DISCLOSURE AND SAVING FOR A RAINY DAY

You buy the house on Monday, and by Tuesday the upstairs tub starts leaking.

Purchasing a used home is certainly an important part of the American dream. Millions of Americans scrape together their savings in order to come up with a down payment. And when they move in, they don't want the euphoria to end.

For most it doesn't.

But while with homeownership comes the expected mortgage payments, insurance payments, and costs of home maintenance, there are unexpected exceptions.

It's the unexpected that can push home purchasers into financial distress. While most unexpected costs are beyond anyone's control, the subject of this article are those expenses that were truly unanticipated by the purchaser, not by the seller.

For some reason, upstairs bathtubs seem to be a common villain. But plumbing leaks of all types, as well as mold conditions and leaking roofs are certainly high up there. What I'm talking about are problems of which the seller knew of before the closing, but which were hidden from the purchaser. Perhaps negligently concealed, perhaps intentionally concealed.

So what of the leaky bathtub upstairs?

Repairing this will cost thousands of dollars. Sheetrock will have to be torn off, a plumber will have to investigate and identify the source, plumbing will have to be put into place, and then the entire area will have to be restored. The price of repairs will vary on how much you know how to do or how much you'll have to pay a professional. It will also depend on the cost of supplies at that time and how high end you need to go. In some extreme cases, it could cost as much as $5 to $10 thousand dollars.

This is just one example. Obviously, there are no limits to the number of instances in which sellers have failed to disclose hidden problems that become apparent only after the purchase. It might be a leaking roof after the first post closing rain fall, a leaking pipe after the first post closing bath, or the appearance of mold when lights are turned on for the first time in the attic (something a home inspection would surely catch).

In all cases, the question is: What legal rights do these home purchasers have?

Of course, the first place to begin this inquiry is an evaluation of the contract and of local state law concerning issues of misrepresentation. Presumably, the contract provides that the purchaser had a reasonable opportunity to conduct an inspection of the home. And further that the purchaser is accepting the home in as is, where is condition.

As is, where is condition, or similar language, means that the purchaser is taking the property in its existing condition. If there are defects, usually the seller has no liability for them.

Usually, but not always. Where a defect is difficult for the purchaser to find prior to closing, and where the defect was intentionally hidden by the seller, the seller may have legal exposure.

You will need to consult with a local lawyer to determine what your rights might be in a particular case. But often, the litmus test seems to be whether the purchaser could have detected this problem had the purchaser engaged in a reasonable inspection of the home.

If the defect is considered to be "latent," in other words, one that is not reasonably discernible through a proper home inspection, then there is a possibility that the seller will be liable to the purchaser for costs associated with the repair. A local lawyer who understands real estate law in your jurisdiction will help you determine the extent of your rights, if any.

And the law may go beyond that. There may also be a question of whether or not this omission of information was intentional. In other words, did the seller attempt to defraud the purchaser by hiding this defect. In certain jurisdictions, this scenario may make the seller liable for punitive damages and attorneys fees.

Not only are remedies available under traditional state law, but many states have consumer fraud statutes that also apply to these circumstances. They may also provide for punitive damages and for the recovery of attorney's fees.

In conclusion, purchasing a new home is full of excitement and anticipation. Purchasers have to understand that even under the best of circumstances unexpected costs will occur.

However, no purchaser should have to put up with paying for something that was intentionally concealed by a seller. When that happens, and where the costs to the purchaser are substantial, it might be appropriate to seek legal advice from an attorney who understands the law in your particular state regarding these issues.

Published: August 31, 2006

By Stuart Lieberman
Realty Times