legal theory was based in tort, not contract. While the plaintiffs counsel had the heavy burden of persuading the New Jersey courts to reverse established legal doctrines, the heart-rending facts of the case lightened that burden.

Schipper embraces the same justifications as products liability law: cost spreading, risk prevention, and efficiency. Producers of defective products are in a better position than injured consumers to absorb the costs of accidents, prevent design and construction defects by developing and deploying improved products and methods, and make cost-safety tradeoffs. After the Schipper case, Levitt & Sons' cost accountants needed to consider whether it made more sense to install mixing valves or to compensate those injured for want of mixing valves. Today, many homebuilders have learned to respond rapidly to consumer complaints of claimed defects, whether covered by warranty or not, because it is often far less costly to satisfy the buyer than to litigate.

Some lawyers worried that mandatory disclosure or "seller tell all" provisions would lead to the imposition of implied warranties upon amateur home sellers.67 But that has not happened.68 Disclosure statutes uniformly caution that a seller's truthful disclosure is not to be taken as a warranty of the condition of the property being sold. Similarly, disclosure forms typically proclaim, sometimes in a big, bold font: "This is not a warranty."

Sensibly, courts have never implied a warranty of fitness or workmanship against amateur home sellers, recognizing that the product liability rationales are inapplicable to the typical home seller. Most home owners, when they sell, are not necessarily richer or better cost-spreaders than their buyers. Nor do they know more about how best to build or maintain houses, or how to shape the design and influence the design and construction decisions of homebuilders.