Introduction
Disclosure of the condition of a residential property has been evolving in its requirements for sellers of real estate. The law reflects the dynamic tension between sellers who are not motivated to stress the less attractive aspects of the house, and buyers who want to know all the negatives, often to be used as a negotiation tactic.
The legal climate today has moved away from the caveat emptor philosophy (“let the buyer beware”) toward placing more responsibility on the seller to disclose relevant information to the buyer, including issues of property condition, environmental issues, and even stigmas which may affect the value or livability of the house itself.
Since there is no national standard or federal legislation (with the exception of the lead based paint disclosure) disclosure law in the sale of residential real estate is affected by myriad state and local laws.
Looking at recently enacted laws and court cases clearly illustrates the direction toward ever-increasing seller disclosure responsibility. However, although the trend is away from strict caveat emptor, there are still many court cases which invoke at least a part of the theory by placing the burden on the buyer, especially for obvious or non-concealed defects. Perhaps the situation can best be described as revealing a shift from “buyer beware” (caveat emptor) to “buyer take care”.
Current Trend Indicators
The most significant trend in disclosure has been the adoption by at least 33 states of mandated property condition disclosure forms. These forms are a required part of the home sale transaction, and are generally quite comprehensive; in fact, many are more stringent than the common law requirements.
Most disclosure issues involve the physical condition of the property, or the ownership and title issues regarding it. There are other, intangible issues which are coming to the public’s awareness and which could potentially affect the value of a residence. These fall under the rubric of “stigmatizing factors” and include, for example proximity to registered sex offenders, AIDS, murders, or other deaths in the house, and similar public notoriety factors.
Disclosure: Application
Fortunately, many of these new problems can be easily dealt with by the application of seller disclosure. Disclosure law is an information requirement. No state requires that sellers of previously owned residential real estate sell a "perfect" property; the only requirement is that the seller disclose structural and other property defects. There is nothing legally preventing a buyer from purchasing a home with myriad defects, so long as they were known prior to the sale.
In employee home purchase programs, there are varying degrees of employer or relocation management companies’ exposure or responsibility for property condition disclosure, depending on the type of transaction. Please see the complete Property Condition Disclosure article for details and guidelines to follow for
- "Regular" or Inventory Home Sale Transactions
- Amended Value Transactions
- Direct Reimbursement Program s
New Problems and Solutions
Court decisions and new legislation reflect the fact that the complexities of residential real estate transactions are being driven by consumer expectations. Policies must be updated continually to reflect these changes and to minimize the cost and liability for each relocation transaction.
"Unhealthy Home" Issues
The unhealthy home concerns also are primarily risk assessment issues. They are mainly pollution-based and may not directly be the fault of any identifiable defendant. They may arise from general atmospheric pollution, water, natural substances, or from previously acceptable building practices. Their common denominator is that, to some degree, they can allegedly cause illness.
The existence of mold, asbestos insulation, lead paint, and radon in water are good examples of risk assessment issues. In each of these cases, there are no government-sanctioned "safe" levels of exposure. Yet, each represents some degree of health risk to the persons living in the home.
As the public becomes more aware of the dangers or alleged dangers, of radon, asbestos, mold, and a host of other toxins, the duty of disclosure will become more stringent. The potential for liability is exacerbated by the fact that for the most part, these toxins are not easily discoverable on inspection, are or may be capable of causing disease, and may cost significant amounts to remove or abate. In essence, these concerns raise the ante in disclosure-related claims. Some of the “unhealthy home” disclosure issues discussed at length in the full article are:
- Asbestos Insulation and Building Materials
- Mold Infestation
- Radon
- Landfills and Toxic Waste Sites
- Effects on the Law of Disclosure of Environmental Hazards
Intangible, Demographic, or Stigmatization Factors
The disclosure issues discussed above have involved physical or legal aspects of the property. However, there are other intangible, demographic or stigmatization factors which may have to be disclose, or which, in some states cannot be disclosed. Some of these issues include:
- Megan’s Law and Disclosure
- Stigmatized Property (murders, suicides, environmental or construction factors, etc.)
What Can Be Done to Limit Liability?
What can be prudently done now in order to forestall the possibility of this liability? The answer is simple: proper disclosure.
Please see the discussion in the full article to learn how employers and relocation management companies can avoid the legal pitfalls caused by the changing aspects of disclosure law, and the transferee can be assured that no liability or lawsuits will arise out of the move.
For a more complete discussion of property condition disclosure requirements, please see the complete article.