But The Seller Lied… | Guest Blog by California Attorney
Following Up on Home Inspection to Verify Seller Disclosures
While we’d all love to think that every seller will choose to provide comprehensive disclosures to their prospective buyers, unfortunately this is not always the case. In some cases the seller and buyer may disagree on whether certain terms and information were sufficient.
“In his 35 years of practice, David Hamerslough has litigated and arbitrated residential and commercial real estate disputes on behalf of brokers and agents, buyers and sellers, and landlords and tenants. Dave also acts as a mediator and arbitrator of real estate disputes.” With decades of experience in real estate litigation, David Hammerslough provides insight into how each party might feel about a small oversight, which can potentially lead to litigate.
But The Seller Lied…
Buyers have closed escrow and are introducing themselves to their new neighbor. The neighbor asks the buyers whether the sellers disclosed that during the listing of the property, a garden hose was run from inside the house out through the front window to discharge water from the crawlspace.
The buyers review the sellers’ disclosures, but there was no mention made of this event. The sellers’ TDS disclosed that with very heavy rain, the back patio could collect water, but a sump pump would drain it and that there was a drainage system to the street that was adequate in all but very heavy ongoing rains (once every 20 years). The sellers’ supplemental disclosure stated that there was water standing on the back patio and under the house during extreme wet weather but added that most years, it was not a problem at all.
The home inspection report indicates that there is efflorescence on the crawlspace walls but does not identify any issue with the foundation itself.
The buyers start to investigate and learn that during the sellers’ 30 years of ownership, they had five or six other instances when they needed to run a garden hose from the crawlspace access opening through the front window of the home in order to discharge water that had collected in the crawlspace, similar to what had occurred during the listing.
The buyers retain a geotechnical engineer, who advises them that a subsurface drainage system across the rear of the property is necessary so that any water that might reach the rear wall, the foundation of the house, or the crawlspace can be collected and then discharged with drain lines on the sides of the house. The geotechnical engineer tells the buyers that the drainage system the sellers disclosed only ran on the right-hand side of the house, not across the rear of the house, and discharged only water that collected at the right rear corner of the house where the pipe started.
The buyers make a claim against the sellers for misrepresenting the history of the property with respect to water issues, the alleged adequacy of the sump pump and drainage system, and failing to disclose the history of having water enters the crawlspace and the need to discharge that water using a garden hose running from the access opening out through the front window, etc.
The sellers respond to the buyers’ claim by making the following arguments: (1) the essential facts related to water collecting at the rear of the property and under the house in very significant rainfall and how the sellers addressed that situation were disclosed; (2) this disclosure, along with the identification of efflorescence in the crawlspace, indicated that historically water had entered the crawlspace, and the buyers, therefore, had an obligation to investigate this issue; (3) the buyers failed to investigate this issue, failed to make any inquiry of the sellers regarding any of the facts that were disclosed, and failed to retain the services of a geotechnical engineer before escrow closed as recommended in the advisories they received; and (4) a letter the buyers submitted with their offer indicated that the buyers had owned a home previously that had drainage issues and they would be comfortable purchasing the home.
Based on these facts, it certainly appears that the sellers have liability for failing to make a full and complete disclosure of all material facts relating to water and drainage issues
The buyers are demanding to be compensated for all costs associated with the installation of the new drainage system, as well as their attorneys’ fees and costs.
The buyers also argue that they would never have bought this property had they known all of the facts or would have requested a price reduction equal to the cost of the necessary drainage work. The sellers respond by stating that there were multiple offers, the buyers were very motivated because they had previously lost out on purchasing a home, and that the buyers accepted the drainage issues on the basis of the letter they submitted with their offer. The sellers also point out that the property has increased in value since the purchase and that if the buyers really would not have purchased this property had they known these facts, then they should demand rescission.
The sellers also learn that the buyers have some experience in construction, they previously owned a home with a sump pump and acknowledge that a sump pump is not a permanent solution to any issue of water intrusion, and they acknowledge that a permanent solution to water intrusion is a properly engineered and installed subsurface drainage system. The sellers also argue that the buyers would not have done anything different had they been told the additional information because the buyers never investigated any of the information they were provided or any of the issues they knew about. The sellers contend that the buyers would not have changed their position in reliance on any additional information.
Other facts and arguments were raised and asserted by each party, but the foregoing gives you a general flavor of the positions being taken by the buyers and sellers. Cases of this nature can be challenging, especially when the buyer and seller lock in on only one of four elements of a misrepresentation claim.
There are four elements to a claim for misrepresentation…
