I hired a contractor a while back to remodel a home I recently sold. The homehowner/buyer has contacted me after the now 5 months after the sale, and informed me that there are significant issues with the home and various things not up to code. The contractor I hired to remodel, installed a new roof, and provided a certificate and 5 year warranty, however, the homeowner sent me pictures that show the roof was not up to code ( i.e., drains installed backwards and not properly sloped, the corners of the roof not nailed down to the trim, foam installed and painted over along gaps between the trim and roof where it should be sealed etc.) The homeowner/buyer also said there were significant leaks inside the house. I'm nervous because I do not know for sure, whether or not my contractor pulled the permits for the roof, as well as over improvements made to the house so things may or may not be up to code. Does the buyer have any ground to stand on here if I disclosed I did not know about any of these things during the sale? If there is liability for not pulling permits and current damage/things not up to code, would that be on me, my contractor or the buyer since they have signed the disclosure document?
This issue may or may not be covered;
-In your purchase/sell contract
-By state law
You don’t know if your contractor pulled permits?.....find out. That probably means he didn’t.
Does the disclosure you signed ask about recent improvements/roof replacement?
The disclosure I signed did ask about "improvements/roof replacements and I claimed "unknown". I also found out that the contractor I hired to fix other issues found during the inspection and were part of the resolution were never completed but I provided the buyers with invoices that the work had been completed.
It looks like my contractor did not pull any permits for the roof or any of the additions to the house (additional expansion etc.). I have recently let this contractor go and he is no longer doing work for me but I'm afraid the damage is done. I have told the buyers I disclosed everything I knew at the time of the sale and that they should take their grievances to my old contractor. They have hinted at pursuing legal action against me. Am I at all liable here? Appreciate any advice!
I don't know for sure, and I'm not an attorney, but I would think that as soon as the deal is closed, you are no longer liable for anything, unless you committed fraud. Certainly five months after closing, you shouldn't be liable.
The first thing I would do in your shoes is to ensure that my personal assets are isolated from my business assets and my business assets are isolated from one another, in order to protect yourself from a suit. In addition, I would ensure all of my corporate documents had my i's dotted and t's crossed so the corporate veil cannot be pierced. All of this is predicated on you having corporate entities established and established correctly. I would do all of that immediately. Then I would worry about checking on permit status, etc.
Anderson Advisors can help you with asset protection. They are in Tacoma and Las Vegas.
Joe, thanks for the advice and reference.
You might be liable, depending on how you advertise the property, what you disclosed and how, your contract and state law, and for sure you can get sued and you'll have to defend yourself ($$$).
Did you advertise it with "new roof"? Was everything new? If not, they can claim "fraud"...and good luck from there.
This is a clear case of why you need asset protection and why you should do rehabbing under an LLC (or better, a Series-LLC) that you put in preservation after the sell.
I'm not a lawyer, nor CPA, so take this with due diligence, but I hope it helps.
So, you had the roof replaced without the required permit just prior to sale and on your disclosure where it asked about improvements/roof replacement you said “unknown”? Really?
I’m guessing you’re on the hook, and rightly so.