Property Condition Disclosure Highlights: 2Q 2016

A. Cases

Most of the cases below involve allegations of the licensee’s failure to disclose water intrusion or damage. In one of those cases, the court found that the licensee could be held liable if he or she had knowledge of the water problems. Interestingly, two of the cases discussed below involve allegations against a seller who was also a licensee.

1. Li-Conrad v. Curran, No. 2015-L-085, 2016 WL 1421312 (Ohio Ct. App. Apr. 11, 2016)

Neither licensees nor a real estate firm were held liable for their failure to disclose defects in the property’s foundation.

A home purchaser sued the sellers, the sellers’ real estate firm, and the licensees who represented the sellers in the transaction for alleged fraud, misrepresentation, and unfair trade practices. At issue was the claimed failure to disclose a crack and dampness in the foundation of the house. The trial court granted summary judgment for the sellers, licensees, and real estate firm.

The appellate court affirmed the judgment. According to the court, the negligent misrepresentation claim fails because the real estate defendants did not owe a fiduciary duty to the purchaser as they were on opposite sides of the transaction. With respect to the fraudulent misrepresentation claim, the as-is clause in the real estate contract relieved the seller of the duty to disclose. Furthermore, the purchase agreement contained a clause indicating that the purchaser had three days after inspection to notify sellers of any problems, or the problems would be waived. By accepting the property after inspection without notification of these problems to the sellers, the purchaser accepted the property as-is. There was also no evidence that the sellers were aware of the problems with the foundation. Finally, the unfair trade practices claim failed because the Ohio Consumer Sales Practices Act does not apply to pure real estate transactions.

2. Kessler v. Schwarzman, No. FSTCV1450142985, 2016 WL 1728000 (Conn. Super. Ct. Apr. 12, 2016); Kessler v. Schwarzman, No. FSTCV1450142985, 2016 WL 1728000 (Conn. Super. Ct. Apr. 12, 2016)

Although the seller-licensee could be liable for failing to disclose defects in home, the buyers’ representative had no knowledge of defects and was not under a duty to investigate.

Purchasers were represented by a licensee who worked at the same brokerage firm as the seller of the property, who was a licensee and acted as the listing broker. The purchasers alleged that both licensees made misrepresentations about the property relating to various issues in the home, including cracking and upheaval in the foundation concealed with carpeting and the existence of “all new piping throughout the house.” Both licensees filed separate motions for summary judgment.

With respect to the purchasers’ representative, the court found that most of the alleged misrepresentations were not statements made by her, and the one statement attributable to her—that she “couldn’t imagine that [the other licensee] did anything cheaply”—was an opinion. There was no evidence she had knowledge of any facts that she did not disclose, and she was under no duty to investigate simply because she transmitted the listing to the purchasers. The court granted summary judgment in favor of the purchasers’ representative.

The court reached the opposite conclusion with respect to the seller-licensee. The as-is clause did not negate the purchasers’ claims, and the allegations of the complaint suggested statements made by the seller-licensee could be actionable misrepresentations. The seller’s motion for summary judgment was denied.

3. Hoang v. Gilbert, No. 01-15-00681-CV, 2016 WL 1470036 (Tex. Ct. App. Apr. 14, 2016)

Licensee was not liable for failure to disclose insurance claims related to flooding, but could not recover attorneys’ fees for defending against the suit.

After purchasing a home, the buyers discovered extensive water damage and learned that the sellers had made insurance claims for several flooding events which had not been disclosed to them. The buyers sued the sellers and sellers’ representative for fraud, conspiracy, and deceptive trade practices. The licensee counterclaimed for breach of contract, alleging that buyers breached a provision in the closing agreement in which the buyers agreed to hold the licensee harmless from any and all liability concerning the condition of the property, and seeking attorneys’ fees for her costs in defending the lawsuit.

A jury found the sellers liable for fraud and deceptive trade practices, but rejected the buyers’ claims against the licensee. With respect to the licensee’s counterclaim against the buyers, the jury found that the buyers breached the hold-harmless provision. Ultimately, however, the court entered a judgment notwithstanding the verdict in favor of the buyers and did not award attorneys’ fees to the licensee. On appeal, the court held that the contract provision was a defense to suit, but did not support an affirmative claim for relief. The trial court judgment was affirmed.

4. Chinniah v. Sheehy, No. CV146045873, 2016 WL 2956059 (Conn. Super. Ct. May 9, 2016)

Purchaser presented evidence sufficient to suggest that the seller-licensee might have had knowledge of water problems at the property.

Purchaser alleged that the seller, who was also a licensee, failed to disclose water problems in the basement of the property. The licensee moved for summary judgment on the ground that there was no evidence of a water problem, nor any evidence that the licensee had knowledge of a defect or water problem. The court held that the purchaser presented evidence, such as the proposal by a contractor to install a water drainage system along the perimeter of the basement, which suggested the seller might have had knowledge of the water issues. Summary judgment was therefore denied.

B. Statutes and Regulations


Nebraska amended its Seller Property Disclosure Statement, to be used beginning January 1, 2017. The revised form adds disclosures regarding the number of carbon monoxide alarms and whether the seller has been notified by the Noxious Weed Control Authority of the presence of noxious weeds on the property in the past three years.

C. Volume of Materials Retrieved

Property Condition Disclosure issues were identified 14 times in 12 cases (see Table 1). The cases addressed mold and water intrusion, underground storage tanks, structural defects, and other issues. One regulation regarding Property Condition Disclosure was retrieved this quarter.

Neb. Admin. R. & Regs. 302.1.001 (2016), Nebraska Real Estate Commission, Seller Property Condition Disclosure Statement.

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.


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State Law Based Changes

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