Property Condition Disclosure: 2Q 2015

A. Cases

The notable property condition disclosure cases for second quarter involved HVAC, sewer/septic, and boundary disputes, while two of the three also raise issues of fraud and deceptive trade practices.

1. Pringle v. C.B. Richard Ellis, Inc., No. B250304, 2015 Cal. App. Unpub. LEXIS 3463 (May 19, 2015)

Broker did not misrepresent property’s location when there was doubt about which municipality it was in. However, one malfunction did not put the buyer on notice that the HVAC system was defective, so that claim was not bound by the statute of limitations and could proceed.

Broker marketed rental property as being in Beverly Hills, and subject to the Beverly Hills rent control ordinances. Broker also advised the buyer that the property was free of defects and had a functioning HVAC system. Buyer found out two years after closing that the property was actually in Los Angeles, and subject to Los Angeles's more restrictive rent control ordinance. Buyer brought suit against the broker for misrepresentation. The court dismissed that claim, and the dismissal was upheld on appeal. At the time the broker made the representation, both cities treated the property as being subject to Beverly Hills's rent control ordinance, a fact the buyer had admitted in a different, earlier litigation. The court also dismissed the buyer’s claim for misrepresenting the condition of the HVAC system based on the statute of limitations, but that dismissal was reversed on appeal. The court concluded that a freon leak, detected and repaired two years before buyer learned that one of the air conditioning compressors was missing, did not give notice of the missing compressor.

2. Laufer v. Fanucci, No. A-3714-13T4, 2015 N.J. Super. Unpub. LEXIS 1113 (App. Div. May 14, 2015)

Court overturned a judgment in favor of the sellers where one of the sellers was the listing agent and there was a question whether sellers disclosed an unauthorized driveway on the property.

Sellers sold residential property to the buyers. The deed did not disclose that a driveway belonging to a neighbor was built across the property without authorization. Sellers did not tell the buyers that they had settled a lawsuit over the driveway against their title insurer shortly before closing on the sale to the buyers. Summary judgment for the sellers was reversed, because there was an issue of fact regarding whether the sellers had told the buyers about the unauthorized driveway. A claim against the sellers under the Consumer Fraud Act was valid, because one of the sellers was the listing agent for the property.

3. Glassford v. Dufresne & Assocs. P.C., 2015 VT 77, 2015 Vt. LEXIS 67 (June 12, 2015)

Buyers could not recover for deceptive trade practices when they did not contract for services, and they could not recover for negligent misrepresentation where they were not the intended recipient of an inspection certification.

Builder hired an inspector to certify that the sewage disposal system for a home met state requirements. The inspector certified the system. Buyers’ attorney requested a copy of the certification before closing, which was provided, but buyers did not see the certification. The sewage system failed, and buyers sued the inspector. The buyers’ claim for deceptive trade practices failed, because the buyers did not hire the inspector to provide services. The buyers’ claim for negligent misrepresentation also failed because they were not the intended recipients of the certificate. The certificate was intended to be filed with the state, to show compliance with the applicable laws.

B. Statutes and Regulations

Connecticut, New Hampshire, and Tennessee made interesting changes to their disclosure laws. Connecticut added requirements concerning storage tanks and hazardous substances, and changed carbon monoxide detector rules. New Hampshire updated arsenic and radon rules, while Tennessee now requires sinkhole disclosures.

1. Connecticut

Connecticut made several changes to its property condition disclosure statement. Notably, if the property had underground storage tanks at one time, the seller must state whether underground storage tanks have been removed, and if so, who did the removal. Also, the seller is also required to disclose whether there has been prior or pending legal action brought by the government or an agency regarding the release of hazardous substances on the property. The seller also must disclose whether the property is in a common-interest community. Note, however, a seller no longer has to disclose the location of carbon monoxide detectors, but must disclose the number of detectors and whether there have been any problems with them.7

2. New Hampshire

New Hampshire amended its statute governing disclosure of radon gas and lead paint to include disclosure about arsenic in groundwater. The seller must provide notice that arsenic may be in the groundwater and that the water in private wells can be tested and any arsenic can be removed from the water with special equipment. The provisions relating to radon also have been amended to require that the seller provide the buyer with notice of the possible presence of radon on the property and the availability of testing.8

3. Tennessee

Tennessee requires sellers to tell buyers about sinkholes on the property. A seller must tell a prospective buyer about any known sinkholes before entering into a contract with the buyer. The disclosure must be made in writing with an acknowledgment of receipt from the buyer. The definition of “sinkhole” has two parts. A sinkhole is a “subterranean void created by the dissolution of limestone or dolostone strata resulting from groundwater erosion, causing a surface subsidence of soil, sediment, or rock” and “is indicated through the contour lines on the property’s recorded plat map.”9

C. Volume of Materials Retrieved

Property Condition Disclosure issues were identified 24 times in 16 cases, with some cases addressing more than one PCD issue. (See Table 1.)

  • Six cases addressed Mold and Water Intrusion.
  • Valuation and Boundaries were both addressed three times. (Boundary issues include disputes over square footage, access, easements, and similar situations involving the size of the property or its rights.)
  • Additional issues addressed include Structural Defects, Sewer/Septic, Plumbing, HVAC, Insects and Vermin, and Pollution/Environmental Other. (See Table 2.)

Seven statutes and two regulations addressing Property Condition Disclosure issues were retrieved.

7Conn. Real Estate Comm’n, Property Cdn. Discl. Form (Oct. 3, 2014) (effective 3/23/2015).

8N.H. Rev. Stat. § 477:a(7).

9Tenn. Code § 66-5-212(c) (2015).

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.


Access All Legal Pulse Research

All Legal Pulse research and archived editions of the Legal Pulse newsletter can be found at the Legal Research Center's Legal e-Book Library.

State Law Based Changes

Read a summary of this quarter's additions to the State Law Based Changes.