Defenses Against Claims of Misrepresentation on a Seller’s Property Disclosure

In a previous article, I wrote about the importance of the Seller’s Property Disclosure and the consequences of concealing or misrepresenting information on the Disclosure. In this article, I want to focus on a home seller’s defenses to accusations of concealment or failure to disclose accurate information.

When selling your house, you are required to fill out a Seller’s Property Disclosure. This sounds simple enough, but there are dangers lurking. When incorrect information appears on a Seller’s Property Disclosure, it can lead to legal consequences, particularly if the buyer incurs damages. However, several defenses can help reduce or avoid liability.

A Simple Error

One primary defense is that the error was an innocent mistake. Sellers can argue they genuinely believed the information was accurate at the time of disclosure and took reasonable steps to verify it. This might include hiring professionals to assess the property. For example, if a seller discloses the roof is in good condition based on a recent inspection, this supports the argument of an innocent mistake.

Lack of Knowledge

Sellers might claim they were unaware of the defect at the time of disclosure. This defense is relevant for hidden defects not discoverable through a reasonable inspection, such as structural damage inside walls. If a defect is not observable and the seller had no reason to suspect it, they can argue they did not knowingly provide false information. Keeping records of inspections can support this claim.

Disclosure of Uncertainty

A way that sellers can protect themselves in the first place is by disclosing uncertainty about certain information. Indicating “not sure” or “unknown” on specific questions shows the seller did not knowingly provide false information. For instance, stating uncertainty about the age of the electrical system can prevent allegations of misrepresentation. Transparency about uncertainties can show good faith and reduce liability risk.

Buyer’s Knowledge

If the buyer knew of the inaccuracies or defects before closing the sale, the seller can argue the buyer assumed the risk. This defense can be supported by inspection reports, written communications, or acknowledgment forms. For example, if an inspection report highlighted foundation issues not on the disclosure and the buyer proceeded with the purchase, the seller can argue that the buyer accepted the property with full knowledge of its condition.

As-Is Clause

When the property is sold “as-is,” the seller might contend the buyer accepted the property in its current condition, including any defects. This is often included in the sales contract, indicating the buyer agrees to take the property without expecting repairs. However, this defense may not hold if the seller intentionally concealed known defects, such as a serious mold problem. Moreover, the “as is” clause may not protect sellers unless the Seller’s Property Disclosure is incorporated into the agreement of sale.

Statute of Limitations

Sellers might invoke the statute of limitations, which sets a time limit within which the buyer must bring a claim for misrepresentation. This period varies by jurisdiction. In Pennsylvania, the statute of limitations is normally 2 years for failure to disclose but may be extended depending on whether the buyer knew or should have known of the concealment, misrepresentation, or other inaccuracy. If the claim is made after this period, the seller may have a valid defense. Sellers should be aware of the specific statute of limitations in their state.

Buyer’s Negligence

Sellers might argue the buyer’s negligence contributed to the issue. This defense suggests the buyer did not take appropriate steps to protect themselves, such as failing to conduct an inspection. For example, if an inspection report indicated termite damage and the buyer did not investigate further, the seller can argue the buyer’s inaction contributed to their damages. This can reduce the seller’s liability.

Materiality

Sellers can argue the incorrect information was not material to the buyer’s decision to purchase the property. Materiality refers to whether the misinformation significantly affected the property’s value or the buyer’s decision. For instance, if a seller misstated the garage’s square footage but this detail did not influence the purchase decision, the error was probably immaterial. Demonstrating that the misinformation did not impact the buyer’s decision can weaken the claim.

Waiver or Release

If the buyer signed a waiver or release form acknowledging the seller’s disclosures and agreeing not to pursue claims for certain issues, this could serve as a defense. These forms indicate the buyer accepts the property in its disclosed condition and releases the seller from future claims. For instance, if a buyer signed a release form after being informed of a minor roof leak, the seller can use this document to argue the buyer agreed not to hold them liable for this issue.

Conclusion

Sellers facing claims of misrepresentation on a property disclosure have several potential defenses. Demonstrating an innocent mistake, lack of knowledge, or seller’s awareness, among other defenses, can mitigate liability. It’s crucial for sellers to consult with a real estate attorney to understand the specific defenses available and the best strategies for presenting their case. Proper documentation and transparency throughout the selling process are key to protecting against potential claims.

 

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