Spring is in the air, and it's time for the residential real estate market to take off. A house can be a home, but it is also a legal asset, and both buyers and sellers need to be aware of potential defects in that asset.
Buying or selling a house is one of the largest financial transactions the average person undertakes in a lifetime.
In Pennsylvania, the sellers of a house are usually required by law to disclose the condition of that home. This real estate seller disclosure law, also known by the acronym RESDL, applies to most transfers of residential real estate in Pennsylvania.
Where applicable, the law requires a seller to disclose to a buyer all known “material defects” about the property being sold that are not readily observable. These defects could be anything from a crack in the foundation or damage to the roof, or any system or structural element in between – any problems with the property that could notably lower its value.
To facilitate disclosure of defects, the state Real Estate Commission has produced a form of disclosure that is widely in use throughout Pennsylvania. In each qualifying sale, the seller needs to fill out the form indicating to the buyer his or her knowledge of the systems and structural elements in the home.
Often, homebuyers obtain a home inspection to help understand just what might need to be fixed in a house they are buying.
Disappointed homebuyers sometimes sue inspectors as well as sellers when the buyers discover some defect after closing.
Home inspectors need to be aware of their potential liability and defenses and draft their contracts accordingly.
One advantage inspectors have is that their obligation is ordinarily only to perform a noninvasive, visual inspection which could not reasonably discover latent defects.
Naturally, any number of systems in a home will decline with age and need to be replaced.
While a buyer needs to consider how soon a roof, heat pump or other major system might need to be replaced, the mere fact that some system or portion of a home is at or beyond its useful life is not a material defect which requires disclosure.
Essentially, the buyer is relying on the seller's statements, so the seller must use the best information available to him.
The seller's disclosures need to accurately reflect the seller's knowledge at the time, and if the seller later learns of a change to the disclosures prior to closing on the sale, the updated information also must be disclosed.
Conflicts creep in when, after closing, the buyers discover some problem they believe the seller must have known about but which was not disclosed. In these cases, buyers sometimes sue the sellers, seeking to recover the cost of repairing the undisclosed defect.
Sellers can be liable for the loss the buyer suffered where the seller failed to make the disclosure – intentionally or negligently. In the event of clear fraud, the seller may even be liable for additional damages.
However, a seller is not liable for failure to disclose a defect if he didn't know about it. Thus, these lawsuits often turn on “he said/she said” disputes about whether the seller had truly noticed – or not – a defect during his time in the house.
Even where a defect was not disclosed by the seller, if the buyer learned of it pre-closing through, for example, a home inspector's report, then the buyer wasn't truly fooled and the seller would have a defense.
Because these lawsuits tend to be highly fact-specific, they often can trigger the mandatory mediation clause found in the standard agreement for the sale of real estate.
Any lawsuit under RESDL must be brought within two years of settlement on the real estate. Actions against home inspectors have an even shorter one-year statute of limitations.
The sale of a house creates many opportunities for friction. Given the large dollar amounts which can be involved, many people turn their eyes toward the law.
Carefully evaluating your options and legal rights is essential, whether you are the buyer or the seller.
Joshua A. Gildea is a shareholder with Fitzpatrick, Lentz & Bubba PC (www.flblaw.com) of Upper Saucon Township. His practice includes construction law, commercial litigation, bankruptcy and intellectual property and he has wide-ranging experience litigating real estate seller disclosure law claims. He can be reached at email@example.com or 610-797-9000, ext. 389.