In response to COVID-19 we're temporarily adjusting office hours to close at 4PM PST. View our hours.

A closer look at boilerplate liability

Most general assumptions and limiting conditions in appraisal reports don’t have value in defending real-world claims — but here are three that do

If you like what you read, then try the E&O program that protects more Valuation Professionals than any other program



Too many appraisers focus their liability prevention efforts entirely on boilerplate general assumptions and limiting conditions. The same boilerplate often gets pasted into every report, regardless of differing intended uses, users or property types. Some of the language I see reads like it was handed down from a time before appraisers were even licensed. Many times, I also find boilerplate assumptions and conditions that are internally inconsistent or that contradict the valuation analysis.

In one negligence case against a commercial appraiser, the trial judge said from the bench, “I’m going to give as much attention to that fine print as the appraiser did copying and pasting it.”

It’s simply wishful thinking to believe that a perfect set of general assumptions and limiting conditions exists and that it’s the most important aspect of liability prevention. In reality, what appraisers state in plain English in their reports is usually more effective than any set of assumptions and conditions.

Strategies for liability prevention

For starters — and this is pretty fundamental — appraisers need to develop a credible valuation analysis and report it correctly. The best strategies for liability prevention also include:

  • Using carefully considered language for the intended use and user for every report. The narrower and more precise the language, the better to fend off the majority of claims that are filed by non-clients and parties that the appraiser believes are not the intended users of the work.
  • Explaining in detail in each report the appraiser’s scope of work and clearly noting items and analyses that were not performed.
  • Including a few sentences in plain English and photos (if applicable) in each report describing special issues or conditions affecting the subject property or the appraiser’s analysis.

About those general assumptions and limiting conditions

While including general assumptions and limiting conditions is not the best defense strategy, you don’t have to throw them out. In some cases, these provisions are meaningful, and they can be made more so when tailored to particular assignments. The Appraisal of Real Estate (14th ed.) suggests that “general assumptions and limiting conditions should not be treated as boilerplate in the report, although they may be typically applicable to almost all assignments.”

Three common general assumptions and limiting conditions I’ve observed to have the most value in defending real-world claims are:

  1. It is assumed that the property is in compliance with all applicable federal, state and local laws, ordinances, regulations, building standards, use restrictions and zoning unless the lack of compliance is stated in the appraisal report. Determining and reporting on such compliance were not part of the scope of work for this assignment.
  2. It is assumed that all water, sewer facilities and utilities (whether existing or proposed) are or will be in good working order, are safe for use, and are or will be sufficient to serve the current or proposed uses of the subject property or any structures or other improvements. Determining and reporting on such matters were not part of the scope of work for this assignment.
  3. Unless otherwise stated in this report, the past or current existence of hazardous materials or environmental contamination on, below or near the subject property was not observed or known by the appraiser. The appraiser, however, is not qualified to detect such substances or to make determinations about their presence. The presence of substances such as asbestos, urea-formaldehyde foam insulation and other potentially hazardous materials or environmental contamination may affect the value of the property. Unless otherwise stated, the value estimated is predicated on the assumption that there is no such material on, below or affecting the property that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering assistance required to discover them. The intended user is urged to retain an expert in this field, if desired.

Please heed my recommendation to tailor the specific wording to fit individual assignments. Also understand that these three examples may not be appropriate for every appraisal or permitted under assignment conditions, and they generally should not be used in litigation reports.

Finally, I recommend that appraisers include standard language in all non-litigation reports that helps make their assumptions and conditions more enforceable, such as:

Use of or reliance on this appraisal or appraisal report, regardless of whether such use or reliance is known or authorized by the appraiser, constitutes acknowledgment and acceptance of these general assumptions and limiting conditions, any extraordinary assumptions or hypothetical conditions, and any other terms and conditions stated in this report.

The fact that I did not include a particular assumption or condition in the examples above does not mean it should be discarded for the purpose of liability prevention. If you think a provision is relevant to your work and it makes you more comfortable to include it, then you should do so. Just recognize that general assumptions and limiting conditions are not the most important element to liability prevention. ◄