Property Condition Disclosure Highlights: 1Q 2019

The Property Condition Disclosure cases consider residential property condition disclosure reports and a disclosure notices. In the first case, the court concluded that the sellers did not misrepresent the condition of the house of the Residential Property Condition Disclosure report. In the second case, the court found that the real estate team had a duty to alert the buyer of the seller’s failure to provide the required explanation in the Disclosure Notice. 

1. Berger, v. Deutermann, No. KNLCV176029185S, 2019 WL 413588, (Conn. Super. Ct., Jan. 8, 2019)

Sellers did not misrepresent the condition of the house on the Residential Property Condition Disclosure Report.

The buyer, a licensed real estate professional, and sellers entered into a purchase and sale agreement for a residential property. The seller completed a Residential Property Condition Disclosure Report containing no remarkable disclosures. A home inspection revealed a portion of the roof had an accumulation of moss, the garage floor had a crack and hole in the foundation, and the chimney needed cleaning. The buyer asserted claims for breach of contract, negligent misrepresentation, and civil theft due to the sellers’ failure to address the issues in the Report. Sellers counterclaimed that buyer breached the contract by failing to “obtain and maintain” financing or notify the sellers of financing approval.

The court found that the sellers reasonably addressed the three contested issues and performed their obligations under the agreement. The court determined the sellers did not misrepresent the condition of the house in the report and rejected the allegation of misrepresentation based on the omission of the garage floor which was merely a cosmetic repair. Furthermore, the court found that the buyer did not rely upon the Residential Property Condition Disclosure Report and opted to have the property professionally inspected. Finally, the court found that the buyer did not establish the requisite intent to prove the sellers’ conduct was synonymous with larceny. As to the sellers’ counterclaim, the court found that the mortgage contingency clause did not provide the sellers with the remedy of retaining the buyer’s deposit and denied the sellers’ claims for attorney fees. The court entered judgment for the sellers on the buyer’s complaint and for the buyer on the sellers’ counterclaim.

2. Calhoun v. I-20 Team Real Estate, No. 12-18-00224-CV, 2019 WL 456892, (Tex. App., Feb. 6, 2019)

Real estate team had a duty to alert the buyer of the seller’s failure to provide required explanation in Disclosure Notice. 

Buyers retained the services of a real estate representative who worked as a part of a team to purchase a home. During a visit, the real estate representative provided the buyers with a copy of the Seller's Disclosure Notice which indicated previous flooding into the structure but did not provide the required explanation of such flooding. The buyers were unaware that an explanation was required or that it was improper for it to be omitted. The buyers purchased the home. Shortly after closing, due to heavy rainfall the home experienced substantial damage to the structure and personal belongings. The buyers discovered the home had inadequate drainage to prevent water from entering the home during normal rainfall and had experienced flooding due to inadequate drainage for years. Based upon these discoveries, the buyers sued the real estate representative for violations of the Deceptive Trade Practices Act, statutory and common-law fraud, fraud by nondisclosure, negligence and negligent misrepresentation. The buyers also sued the real estate team for negligently failing to advise them the Seller's Disclosure Notice was deficient. The real estate team moved to dismiss the suit, and the trial court granted the motion. 

The appellate court concluded the buyers’ pleadings established the duty element of their negligence claim, after the real estate team conceded that it had a duty to alert the buyers to the seller’s failure to provide the required explanation in the Notice. Additionally, the court determined that the team’s acts or omissions were a substantial factor in bringing about buyers’ damages, establishing proximate cause. The appellate court reversed the trial court’s judgment dismissing the claim and remanded the case for further proceedings. 

Statutes and Regulations

Indiana

Indiana amended a statute related to its disclosure form by replacing “approved inspector” with “qualified inspector” certification in connection with controlled-substance contaminated property. 1

Volume of Materials Retrieved

Property Condition Disclosure issues were identified four times in four cases (see Tables 1 and 2). The cases addressed structural defects, and other issues. One statute related to property condition disclosure issues was retrieved but no regulation was retrieved this quarter (see Table 1).


1Ind. Code § 32-21-5-7 (2018)

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