Property Disclosure agreement

[Shirin Namavar]

Hi everyone! 

What are the consequences of failing to disclose items such as unpermitted additions in a property disclosure agreement after a flip? Additionally, how long after the sale is a seller legally responsible for nondisclosure—particularly if the undisclosed items result in issues or damage?

Thank you! 

[Lauren Robins]

Hi Shirin. 

Failing to disclose known issues—such as unpermitted additions—on a property disclosure form after a flip can lead to serious legal consequences. In most states, sellers are legally obligated to disclose material defects that could affect the value, safety, or usability of the home. An unpermitted addition is considered a material defect because it can impact everything from insurance coverage and resale value to compliance with local building codes. If a buyer discovers that an addition wasn’t permitted and wasn’t disclosed, they may have legal grounds to sue for misrepresentation, breach of contract, or fraud—especially if the issue results in damage, safety hazards, or enforcement action by the local government.

The timeframe in which a seller can be held legally responsible for nondisclosure varies by state but generally ranges from one to four years from the date the buyer discovers (or should have reasonably discovered) the issue. This is known as the “discovery rule,” and it can extend a buyer’s right to bring legal action even beyond the standard statute of limitations if the seller actively concealed the defect or failed to respond honestly to disclosure questions. In cases of fraudulent nondisclosure, some states allow for longer timeframes or additional damages, including legal fees and repair costs. Courts may also weigh whether the seller had professional experience (e.g., being a flipper or licensed contractor), which can raise the standard of what they “should have known.”

If a buyer sues and proves that the seller knowingly failed to disclose a material defect, the court can order the seller to pay for the cost of repairs, rescind the sale, or compensate the buyer for diminished value. To protect themselves, flippers and sellers should thoroughly document all work done on the home, ensure all permits are closed out properly, and fully complete disclosure forms—even if the buyer is purchasing the property “as is.” Transparency is not only a legal obligation but also a best practice that protects all parties in the transaction.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.