Property Condition Disclosure Highlights: 2Q 2017

The first Property Condition Disclosure case discussed below covers familiar territory – the failure to disclose water damage on the property.  In that case, the sellers were also licensees who handled the real estate transaction.  The other case involves the licensee’s failure to accurately describe beach access on the property. There, the court originally found in favor of the licensee, finding that the buyer did not justifiably rely on the licensee’s statement; but the court reconsidered its determination and reversed the judgment it had entered in favor of the licensee.

A.         Cases

1.         Basso v. Campos, 2017 WL 2291414 (Md. Ct. Spec. App. May 25, 2017)

Testimony of home inspector might establish that licensee-sellers had knowledge of flooding on the property during the time licensee-sellers owned the property.

The home purchaser sued the sellers of the home, who were also real estate licensees with the broker Campos & Associates Realty, for misrepresentation.  The licensees bought the home as a foreclosure, remodeled it, and then sold it to the plaintiff.  Within weeks of the closing, the purchaser’s basement flooded and it continued to flood regularly in the following months and years.  The purchaser claimed the licensees had actual knowledge of previous flooding in the home and tried to conceal defects. 

The purchaser sued the broker for negligent supervision and vicarious liability.  After a jury trial, the court granted the defendant’s motion for judgment, finding that the purchaser failed to show the licensees had knowledge of water, flooding conditions, or a wet basement during the time in which they held title to the property. 

At trial, the court did not allow a home inspector to testify on the purchaser’s behalf regarding his opinion as to whether the house would have flooded previously and during the renovation period.  On appeal, the purchaser argued that the trial court wrongly excluded the testimony of the home inspector.  The appellate court determined that exclusion of the evidence was prejudicial error.  The judgment for the real estate defendants was reversed, and the case was remanded for further proceedings.

2.         9826 LFRCA, LLC v. Hurwitz, No: 3:13-CV-01042-L-JMA, 2016 WL 8922256 (S.D. Cal. Aug, 10, 2016), modified on reconsideration, 9826 LFRCA, LLC v. Hurwitz, No.: 3:13-CV-01042-L-JMA, 2017 WL 1885668 (S.D. Cal. May 9, 2017)

Seller’s representative could be liable to purchaser for alleged misrepresentation regarding private access to beach.

The seller’s representative informed the purchaser that the property included private access to a beach.  Upon learning that the access was shared with others, revocable, and located half a mile from the property, the purchaser sued the representative for misrepresentation, fraudulent concealment, and negligence.  The trial court originally granted the representative’s motion for summary judgment on the misrepresentation claims, finding that the purchaser could not have justifiably relied on the representative’s statement because the purchaser was a sophisticated party, had inspected the property, and the title report did not mention beach access.  The court denied summary judgment on the negligence claim.

On a motion for reconsideration, the real estate representative argued that the lack of justifiable reliance should also bar the purchaser’s claim for negligence.  The court denied the representative’s motion for reconsideration on the negligence claim.  Going further, the trial court reconsidered and reversed its earlier decision that the purchaser could not have justifiably relied on the representative’s misrepresentation.  Upon reconsideration, the court found that a reasonable jury could conclude that purchaser’s reliance was justified.  Thus, the purchaser’s claims should proceed to trial.          

            B.         Statutes and Regulations

Maine

The seller’s disclosure to purchasers must describe the means of accessing a property by a public way and any means other than a public way, if known by the seller.[1]

Texas

Texas modified the Seller’s Disclosure Statement to indicate that property may be located near a military installation and may be affected by high noise or air installation compatible use zones.[2]  The Disclosure Statement also states that information regarding air installation compatible use zones can be found online.[3]

Pursuant to a new statute, a person who is selling an option or assigning an interest in a contract to purchase real property must disclose to potential buyers that the person is selling only an option or assigning an interest and does not have legal title to the property.[4]

C.         Volume of Materials Retrieved

Property Condition Disclosure issues were identified 3 times in 3 cases (see Tables 1, 2).  The cases addressed Mold and Water Intrusion and Other Issues.  Three statutes and two regulations regarding Property Condition Disclosure issues were retrieved this quarter (see Table 1).