Real Estate Sellers: Be Aware of Property Disclosure Laws

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real estate lawBackground of Property Disclosure Laws
In the wake of the consumer-rights movement and the increasing influence of realtor organizations around the country, many states began to draft and implement property disclosure laws in the 1980’s that were designed to protect buyers of residential properties. The goal was to protect uninformed and inexperienced buyers in an era where typically only sellers had agents leaving buyers to fend for themselves.

Around the country, state real estate commissions were called upon by the legislature to draft property disclosure statements that satisfied the requirements of the law in that state. The focus at that time, and still to this day, is to protect home buyers from material defects existing on the property, which are known to the seller. In most cases, “material defects” are problems with the property or any portion of the property that would have a significant adverse impact on its value or that involves an unreasonable safety risk to people on the property including the land.

In jurisdictions such as Pennsylvania, the Real Estate Seller Disclosure Law mandates that the seller “deliver” a signed and dated copy of the property disclosure form to the buyer prior to the execution of an agreement of sale. As the term is used in the statute, “deliver” means to give to the buyer by personal delivery, first-class mail, certified mail/return-receipt requested or facsimile to buyer or buyer’s agent. In practical application, a seller’s agent usually leaves several copies of the disclosure form at the property for potential buyers to take with them upon looking through the house for the first time.

Although each state typically utilizes a standard disclosure form for properties sold in that state, the disclosure laws vary from one state to another—so, buyers, sellers and agents should familiarize themselves with the disclosure requirements in their particular state.

Examples of the types of issues covered by disclosure forms include:

  1. When the property was last occupied by seller;
  2. Condition of the roof;
  3. Structural problems;
  4. Water and sewage systems or service;
  5. Electrical system;
  6. Heating and air conditioning;
  7. Plumbing system;
  8. Presence of hazardous substances;
  9. Municipal violations against the property;
  10. Presence of mold

What Should Sellers Do About these Disclosures?

It is imperative that both the seller and seller’s agent take a significant amount of time to go through each item on the disclosure form and provide as complete and accurate a response as possible based on the information at hand. Generally, a seller will not be held liable for an error or inaccuracy on the disclosure form, so long as the seller did not have knowledge of the error or inaccuracy. Further, most states do not require a seller to spend money to conduct various tests and investigate the current condition of the property. However, sellers (and possibly their agents) will be held liable for negligently or recklessly reporting/failing to report information or perpetrating a fraud by intentionally misrepresenting the condition of the property.

The judgments that have been awarded in cases involving violations of the seller disclosure laws include: 1.) Monetary damages to the buyer so that the misrepresented condition can be repaired; 2.) Payment of buyer’s attorney’s fees; 3.) Rescission of the contract (thereby allowing the buyer to void the transaction). I can assure you that cases involving alleged misrepresentations by sellers and overzealous agents who are trying to make a sale are on the rise. Attorneys representing buyers in these matters are becoming very aggressive in order to protect their clients’ investments. Many are seeking punitive damages against both the seller and the agent, and more and more agents are being held accountable for failing to instruct their client to disclose a known material defect of the property.

At one time we were a nation governed by the famous doctrine of “Caveat Emptor”. As times have changed, especially in the world of real estate, the consumer has become king. The laws have changed and the playing field in a lot more level—maybe, it’s time for the seller to beware.

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10 Comments

  1. Sadly, many sellers choose to try and avoid responsibility by simply indicating IDNK (I do not know). For forum readers, education is the key. YOU need to be diligent, and ask questions. Don’t accept IDNK! If the seller resists, lower your offer accordingly, assuming the worst.

  2. I need some advice…..I am aware of caveat emptor, however we have bought some property advertised as waterfront …lakefront property..when we looked at the property the wk youaterfront was at the property setback and at 2800ft.After building a home ,weekend place we discovered in a few months the lake was receding quite a bit.We asked the realtor about it. He told us that it was normal evaporation of the lake,especially because of the California drought.we believed him……This lake we found out is actually a agriculture resevoir and farmers can use the water up until October each year. By june of the following year there is no lake……it totally drys up and you can actually walk across it for more than a mile to the otherside. We are furious…..what can we do about this that should have been discloed to us ????than

  3. Quick story.
    Last week of Dec, I moved into a rental house purchased by my parents.
    Just as I was finished moving in the last batch of my stuff after two weeks, the furnace started having problems. When I say problems, I mean serious stuff, it was starting to explode!. It had to be shut down and then it left toxic soot and fumes all over the house.

    I had just moved in so I decided I’d organize and then see about the mess and besides I needed to make sure my former apartment was ready by the first so I’d get my deposit back.
    About week later, I happened to look online to find tips about cleaning up the mess. I happened to find out by accident browsing that I needed to have professional cleaners come over and clean it up. Which lead to me finding out it was unsafe to stay in my new rental house.

    MY goodness….a new rental house that has been recently inspected and is a health hazard to be in as soon as I move in?. That’s not really what most people expect after being told the house was inspected and not to worry!!!!!!.

    To sum up problems caused by the dishonest former owners:
    – Property damages by the toxic soot/fumes.
    – Among the property damaged, my years of art-work as I had been a working artist prior to what I’ll call the attack.
    – Loss of income as my massage gear was all contaiminated and un-safe for me to start my massage room as planned.
    – My life revolves around cleaning up the mess and repacking my items to be moved around for the professional cleaning so it’s a waste of time for me when I could be doing other things, like say getting a new job to replace my massage income.
    – My pets died as a direct result of what I suspect was being poisoned. This really feels like a personal attack.
    – Health hazards from being exposed to toxic fumes without my knowledge until I happened to look up the risks on the internet at my parents. How was I supposed to know how bad it really was?…Really I lived with the problems from day one when I moved in so I didn’t have much to compare to.

    Upon further inspecting the malfunctioning furnace, there was a tag on the outside that said it had not been cleaned in four years since 2007.
    No warning for the problems was ever given that there was a malfuctioning furnace so I am seeking a disclosure lawsuit now.

    I hardly know where to start as I’ve never done this. I only want fair compensation for what the negligence of the former home owners have caused when they could have so easily warned us and the furnace could have repaired.

  4. I moved into a house in 2006. In the disclosure statement it read, “…hard blowing rain may get small amount of water in front of basement (oil tank room) note: occurred when gutter was clogged/overflowing”. When asking my agent about it, she replied, “The water in the basement occurs when rains are particularly heavy, as they have been recently.”

    After moving into the house we discovered the basement floods at a level, nothing can be stored down there. This occurs even during a mild rain or snow melt (or the neighbors draining their pool water).

    During a bad real estate market, we decided to move out of the house and rent. The renter’s loved the house and the neighborhood, but at the end of the lease did not want to buy due to the flooding. We are now unable to sell our beautiful house in a beautiful neighborhood, due to this factor. What are the statue of limitations on making the seller and their agent responsible for this false statement in the disclosure?

  5. I am going through something right now regarding my house. The small issues are that they claimed NO on foundation repairs, but there is CLEAR foundation repair after deep inspection. His mother died in the home (which I’m not angry about). But the main thing:

    The house is grandfathered in as “conditional Use’, being zoned as commercial now (it was built in 1935). This fact was not divulged prior to, during or after the sale, I found out by accident. I have learned that if my home burns to the ground, I will NOT be able to rebuild a home (anything over 60% damage will nullify the residential status use. I cannot expand my home in any way (but can remodel existing structure). If I had know this, I never would have purchased this house and because I am honest, I will probably not be able to sell it – will divulge this fact.

    Do I have any recourse? Were they required to divulge this on the disclosure sheet? Or, am I just screwed?

    David

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