What is the economic loss rule?
So you purchased a home where the seller represented on the Form 17 that there was a new roof but now the “new roof” is leaking. A contractor tells you that the roof is not new, rather there is merely new metal placed over layers of old metal. Now you have had to replace the roof for a cost of $6,000.00. Can you sue the seller for misrepresentation to recover your loss?
The short answer is No.
The first claim that comes to mind is misrepresentation. However, the economic loss rule bars a claim for negligent misrepresentation in the context of the sale of a home. Alejandre v. Bull, 159 Wn.2d 674, 685, 153 P.3d 864 (2007). “The economic loss rule applies to hold parties to their contract remedies when a loss potentially implicates both tort and contract relief. Id. at 681.
In Alejandre, the buyer of a home sued the seller for negligent misrepresentation regarding the condition of a septic system. Id. at 679-80. However, because a contract governed the parties’ transaction, and the parties had the opportunity to allocate the risk of lost in the contract, the tort claim was barred. Id. at 685-86. The buyer’s claimed damages from the failed septic system were purely economic losses, and the buyer was therefore limited to contract remedies. Id.
The rule of Alejandre controls this situation to eliminate any cause of action for negligent misrepresentation. You seek to recover the cost of a new roof—a purely economic loss. The terms of the transaction are clearly documented in the purchase and sale agreement between the parties. Just like the buyer in Alejandre, you are limited to any available contract remedies.
The second claim that comes to mind is breach of contract. However, you cannot rely on the contents of the Form 17 to support your claim for damages because the contents of the disclosure form do not become part of the contract: “The seller disclosure statement shall be for disclosure only, and shall not be considered part of any written agreement between the buyer and seller of residential property.” RCW 64.06.020(3) (emphasis added). The form itself reiterates this understanding: “This information is for disclosure only and is not intended to be a part of the written agreement between Buyer and Seller.” Nothing in the seller disclosure form was incorporated into the contract.
Even if Plaintiff can prove an error in the disclosure form, Washington law severely restricts a seller’s exposure to liability based on the contents of the disclosure form:
The seller of residential real property shall not be liable for any error, inaccuracy, or omission in the real property transfer disclosure statement if the seller had no actual knowledge of the error, inaccuracy, or omission. Unless the seller of residential real property has actual knowledge of any error, inaccuracy, or omission in a real property transfer disclosure statement, the seller shall not be liable for such error, inaccuracy, or omission if the disclosure was based on information provided by public agencies, or by other persons providing information within the scope of their professional license or expertise, including, but not limited to, a report or opinion delivered by a land surveyor, title company, title insurance company, structural inspector, pest inspector, licensed engineer, or contractor.
RCW 64.06.050(1) (emphasis added). Thus, the Form 17 (even if it contains errors) cannot support any claim for damages against the seller.
