Law Talk with Erin: Real Estate Disclosure Rules and What Really Happens in Litigation- (PART 1)
Home buyers and sellers, this post is for you, so listen up!
Most states, including Tennessee, where I practice, have residential property disclosure laws which require the Seller of a home to provide the Buyer with a Property Disclosure Statement. A Seller has to disclose the condition of the home, as well as any material defects. Buying a home is a huge deal, and disclosure laws are meant to afford a Buyer the chance to make an informed decision about whether or not to purchase the home. Despite the disclosure rules, there are still many cases filed in our court system because of problems discovered in a home after the new owners have moved in.
Each state's rules are different, and you should hire an attorney who has experience in real estate disclosure litigation if you've bought a home and you think the previous owners failed to properly disclose a problem to you. If you aren't sure who to hire, I can point you in the right direction.
As usual, "laws," are lengthy and often complicated, but here are a few of the basics in plain English.
Sellers are required to tell you about the condition of the home, including any “material defects.” What's a material defect? Whether a condition is a material defect is a highly litigated issue and it is a fluid concept open to interpretation. Generally, any fact or condition that might affect a Buyer's decision to buy a house should be disclosed. If you are a Seller, put yourself in the shoes of the Buyer. If you were buying your house, would you want to be told about a certain issue before you bought it? If so, you should probably disclose it. Now, this isn't written into the law, but here's a scenario where you can apply the Golden Rule: treat others as you would like to be treated.
Sellers are only required to disclose based on the info they have. You can't disclose what you don't know. A person selling a house isn't required to have a home inspection, hire experts, or conduct an investigation to discover everything that might be wrong with the home. This is not, however, a license for a Seller to stick her head in the sand and hope no one finds out about a problem.
A Disclosure Statement is not a warranty. A disclosure form is not a substitute for a home inspection. If you are buying a house, you should hire a home inspector and have the home inspected before you buy it. You should not just rely on the disclosure form, regardless of whether you think the Sellers are honest people. Home Inspections usually reveal problems that even the Sellers are unaware of, so it isn't just an issue of honesty. You want to be able to address any problems before you purchase the home.
Sellers are not required to repair. Sellers don’t have to fix the problems they disclose. Say, for example, that you're buying a house and the Seller disclosed that there is a leak in the roof over the guest bedroom. The Seller doesn't have to fix the roof leak. All the Seller has to do is tell you about it. If you want an item repaired, you must contract for it. Both Buyer and Seller must agree on repairs in the sales contract.
Real Estate Agents usually have disclosure duties, too. In most states, there are also disclosure rules that apply to real estate agents. This is why, if you think you have a disclosure problem, you need to find the right lawyer who knows the differences in the rules and where to find the laws that apply to the different players in your case. For example, in Tennessee where I practice, real estate agents aren't subject to the same disclosure rules as Sellers are. But, agents are still required to disclose any “adverse facts” he or she knows about. What are adverse facts? In my state, it means issues that significantly reduce the structural integrity of a home, present a significant health risk , or which have negative impact on the value of the home. As you can imagine, whether or not a condition constitutes an adverse fact is also the subject of many court cases.
There are time limits, a/k/a deadlines, for filing lawsuits concerning property disclosures. Another reason you need to call a lawyer if you think you have a disclosure problem is to find out what your deadline for filing a lawsuit is. The deadlines vary from state to state, and they are called "Statutes of Limitation." If you do not file your lawsuit within the time allowed, you lose your ability to pursue the matter in the legal system. For example, in Tennessee, if you want to file a lawsuit based on the disclosure rules, you must file it within one (1) year from the date you received the disclosure statement or the date of closing, or occupancy, whichever occurs first. There are also other deadlines that could apply. So, call a lawyer sooner rather than later so that he or she can advise you of your legal options.
Over the course of my legal career, I have handled many real estate property disclosure cases. I have represented both Buyers and Sellers. I have also represented Real Estate Agents and Brokers, both on the buying and selling side. In PART 2 of this piece (coming soon!), I'm going to tell you about what really happens when a disclosure problem arises. Based upon my years of experience with these types of cases, I will tell you how you can try to resolve the issue without filing a lawsuit and what you can expect once the case is filed in court and proceeds through the litigation process.
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