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Real Estate Appraiser’s Duty of Care in Partnership Disputes

Type Matter:  Real Estate Appraiser’s Duty of Care in Partnership Disputes
Issue:  Does a Real Estate Appraiser owe a duty of care to each Partner of a partnership when only one Partner engages the Appraiser to prepare an appraisal report for that Partner’s benefit?
Answer:  Probably not.

Facts:  Appraiser is engaged by one Partner (the “Client”) of a partnership to appraise a parcel of real property in connection with a dispute amongst Partners concerning the value of the parcel of real property that is to be sold in connection with dissolution of the partnership. Appraiser prepares and issues an appraisal report to the Client and expressly states in the appraisal report that the Client is the only Client and the only intended user of the appraisal report. After the partnership dispute is settled, the Partner of the Client brings a claim against the Appraiser for negligence. The Partner of the Client’s claim is that he was a foreseeable and intended user of the appraisal report since the Appraiser prepared the report for the claimant’s partner.

Results: The Court dismissed the claim for negligence based on the position that an Appraiser’s duty of care extends only to the Appraiser’s client who actually engages the appraiser’s services.

Lesson:  Appraisers should always state clearly the intended users of the appraisal report and the intended purposes for the report. These terms should be clearly stated and as limited as possible. By doing so, the risk of a claim by an unintended Party or for an unintended purpose can be minimized.

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