If you’ve ever bought or sold a home, you are likely familiar with a very important document called the “Seller’s Property Condition Disclosures.”
If you haven’t bought or sold a home before, here’s the skinny:
The Seller’s Property Condition Disclosure form (“Seller’s Disclosures”) is a document any homeowner who is selling their property is required to fill out detailing any and all known issues with the property. This includes things like whether there were ever remodels or additions made to the home; whether the home was ever used as a rental property; any known problems with the roof, sewer system, electrical system, etc.
As the Seller’s Disclosure form states, in capital letters:
SELLER IS OBLIGATED UNDER LAW, REGARDLESS OF OCCUPANCY, TO DISCLOSE TO BUYERS DEFECTS IN THE PROPERTY AND FACTS KNOWN TO SELLER THAT MATERIALLY AND ADVERSELY AFFECT THE USE AND VALUE OF THE PROPERTY THAT CANNOT BE DISCOVERED BY A REASONABLE INSPECTION BY AN ORDINARY PRUDENT BUYER.
Basically, if anything “material” ever happened, or was done, to the property–it can be good or bad–it should be identified on the Seller’s Disclosure form.
The Seller’s Disclosures are intended as a means of protection for the future owner of the property – to give them advance notice of anything that might affect their decision to purchase the property. In the same sense, the Seller’s Disclosures are also a protection for the seller, as well: if the Buyer comes back to the Seller later, complaining that the Buyer wasn’t aware of subsiding soil issues, if the Seller has disclosed those issues (thereby giving the buyer advance notice), then the Seller is protected against any recourse from the Buyer over that issue.
Of course, this envisions a scenario where the seller both knows about the soil subsidence and discloses it on the seller’s disclosure form.
Obvious questions arise, then, of what happens when there is an issue that is not disclosed.
Considering that you’re reading this post on the website of a law firm, you may have deduced that questions over what was and wasn’t disclosed in the Seller’s Disclosures have often led to legal disputes.
At Hepworth & Associates, we have represented both buyers and sellers in these types of disputes, and we have seen everything from egregious instances of intentional nondisclosure, to cases where the seller didn’t disclose an issue because they didn’t know about it, to honest-to-god mistakes where a nondisclosure was completely by accident. It all happens. And because buying a home is such a huge investment, it’s completely understandable when people want to stand up for themselves and what is perhaps the biggest investment they’ll ever make.
In Utah, where a buyer intends to sue a seller for nondisclosure of conditions on the property (i.e. not identifying crucial issues with the property), the primary claim that the buyer would be making is one for fraud. That is, the buyer is claiming the seller defrauded them by not telling them about a condition on the property that, had the buyer known about the condition, they might not have purchased the property.
In Utah, winning a claim for fraud as the plaintiff (suing party) is no easy task, even in comparison to other types of lawsuits. Why? Largely because of an old, legalese-sounding word: Scienter.
Scienter is an outdated word that even most lawyers don’t use anymore, but it embodies the crux of a fraud claim. Scienter is the knowledge that one’s actions are wrongful, and the intent to act in spite of this knowledge.
To prove a claim for fraud, and in the case of Seller’s Disclosures, a claim for fraudulent nondisclosure, the buyer needs to prove that the seller knew of the issue on the property and intentionally decided not to disclose the issue so that the buyer would purchase the home.
In our example from above, in order to be liable for fraud, Seller needs to have known about the soil subsidence issue on the property and intentionally left it off the Seller’s Disclosures so that Buyer would purchase the home. In the example above, Seller identified the soil shifting issues in the Seller’s Disclosures, so Seller would be protected.
If, however, Seller did not disclose those issues the case becomes more complex. Because it isn’t just a matter of whether or not Seller did or did not disclose the soil issues, is it? It’s actually a question of whether or not Seller knew about the soil issues when they filled out the Seller’s Disclosures. And this is a much more complicated question.
Playing out our hypothetical scenario as many of these cases go (in our experience), Buyer will sue Seller for fraud over the nondisclosure of the soil issues. Seller will deny that they defrauded Buyer. Then Buyer will then engage in investigation and “discovery” (the process of exchanging evidence with the other party, and identifying the evidence the parties will use at trial) in order to seek out evidence that will support their case. Specifically, Buyer would be looking for evidence that Seller knew about soil issues on the property.
As with all legal issues, questions over fraudulent nondisclosure and the Seller’s Disclosure form are highly fact-specific. It’s simply not possible to cover all possible contingencies in a short article like this, and even less possible to give our readers an indication of the strengths of their particular case. As always, we want to hear from you if this is an issue affecting you. Call us today if you think you are the victim of a situation like this. Likewise, if you’ve sold a home and someone is threatening you with legal action over a disclosure question, we can help.
If you are considering buying or selling a home, this article is not intended to alarm you. Quite the contrary. Forewarned is forearmed. And there are ways to protect yourself in this process:
- If you are buying a home, a thorough inspection is more than worth the price; consider it a part of the price of the home (and a very small part of it, at that);
- If you are selling a home, take the Seller’s Disclosure form seriously. It is meant to protect you as well as the buyers.
- Finally, consider legal protections through our partner, Mountain West Legal Protective (www.mwlp.com). MWLP was created to help protect home buyers in just these sorts of situations from the spiraling costs of a legal action. It designed its Home Buyer Legal Protection Plan specifically for home buyers seeking to safeguard the biggest investment of their lives.
Remember, you’re not alone in this process. Hepworth & Associates is here to help.