There is no doubt that discussion surrounding the inspection contingency keeps the WRA legal hotline attorneys, managing brokers and agents busy in daily practice. Typically the debate surrounds the use of notice versus amendment, the definition of defect and the right to cure. However, the dialogue lately has taken on a new tone to include the topic of testing.

Essentially, the conversation breaks down into two scenarios — both of which throw radon testing incorrectly into the realm of the inspection contingency.

Testing versus inspection

Before evaluating each scenario, we must first make the distinction between testing and inspection as they relate to the offer to purchase. For ease of use, all line references made within this article are to the 2011 WB-11 Residential Offer to Purchase.

The preprinted inspection contingency in the offer to purchase (lines 410-433) provides three opportunities:
1. A home inspection by a Wisconsin-registered home inspector.
2. A separate inspection of any named property component, if included.
3. Any follow-up inspections recommended in a written report by one of the above.

The preprinted inspection contingency clearly states on line 410, “This contingency only authorizes inspections, not testing (see lines 395-409).” Lines 395-409 define both tests and inspections; and within the definition of inspection, the offer specifically states that an inspection does not include an appraisal or test other than testing for “leaking carbon monoxide, or testing for leaking LP gas or natural gas used as a fuel source, which are hereby authorized.” In addition, testing is defined on lines 398-399 as “the taking of samples of materials such as soils, water, air or building materials from the Property and the laboratory or other analysis of these materials.”

The offer makes a very clear distinction between an inspection and a test. Therefore, if the offer does not include a separate testing contingency, then a buyer is not permitted to conduct any test unless the offer is amended or the test is one of those enumerated within the definition of inspection.

When radon testing and the inspection contingency converge 

Scenario A: In the blank lines of the testing contingency, the offer presented to the seller includes a radon test or language that provides for any other follow-up inspection or test recommended by the home inspector. 

What now?

The listing agent who receives an offer that includes a radon test, or language to the effect of a test recommended by the home inspector, should immediately suggest to the seller that a counteroffer needs to remove the language referencing radon testing or any testing from the home inspection contingency. The seller may wish to include a testing contingency specific to radon in that same counteroffer as well. Whatever the decision of the seller as to the buyer’s proposal to have a radon test or any other testing, the inspection contingency is not the appropriate venue in the offer to address such matters. In addition, when the parties are negotiating testing, it is advised to determine what specific testing will occur to avoid any confusion or dispute in the future.

It is also important to note that the ability to conduct follow-up inspections (but not testing) is limited to those inspections recommended in writing by an authorized inspector. The blanks at lines 413 and 414 should be used only to list the specific components of the property that will have specific inspections and should not, without other modifications to the contract, refer to testing.

Scenario B: The offer makes no mention of a radon test. During the home inspection, though, the buyer decides, either after a discussion with the home inspector or on their own, that they would like to have a radon test. Therefore, the home inspector leaves a radon test canister behind at the property without the seller’s consent. 

What now?

When an offer does not authorize testing and the home inspector leaves a radon canister or some form of radon test behind at the property, the seller should remind the buyer that the offer to purchase does not grant the buyer, or his home inspector, authority to test for radon. Both the listing broker and seller may contact the Department of Safety and Professional Services regarding the unauthorized activity of the home inspector. Arguably, unauthorized testing constitutes trespass.

In addition, the canister or other form of radon test should be removed promptly upon discovery, preferably by the seller — not by the listing agent.

If the radon test equipment goes unnoticed by the seller or the listing agent, the biggest issue may still be on the horizon — the radon test results show 4.0 picoCuries (pCi/L) per liter of air, or better known as active levels of radon in the property. Because the test was conducted without authorization and tests are not within the scope of the home inspection, the results are arguably not the basis for a notice of defects per the home inspection. The parties should consult with legal counsel for advice regarding their rights under the terms of the offer.

Because home inspectors are required to identify all conditions that the inspector has knowledge of, the home inspector must report the conditions discovered during the inspection, conditions disclosed by the seller, and conditions disclosed by test results. Unless permission is granted, sellers do not have to allow tests. In this case, the radon test was not approved, and the seller did not have to allow it to be conducted. Given that the test has been conducted, and the results have been included in the inspection report, the seller should consult with legal counsel to determine what effect the unauthorized test has on buyer’s rights under the inspection contingency. The key for future transactions is to ensure that the parties and the home inspector are aware that radon tests are not permitted unless specifically authorized by the seller.

Avoiding scenarios A and B

Prior to writing the offer, your job is to encourage the buyer to have a discussion with a home inspector. This discussion should surround which tests, if any, the buyer may like to reserve the right to have. However, the majority of buyers typically do not even know which home inspector they would like to hire, let alone reaching out to one prior to writing the offer.

If the buyer decides that radon is a concern and would like to reserve the right to test for radon, an agent should include a separate radon testing contingency.
The note on lines 403-405 cautions: “Any contingency authorizing testing should specify the areas of the Property to be tested, the purpose of the test, (e.g., to determine if environmental contamination is present), any limitations on Buyer’s testing and any other material terms of the contingency.” A testing contingency should specify who will conduct the test, when and where it will be conducted, what standards will trigger the buyer’s ability to request remediation or terminate the offer, and whether the seller will have the right to cure. Essentially, the contingency should address who, what, when, where, how, cost and what will happen if not. The February 2013 Legal Update, “Contract Law Drafting Pointers,” found at www.wra.org/LU1302 is a great guide on drafting.

According to EPA estimates, one in every 15 homes nationwide has a radon level at or above the recommended radon action level of 4 picoCuries (pCi/L) per liter of air — therefore it is no surprise that a buyer may want to have a radon test. According to Wis. Admin. Code § REEB 24.03(2)(c), licensees are expected to be knowledgeable regarding laws, public policies and current market conditions on real estate matters and advise the buying or selling public based on these factors. Do keep in mind that radon is a radioactive, non-discriminatory gas. Testing is the only way to know if radon is a concern with any specific property. If there is known incidence of high levels of radon in a particular community, neighborhood or geographic area, an agent from that market area would be prudent to inform the buyer and recommend the buyer consider negotiating an offer with a radon testing contingency.

The WRA’s Addendum A includes a testing contingency, in addition a great deal of REALTOR^® board-created addenda have a preprinted radon test contingency. However, after discussion with the buyer, the buyer may wish to set their own specific standards in a radon test contingency. For instance, a buyer may want to detail in the contingency how much radon is too much radon in order for them to accept the property. Moreover, the buyer may want to have a mitigation system installed when the radon test level is 2 picoCuries (pCi/L) per liter of air rather than the EPA-recommended action level of 4 picoCuries (pCi/L) per liter of air.

And while the buyer is free to propose terms in the offer acceptable to buyer, the seller is also free to refuse or counter the proposed terms. However, we all know that any and all testing, including radon, should not seep into the inspection contingency.

For more information as to the preprinted inspection contingency, review the following in the Wisconsin Real Estate Magazine, “Uncovering the Truth: Inspection Contingency” found at www.wra.org/WREM/Apr11/UncoveringTruth, and the November 2009 Legal Update, “WB-11 Residential Offer to Purchase — 2010 Edition” at www.wra.org/LU0911.

Cori Lamont is Director of Regulatory Affairs for the WRA.