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Property Condition Disclosure Highlights: 1Q 2014

May 5, 2014

A. Cases

  • Etelson.11 Condominiums on the top floors of a high-rise building overlooking the Hudson River were marketed as having spectacular views of the Manhattan skyline. None of the marketing materials or the model or painting in the developer’s office disclosed that the developers planned to build an additional high-rise that would block the view. The marketing materials stated that the painting was an “artist’s impression” and was not necessarily accurate. The real estate agents who worked for the defendants and showed the properties did not disclose the plan to build another building; they testified at trial that they did not know about the plan. The plaintiffs, who had bought condos on the upper floors for a significantly higher price, sued the developer and related entities alleging common-law and statutory fraud and other claims. They recovered a verdict of $4,817,638.12, which represented the total of the plaintiffs’ purchase prices (trebled under New Jersey’s consumer fraud act), prejudgment interest, and attorneys’ fees. The verdict was affirmed on appeal.
  • Boulder Skies.12 In Boulder Skies, the broker owned both the property, which had an access easement (the “servient” property), and the property that benefitted from the easement (the “dominant” property). The broker sold the dominant property, believing that a road through a neighboring national forest provided access. He then built a house on what he thought was the servient property. As it turned out, the boundary line was not where the parties thought it was (there was a mistake on the original government section map and surveyors from the U.S. Forest Service later moved the property line). The house, its leach field, and a water tank were mistakenly built on the dominant property. Further, the forest road access, though it was on the map, was impassable. Serious disruptions arose between the seller/broker and the buyer and the buyer sued. The court concluded that the broker did not owe the buyer any duty merely by being an adjoining landowner. The broker’s duty arose from his status as a real estate broker, and that duty was restricted by the terms of the purchase agreement.
  • Zhu..13 The Zhus bought a house that had 755 square feet less than had been represented to them by their agent. The agent had relied on the representations of the listing broker. The Zhus sued their agent for breach of fiduciary duty and misrepresentation. Zhu remarked during the showing that the space seemed smaller than the square footage stated, but the buyers’ agent restated the wrong square footage and explained that it seemed smaller because the house had an open floor plan. The trial court granted the agent’s motion for summary judgment because there was no evidence that the agent knew the actual square footage and was not required to measure or investigate the square footage. The court also pointed out that the buyers were not able to prove that they suffered any compensable damage. The ruling was affirmed on appeal.
  • Hubbard Family Trust. 14 Discussed in Agency section above.
  • Saffie.15 Discussed in Agency section above.
  • 9826 LFRCA, LLC.16 Discussed in Agency section above.

B. Statues and Regualtions

  • Indiana has modified its property condition disclosure form to require disclosure of methamphetamine production or dumping the waste products of methamphetamine production on the property.17
  • Pennsylvania has enacted the Carbon Monoxide Alarm Standards Act, a provision of which requires the seller of a residential property to disclose information as to whether carbon monoxide detectors have been installed on the property.18

C. Volume of Materials Retreived

  • Property Condition Disclosure Issues were identified eighteen times in twelve cases. (See Table 1.) (Some cases addressed more than one Property Condition Disclosure issue.) Most of the cases addressed Boundary issues, which includes disputes over square footage, easements, and similar situations involving the size of the property or its rights. Other issues addressed more than once include Structural Defects, Off-site Adverse Conditions, Pollution/Environmental Other, and Property Condition Disclosure: Other. (See Table 2.) One statute and one regulation addressing Property Condition Disclosure Issues were retrieved.19

11 Etelson v. Shore Club S. Urban Renewal, L.L.C., A-0570-11T4, 2014 WL 901942 (N.J. Super Ct. App. Div. Mar. 10, 2014).

12 Boulder Skies Ltd. P’ship v. Prazma, No. D061973, 2014 WL 1087875 (Cal. Ct. App. Mar. 30, 2014). See also Kloster v. Roberts, No. 30546-5-III, 2014 WL 470742 (Wash. Ct. App. Feb. 6, 2014) (after buying property and being denied use of neighbors’ driveway, plaintiffs learned it would cost $20,000 to build an alternate access to the property; not all of the neighbors agreed to sign the plat map to dedicate part of the land for a driveway; no liability for sellers’ broker because the broker did not make any representations about access and the buyers should have investigated the situation more thoroughly).

13 Zhu v. Lam, No. 14-13-00368-CV, 2014 WL 1028485 (Tex. App.–Houston [14th Dist.] Mar. 18, n.w.h.).

14 Hubbard Family Trust v. TNT Land Holdings, LLC, 2014-Ohio-772, 2014 WL 858363 (Ct. App. Feb. 25, 2014).

15 Saffie v. Schmeling, 224 Cal. App. 4th 563, 168 Cal. Rptr. 3d 766 (2014)

16 9826 LFRCA, LLC v. Hurwitz, No. 13 cv 1042L(JMA), 2014 WL 925457 (S.D. Cal. Mar. 10, 2014).

17 Ind. Code § 31-21-5-7(2) (2014) (Pub. Law 180, § 5; HEA 1141).

18  Penn. Pub. Acts ch. 121, § 4 (2013) (SB 607) (not yet codified).

19 See note 10, above, regarding the coverage of this update.