Your home is your sanctuary. Unfortunately many prospective sanctuaries are riddled with conditions or post-closing problems that ultimately lead to litigation. Below is a list and an explanation of possible causes of action related to a home purchase when the property condition post-closing becomes at issue.
Breach of the Implied Warranty of Inhabitability
Under the Implied Warranty of Inhabitability, a seller, builder or a landlord can be held liable for latent defects that render a house unfit. A latent defect is one that can be reasonably viewed with the common eye. Potential plaintiffs to these actions are the purchasers and homeowner associations. Defendants in these actions could be the buyer or the seller of the residence and those who were responsible for building the home.
Breaches of the Implied Warranty of Inhabitability can happen in or around a residence. Examples of this warranty include unbearable odors, cracked floors in your home, insects or lack of adequate heating or cooling or problems with your septic system. If the buyer finds that their home contains any sort of problem that you find intolerable, give Sherwood Law Group a call immediately! These breaches must be reported within a reasonable time or you might not be properly compensated for your efforts to combat the breaches.
However, if the buyer does report the uninhabitable condition within a reasonable time, the buyer will be entitled to remedies from the defendants. The buyer will have four options:
(1) The buyer can move out and terminate the lease or
(2) The buyer can repair the condition and deduct the repair price from the rent due under the lease or
(3) The buyer can reduce or withhold rent until a court determines what would constitute a fair reduction of the rent due to the condition. (Although, a court would require the tenant to put the rent money in escrow until such a determination can be made) or
(4) The buyer can keep the lease going under the same conditions and sue for monetary damages caused by the breach of the Implied Warranty of Inhabitability.
Breach of Express Warranty
An express warranty is any condition that a seller promises to a buyer about the home. Express warranties essentially become part of the sales contract. Therefore, if a seller breaches an express warranty, the buyer can bring a cause of action against the seller for breach of contract. The buyer’s damages will be measured by the repair costs that you incur. Again, it is important to bring this problem to the Sherwood Law Group as soon as these breaches are discovered because the time for filing a lawsuit must be reasonable.
Negligent misrepresentation in property usually means that the seller made a false statement of material fact that has the effect of inducing buyer into a contract. In this type of action, the seller must have the intent to lie about the condition of the home and the intent to induce the buyer to rely on the statement. The buyer must have believed the representation and reasonably relied on that misrepresentation and, as a result, the buyer has suffered damages. The measure of damages is the difference between the price paid by the plaintiff and the true value of the residence at the time of the purchase.
Common Law Fraud
Common Law Fraud is a more serious variety of negligent misrepresentation. In the United States, common law generally identifies nine elements that are needed to establish fraud: (1) a representation of fact; (2) its falsity; (3) its materiality; (4) the representer’s knowledge of its falsity or ignorance of its truth; (5) the representer’s intent that it should be acted upon by the person in the manner reasonably contemplated; (6) the injured party’s ignorance of its falsity; (7) the injured party’s reliance on its truth; (8) the injured party’s right to rely thereon; and (9) the injured party’s consequent and proximate injury. In real estate, common law fraud is usually created by the seller giving a direct untrue statement to the buyer as to the condition of the home. A direct false statement as well as omitting important qualifying information about the home will be considered fraud as well. Damages that can be recovered for common law fraud will usually be the difference between the sale price and the true value of the residence.
Real Estate Broker Breaches of Duty
The buyer will have the ability to exercise legal remedies against their broker if he or she does not exercise good faith, trust, loyalty, skill and full disclosure while working on the buyer’s real estate deal. If the buyer feels that the broker is not conforming to the good faith standard, a buyer may be entitled to the profits that the broker incurred as a result of the broker’s bad faith efforts.
Residential Real Property Disclosure Act
The seller must provide a disclosure report of all possible defects to the seller in accordance with the Residential Real Property Disclosure Act. This report contains 23 essential questions that summarizes the seller’s knowledge of specific defects within the residence. If the buyer does not receive a disclosure report, the buyer may terminate the contract and may file an action for damages as well as attorney costs for any defect on the property that is not disclosed. It is essential to note that the buyer has only one year to bring a claim under the Real Property Disclosure Act or their claim will be waived. Therefore, a buyer must contact their attorney immediately if the buyer does not receive a disclosure report.
Consumer Fraud Act and Real Estate License Act of 2000
Both of these acts establish a fiduciary duty of brokers to promote the buyer’s best interest and not engage in deceitful practices to sell a property. This includes honesty towards a non-client who has not yet signed with the seller. Violations of both of these acts can be used together to cast a wider net of culpability on the seller.
Overall, buying a home can lead to many problems. A buyer must be aware of all the options that they have in order to be fully protected. Sherwood Law Group has an extensive history in protecting and fighting for buyers throughout every step of a real estate transaction both in closing deals and litigating issues post-closing. Please contact our office immediately for further information.